Including intangible assets in CAPEX? (Morningstar vs. Bloomberg analysts) DCF model
Looking at basic DCF for AAPL:
When Morningstar calculates AAPL's FCF from CFO (2013 10k) they calculate:
Free Cash Flow = Cash flow from operations - (Payments for property, plant and equipment + Payments for acquisitions of intangible assets)
Bloomberg doesn't include intangibles in their calculation.
How can we argue that Morningstar's estimate is stronger/weaker than Bloomberg's?
First of all, when using a DCF, you are only using future cash flows, thus what they did in 2013 does not matter. Should you include it in your projections? In theory all cash outflows should be included, but there is no way to know what acquisitions AAPL will make in the future, and further you should then also account for these on the P&L. If you are looking for a 'clean' number to use in your projections, you should exclude intangible assets.
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