Capital/Finance Leases and Capital Expenditure DCF Projections
Hello,
Have done some searching around and couldn't find an answer. Should Capital(Finance) Leases affect our projections for CAPEX in DCF?
I ask this because often CAPEX is projected as a % of revenue, guided by historical trends. However, since Capital Leases bypass the Cash Flow Statement to the extent that they are not recorded as CAPEX, for companies that are particularly Capital Lease heavy should one adjust CAPEX as % of revenue upwards for projection purposes?
If not, FCFF/UFCF & Enterprise Value would be overstated as the future spending on CAPEX needed to support the business's revenue is understated due to Capital Leases omission on historical CAPEX as % of revenue. Wondering if there's any merit to this line of thought and appreciate any input, thanks!
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