Predicting D&A in the future
If you know the amount CapEX will grow by over the next 10 years, how would you predict how much D&A would grow by.
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It depends on who I’m building the model for, but generally I would say the most accurate way would be to project Depreciation as a % of prior year PP&E and Amortization as a % of prior year Intangibles
When you say PP&E do you mean gross or net PP&E, or just Change in PP&E for the last year.
Net PP&E
you can take D&A as a % of sales or make assumptions about the life of the capex and build out a depreciation schedule
I'm new to this so I'm assuming sales means revenue. In regards to making a depreciation schedule, are you saying for example, if capex last year was $3,000,000 and I said the useful life was 10 years and the salvage value was $1,000,000. Depreciation each year would be $200,000?
Indeed, however you would also need to add the depreciation of the capex of previous years.
So because here I said ten years, I would only need to account for the previous 10 years of depreciation of CapEX?
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