CAPEX on Acquisitions in 3 Statement Models
Hi everyone,
I have been building a new valuation model but I incurred in a sort of dilemma. Previously, I would embed all fixed operating assets within the same group (tangibles and intangibles altogether, while other assets on a separate group and projected their current carrying value in the future without increasing them) and the same for D&A and all kind of CAPEX. Right now I need to separate the forecast for tangibles and intangibles, therefore I need to increase them over time using their own CAPEX/Revenue ratios and decrease them with their own D&A/Beginning Assets ratios. Until here there is no problem, just more hardcodes. The issue arises when a company consistently allocates capital to acquisitions and that CAPEX needs to be properly projected in the case we want to estimate a reliable future FCFF. My question is how am I supposed to balance acquisitions in a 3 statement model? The cash paid for acquisitions can indeed increase the value of non-current assets, current assets, non-current liabilities, and current liabilities. Do you have any advice?
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