"Calculate future depreciation based on a % of depreciation to capital expenditures smoothed (changing in equal increments) from actual ratio observed for year ending 1/30/2016 to a ratio of exactly 1 to 1 in the final year of the forecast.
Assume no asset write offs or any other items are included within depreciation and amortization."
Thank you so much
let's say depreciation is 10 and CAPEX is 100 in 2016. Depreciation as% of CAPEX is 10%.
Seems to me that the assumption says, depreciation is 10 in 2016, and 100 in final year of forecast. Probably reasonable to straight line appreciate it for 2017-penultimate year of forecast.
Intuitively, I think the company is saying that although net PPE may be increasing now (company may be growing and in need of machinery) , they expect the longer term trend to be replacement of physical assets as they expire (as the company matures)
lmk if I'm way off base
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