CapEx +$100 makes your DCF EV fall. But the EV equation says EV goes UP when you convert $100 of cash to a capital asset. Explain.

Question

IBPrep · Accepted Answer

Both are correct, but they measure different things. DCF EV reflects future FCF generation, the DCF doesn't credit the asset for future cash flows it might create; it just sees the $100 outflow.

CapEx +$100 makes your DCF EV fall. But the EV equation says EV goes UP when you convert $100 of cash to a capital asset. Explain.

Answer

More Valuation interview questions

CapEx +$100 makes your DCF