Got a tricky question? Receive an answer from students like you! Try us!

Capital Expenditure and Depreciation - Essay Example

Only on StudentShare
Author : keyshawn72


Finance and Accounting What capital expenditure is means? Capital expenditure (Capex) is defined as the expenditure gained on the purchase or improvement or alteration of fixed assets (Henry and Piekarski, 2005). For example: purchase of a car used to deliver goods…

Extract of sample
Capital Expenditure and Depreciation

Acquiring fixed assets like building, land, plant and machinery, motor vehicle and furniture fittings are regarded as the capital expenditure. The assets are not to be sold for making profit but that assets should be retained in the business. Capex generally yields gains over a long period of time (Banerjee, 2010). Capex on a financial statement is important as the investors are interested in the amount of capital improvement that he experiences. The declining capex will make the investor cautious as well as abnormal increased values signals that the investor should also be cautious (Jennings, 2006). The different types of capex are the following: Expenditure resulting from the acquisition of permanent assets: Any asset that can be converted into cash later. The money spent to acquire the asset is called capex (Warren, 2009). Expenditure resulting from purchase, erection or receipt of a fixed asset: The expenses in addition to the purchase price that are incurred for manufacturing the asset for use are added to the cost of the asset and thus is regarded as capex. The examples are the wages that are paid to the workers for manufacturing machines, the cost of the place where the machine will be manufactured and the interest on the loan raised to purchase a fixed asset. ...
Download paper

Related Essays

Valuation of Sainsbury
The average growth rate in net income over the five years is calculated as 18%. This rate is higher than the estimated cost of equity. For this reason this figure has been ignored. …
14 pages (3514 words)
Capital Budgeting: Cash flow projections of Bauer Industries
Since the management of Bauer is not certain about the forecast of revenue in the coming years, they plan to check the NPV’s sensitivity to revenue variations. They consider two cases, one: where the revenues are 10% higher than the given revenue forecast and two: where the revenues are 10% lower than the mentioned revenue forecast. …
3 pages (753 words)
William Hill Plc acquired 624 betting shops of Stanley Leisure – an Evaluation
The researcher states that there are different forms of growth approaches that companies generally follow. Typically if a company wants to make growth, then in such circumstances the company has two choices whether to go for an organic growth or to go for acquisition or a combination of both. For organic growth, the companies generally expand their business operations by opening up new branches, adding up new product lines etc. On the other hand, for acquisitions, the companies generally purchase an existing business such that the company owns that business and in this way it brings expansion…
10 pages (2510 words)
Planning and Controlling Capital Expenditures
Thus most companies hold on capital expenditures every year, in an attempt to continuously upgrade and improve things like facilities, vehicles, buildings and equipment. A capital expenditure is considered deductible since it represents an improvement to the business and this deducted takes place over a specific life of an item, after than all at once as in the case of repair or maintenance expenditures. …
13 pages (3263 words)
Capital Budgetting Research Paper
This topic has various fields such as capital budgeting which acts as an instrument in the monetary and fiscal policy. The two policies are necessary in improving net worth in the economy of a country in order to enhance development. This is mainly achieved through the reliance of debts rather than from other convectional sources such as tax. Capital budgeting is introduced in the economy so as to reduce deficit caused when expenditure exceeds revenue. In addition, capital budgeting is also primarily concerned with investment in the economy within long-term assets. These assets can either be…
Capital Budgetting of Caledonia Products
A- Caledonia Products should focus on free cash flows for evaluation of the project investment as compare to accounting profit in capital budgeting decision. Free cash flows provide the real picture of the amount that would be available to company from the project as the results are arrived with incorporating elements of time and risks in evaluation. Accounting profits, on other hand, are more like figures on paper only and due to ignorance of mentioned factors. There is every opportunity that accounting profits of the project shows an investment profitable, but it might be possible that the…
5 pages (1255 words)
Appraisal of a capital expenditure project
The three projects have different implications on the number of people needed to operate the machines, and vary in costs and capacity. Evaluating Capital Expenditures Choosing among capital expenditure projects should not rely solely on financial assessment. It is also important to undertake a subjective evaluation of each of the projects, in terms of its suitability for the macro-environment. An examination of the PEST (political, economic, social, and technological) conditions will determine which of the firms, if any, must be excluded by environmental conditions, or which would prove…
8 pages (2008 words)