Aswath Damodaran 190
Depreciation and Capital Maintenance
Year Depreciation as % Capital Maintenance as %
of book value of Depreciation
1 0. 00 % 0. 00 %
2 12. 70 % 50. 00 %
3 11. 21 % 60. 00 %
4 9. 77 % 70. 00 %
5 8. 29 % 80. 00 %
6 8. 31 % 90. 00 %
7 8. 34 % 100. 00 %
8 8. 38 % 105. 00 %
9 8. 42 % 110. 00 %
10 8. 42 % 110. 00 %
!The capital maintenance expenditures are low in the early years, when the parks are still new but
increase as the parks age. After year 10 , both depreciation and capital expenditures are assumed to grow
at the inflation rate ( 2 %).
This is accrual accounting at work. Some expenses such as regular maintenance
expenses will be treated as operating, but some expenses (such as replacing a
significant portion of an existing ride) will be treated as capital expenditures.
The capital expenditures on this page are maintenance capital expenditures,
designed to keep the parks in operational condition, generating revenues in the
long term, and are on top of the initial capital expenditures.
The depreciation is the total depreciation on all cap ex. Note that capital
expenditures moves towards depreciation over time, reflecting the fact that on an
infinite-life project, depreciation is usually no longer a cash inflow, since it has to
be reinvested back to sustain future growth.
