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http://www.fool.com/newsletters/04/issues/html/2004/08j29us7/08.htm

I came across Tom G's valuation thumbnail recently and found it to be a real eye opener. I have a question about subtracting out cap ex. Tom is suggesting to break out only the maintenance portion of cap ex, I beleive he is referring to recurring types of expenditures but I was hoping someone could eleaborate on this a little bit. Examples would be nice. Also what do you do if a company does not break down cap ex?

I also have a question about a possible shortcut. I have been using One year cash flows from operating activities as provided by Edgar online in lieu of trying to adjust earnings and then subtracting out cap ex from cash flows. Does this work?
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Figuring out what constitutes a capital expenditure is half the battle. Although, generally, CAPEX is made up of the company's investments in its plant, property, and equipment (the investments needed for the company to continue operating and growing), certain situations call for separating out maintenance CAPEX from expansion CAPEX or acquisition growth CAPEX. Maintenance CAPEX consists of the company's investments in its existing facilities and equipment. This is often the preferred figure to use for very conservative valuations that assume no growth outside of that which comes from existing capacity.

From TMF article Free sailing with Free Cash Flow. I am not sure what you mean when you say separating out maintenance capex from expansion or aquisition capex? Are you saying only the maintenance part of capex should be subtracted from operating cash flow? The statement about this being the preferred figure for conservative valuations has me confused, would not subtracting all capex be the most conservative method? I think I understand the difference between maintenance, expansion and aquisition capex, but I am unclear about which part(s) should be subtracted from operating cash flow and under what circumstances in order to determine FCF.

Thanx,

Mike
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