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What's the difference between growth CapEx and maintenance CapEx?
Answer
Maintenance CapEx is spending required to maintain the existing asset base and current revenue level — replacing worn-out equipment, refreshing IT, etc. Growth CapEx is incremental spending to expand capacity, enter new markets, or build new product lines that drive future revenue growth. Maintenance CapEx is roughly equal to depreciation in a steady state; growth CapEx is anything above that.
Why interviewers ask this
In a DCF, you should project growth and maintenance CapEx separately because they have different ROIs. For valuation: companies investing heavily in growth CapEx (Amazon historically, semis) often have low or negative FCF but high intrinsic value. Mature businesses spending only maintenance CapEx are 'harvest' companies — strong FCF, limited growth.
CapExgrowthmaintenance