What is Capital Expenditure (CAPEX) Formula?

Capital Expenditure is the total amount that a Company spends to buy & upgrade its fixed assets like PP&E (Property, Plant, Equipment), technology, & vehicles etc. The formula of Capex is the addition of net change in Property Plant and Equipment (PP&E) value over a given period to the depreciation expense for the same year.

CAPEX Formula = Net Increase in PP&E + Depreciation Expense

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For eg:
Source: Capital Expenditure Formula (CAPEX) (wallstreetmojo.com)

Steps to Calculate Capital Expenditure (CAPEX)

The calculation of capital expenditure formula can be done by using the following three steps:

Firstly, the PP&E value at the beginning of the year and the end of the year is collected from the asset side of the balance sheet. Then, the net increase in PP&E value is calculated by deducting the PP&E value at the beginning of the year from the PP&E value at the end of the year.

Net increase in PP&E = PP&E at the end of the year – PP&E at the beginning of the year
Next, the accumulated depreciation at the beginning and the end of the year is collected from the balance sheet. Then, the depreciation expense during the year is calculated by deducting the accumulated depreciation at the beginning of the year from the accumulated depreciation at the end of the year. Conversely, the depreciation expense incurred during the year can also be directly collected from the income statementThe Income Statement The income statement is one of the company's financial reports that summarizes all of the company's revenues and expenses over time in order to determine the company's profit or loss and measure its business activity over time based on user requirements.read more, where it is captured as a separate line item.

Dep. expense = Accum. Dep. at the end of the year – Accum. Dep. at the beginning of the year
Finally, the capital expenditure incurred during the year can be calculated as either,

Capex Formula = (PP&E at the end of the year – PP&E at the Beginning of year) + (Accum. dep. at the end of the year – Accum. dep. at the Beginning of year)

or

Capital Expenditure Formula= (PP&E at the end of the year – PP&E at the beginning of the year) + Dep. expense

Examples of Capital Expenditure Calculations

Let’s see some simple to advanced examples to understand the calculation of Capital Expenditure.

You can download this Capital Expenditure Formula Excel Template here – Capital Expenditure Formula Excel Template

Example #1

Let us take the example of a company ABC Ltd and calculation of capital expenditure in 2018 based on the following information:

Depreciation expense is $10,500 in the income statement
PP&E value at the end of 2018 is $45,500 in the balance sheet
PP&E value at the beginning of 2018 is $40,000 in the balance sheetThe Balance Sheet A balance sheet is one of the financial statements of a company that presents the shareholders' equity, liabilities, and assets of the company at a specific point in time. It is based on the accounting equation that states that the sum of the total liabilities and the owner's capital equals the total assets of the company.read more

Therefore,

Net increase in PP&E = PP&E value at the end of 2018 – PP&E value at the beginning of 2018

Consequently,

Capital Expenditure (capex) Formula = Net increase in PP&E + Depreciation expense

Therefore, the calculation of Capital Expenditure incurred during 2018 is $16,000.

Example #2

Let us take the example of Apple Inc. and calculation of capital expenditure in 2017 and 2018 based on the following information:

Particulars (in Millions)	Sep 29, 2018	Sep 30, 2017
Net PP&E (opening)	$33,783	$27,010
Net PP&E (closing)	$41,304	$33,783
Accum. depreciation and amortization (opening)	$41,293	$34,235
Accum. depreciation and amortization (closing)	$49,099	$41,293