Asking, as different sources give different answers. For example when checking some of Ashwath Damodaran works, he just mentions to subtract Net Capex where he defines it as "Capex – Depreciation", and there is no word about Amortization at all.
Additionally, when calcuating proxies for Growth and Maintenance Capex, some sources will also use "Capex – Depreciation" formula without mentioning Amortization.
When calculating FCFF for DCF valuation, do you subtract Depreciation or Depreciation & Amortization?
byu/Invpea ininvesting
Posted by Invpea
1 Comment
There are multiple ways to define FCFF. I think you’re using the one that starts at Operating Cash Flows (OCF), adds back the interest tax shield and subtracts capex (not depreciation). Capex is cash used for investing in property, plant, and equipment (you can find this row in most 10-K forms).
You’re adding back all non-cash expenses when reconciling net income/NOPAT to OCF. Amortization should be added back with depreciation, even if not mentioned. Stock Based Compensation and Impairments are also added back to OCF.