"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
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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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