Capital Expenditure Formula (CAPEX)

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:

  1. 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

  2. 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 StatementThe 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

  3. 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:

Therefore,

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

capital expenditure 1

Consequently,

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

capital expenditure 1.2

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, 2018Sep 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

Net increase in PP&E in 2017 = $33,783 – $27,010

capital expenditure 2-1

Depreciation in 2017 = $41,293 – $34,235

capital expenditure 2-2

Consequently,

The Calculation of Capital expenditure in 2017 = $6,773 + $7,058

capital expenditure 2-3
capital expenditure 2-3

Again,

Net increase in PP&E in 2018 = $41,304 – $33,783

capital expenditure 2-4

Depreciation in 2018 = $49,099 – $41,293

capital expenditure 2-5

Consequently,

The Calculation of Capital Expenditure in 2018 = $7,521 + $7,806

capital expenditure 2-6

CAPEX Formula Video

 

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