Capital Expenditure Formula (Examples) | How to Calculate CAPEX? [Video]

In this video on Capital Expenditure Formula, here we discuss how to calculate CAPEX along with its formula and practical example.

𝐖𝐡𝐚𝐭 𝐢𝐬 𝐂𝐚𝐩𝐢𝐭𝐚𝐥 𝐄𝐱𝐩𝐞𝐧𝐝𝐢𝐭𝐮𝐫𝐞 (𝐂𝐀𝐏𝐄𝐗) 𝐅𝐨𝐫𝐦𝐮𝐥𝐚?
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Capital Expenditure (Capex) Formula measures the company’s overall purchase of assets in the fiscal year and can be easily measured by adding a net increase in the PP&E value during the year to the depreciation cost for that year.

𝐂𝐚𝐩𝐢𝐭𝐚𝐥 𝐄𝐱𝐩𝐞𝐧𝐝𝐢𝐭𝐮𝐫𝐞 𝐅𝐨𝐫𝐦𝐮𝐥𝐚
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CAPEX Formula = Net Increase in PP&E + Depreciation Expense

𝐄𝐱𝐚𝐦𝐩𝐥𝐞 𝐨𝐟 𝐂𝐚𝐩𝐢𝐭𝐚𝐥 𝐄𝐱𝐩𝐞𝐧𝐝𝐢𝐭𝐮𝐫𝐞 (𝐂𝐀𝐏𝐄𝐗) 𝐅𝐨𝐫𝐦𝐮𝐥𝐚
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Let us take the example of a company EFG Ltd and calculate capital expenditure in 2017 based on the following given data –

Depreciation Expense is $20,500 in the income statement
PP&E value at the end of 2017 is $48,500 in the balance sheet
PP&E value at the beginning of 2017 is $42,000 in the balance sheet

Firstly we need to calculate Net increase in PP&E using below formula,

Net increase in PP&E = PP&E value at the end of 2017 – PP&E value at the beginning of 2017

=48500-42000
=6500

Now we will calculate capital expenditure for the year 2017 by using below formula –

Capital Expenditure (capex) Formula = Net increase in PP&E + Depreciation Expense
= 6500+20500
=27000

Therefore, Capital Expenditure incurred during 2017 is $27,000.

To know more about the 𝐂𝐚𝐩𝐢𝐭𝐚𝐥 𝐄𝐱𝐩𝐞𝐧𝐝𝐢𝐭𝐮𝐫𝐞 (𝐂𝐀𝐏𝐄𝐗) 𝐅𝐨𝐫𝐦𝐮𝐥𝐚 , you can go to this 𝐥𝐢𝐧𝐤 𝐡𝐞𝐫𝐞:-
https://www.wallstreetmojo.com/capital-expenditure-formula-capex/

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