# 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

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 , 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:

• 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

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:

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

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

Consequently,

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

Again,

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

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

Consequently,

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

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