I know that depreciation and CapEx need to converge in the terminal year...say I forecast out 5 years and my depreciation is as follows:
Depreciation: Year 1: 200 Year 2: 210 Year 3: 220 Year 4: 230 Year 5: 245
Suppose the forecasts from Management have CapEx as follows
CapEx: Year 1: 150 Year 2: 160 Year 3: 170 Year 4: 180 Year 5: 200
How should they converge in the terminal year - should I set CapEx equal to depreciation, set depreciation equal to CapEx, some up with a number in the middle, or re-do the forecasts so they start converging over the forecasted period.
Thanks!
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