Financial Modeling in Excel For Dummies

Chapter 12

Budgeting for Capital Expenditure and Depreciation

IN THIS CHAPTER

Calculating the cash required for budgeted asset purchases

Determining the depreciation on budgeted capital expenditure

Figuring out the written-down value of assets for inclusion on the balance sheet

The last two chapters deal with building financial models at quite a high level. In this chapter, you delve into more detail in one part of a financial model: the capital expenditure (CapEx).

In Chapter 10, I explain the process of purchasing assets and calculating their depreciation. For example, you purchased a coffee machine, as well as fixtures and fittings. These purchases were reflected in your cash flow statement, but you also needed to calculate their depreciation based on their useful life. You used this amount in the Income Statement and showed it on the Balance Sheet in order to show the current value of fixed assets. The way this was calculated was fairly simple.

In this chapter, I explain in more detail how to model depreciation. Here, you take a list of existing and budgeted CapEx items, convert them into a cash flow schedule, calculate the depreciation, and use the depreciated amounts to ...