Anyone ever seen a depreciation schedule built like this with the useful life above the schedule but as a fixed number? I recently received a modeling test from a well-known hedge fund (rhymes with Citadel) and it came in this form. I just forecasted depreciation as a % of capex and rolled forward the schedule using those assumptions. Is there another way?
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Hey Jack_the_Banker, I'm here because nobody responded to this thread after a few days...maybe one of these resources will help you:
More suggestions...
Hope that helps.
Ha - just did this same one.
Couple of key details this exhibit is missing : PP&E starting balance was 0; and the starting Depreciation was exactly 1/5 the Capex spend for that year.
If you assume that the salvage value is 0 for each asset, you can create a simplified waterfall in each cell that is (1/5 Capex from 5 periods ago) + (1/5 Capex from 4 periods ago) + (1/5 Capex from 3 periods ago)... and then just roll that forwards.
At least that's what I did.
I couldn’t remember exactly the structure but yes you are correct that beginning PPE was zero.
So did you assume D&A as a % of capex remained constant throughout the period? If you assumed a zero salvage value at the end of the forecast period did you converge D&A as a % of capex to 100%?
No, I think that’s overcomplicating it. If starting PP&E was zero, there’s nothing else to depreciate except for the new capex. They give you the D&A for years 0-4, so in year 5 (the first forecast year) you need to account for depreciation for the capex in years 1-5. If the lifetime is 5 years, then depreciation is the sum of (1/5 of capex years 1-5). You can build a “rolling” formula that sums the current year and the 4 cells to the left. When you fill that to the right, it should move the 5 references each time. So each year’s capex is being depreciated 5 times: once in the year it was spent, and then 4 years after. The last year will be treated the same, no convergence needed.
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