CFA Level I · CFA Level I Exam · Company Analysis: Past, Present, and Future
When forecasting a company's future capital expenditures, an analyst should most likely consider:
The analyst should consider the company's growth plans and capacity utilization, since expansion and near-full capacity require investment in new assets. Using only past depreciation ignores growth, and the share price does not determine physical investment needs.
- Aonly last year's depreciation expense
- Bthe company's growth plans and capacity utilizationCorrect
- Cthe share price on the forecast date
Explanation
Capex depends on expansion plans and whether existing capacity is fully used. Depreciation alone ignores growth, and share price is not a driver of capex needs.
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