Depreciation - To add or not to add?

by a searcher

2 years ago

Hello Search Funders.

Interested to know what everybodys thoughts are regarding adding or not adding depreciation in when valuing a business?

I see it as a tax break for capital expenditures (which a business requires in order to create revenue). Cap ex is an expense obiously.. so then why is depeciation added into a valuation and multiplied? 

Happy to hear peoples opinions and how you all view this when valuing a company.

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9 comments

searcher from Northwestern University - Kellogg School of Management

I would include it in the EBITDA add-back; however, it's a real costs to consider if manufacturing intensive.

2 months ago | like reply | 0 likes

searcher from The University of Michigan - Stephen M. Ross School of Business

Use EBITDA for multiples, but you need to understand the ongoing capex requirements to project future cash flows.

3 months ago | like reply | 0 likes

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