Wecannormalizethenetcapitalexpendituresintwoways.
Onewayistotaketheaveragenetcapitalexpenditureover
the five-year period, which would result in net capital
expendituresof32.31millioneuros(161.57/5).Theproblem
withdoingthisisthatitdoesnotreflecttherisingoperating
income at the firm and its larger size. A better way to
normalize capital expenditures is to use the net capital
expendituresasapercentofafter-taxoperatingincomeover
the period:
Thisapproachcanbeusedtoforecastnetcapitalexpenditures
in future periods as well.
Capital Expenses Treated as Operating Expenses
Earlier in this chapter, we discussed the capitalization of
expenses such as R&D and personnel training, where the
benefits accrue over multiple periods, and examined the
effectsonearnings.Thereshouldalsoclearlybeanimpacton
our estimates of capital expenditures, depreciation, and,
consequently, net capital expenditures.
- Ifwedecidetorecategorizesomeoperatingexpenses
as capital expenses, we should treat the current
period’svalueforthisitemasacapitalexpenditure.
For instance, if we decide to capitalize R&D
expenses,theamountspent onR&Din thecurrent
period has to be added to capital expenditures.