10 CAPEX KPIs

1/ Acquisition

Description: Total amount spent on acquiring fixed assets

Formula: Purchase Cost + Direct Costs

2/ Commitments

Description: Total amount committed for future fixed asset purchases.

Formula: Future Purchase Contracts

3/ Asset Turnover

Description: Revenue generated per dollar of fixed assets.

Formula: Revenue / Fixed Assets

4/ Return on Assets (ROA)

Description: Profit generated per dollar of fixed assets

Formula: Net Income / Fixed Assets

5/ Return on Investment (ROI)

Description: Return on Investment (ROI): Profit generated per dollar invested in fixed assets

Formula: Net Income / Total Investment

6/ Payback Period

Description: Time required to recoup the investment in fixed assets

Formula: Total Investment / Annual Cash Flow

7/ Internal Rate of Return (IRR)

Description: Expected rate of return on fixed asset investment

Formula: (Future Value / Present Value) ^ [(1 / Number of Periods) – 1]

8/ Net Present Value (NPV)

Description: Present value of future cash flows from fixed assets

Formula: Net Cash Flows / [(1 + discount rate) ^ Number of periods]

9/ Depreciation

Description: Value of fixed assets consumed over time

Formula: Acquisition / Useful Life

10/ Utilization

Description: Degree to which fixed assets are being used

Formula: Actual Production / Maximum Production x 100%

NPV relates to capital investment

NPV needs discounting of series of cash inflows not returns..
NPV needs discounting factor determined in advance say 8% or 10%

NPV =Net cash flow/(1+discount rate)^no of years is just a mathematics formula but it doesn't
reflect true concept of NPV as far as business is concern..

Why my statement is like this..?

If your outflow is made in a particular year and inflow is coming in a particular future year then
formula is true. Like you invested Rs 100 on zero date say 1.4.2020 and got the cash inlow rs 200 on
31.3.2022. Discounting rate say 10%

Then that formula works which means NPV = ( -100 ÷1)+ [200÷ (1+0.1)^2] = -100 + 165 = 65

But Business is not like this simple formula. Business experience One outflow but multiple cash inflow
in different years in future.

So formula appropriate for NPV is

[Cash inflow 1st year ÷ 1.1] + [cash inflow 2nd year ÷ (1.1)^2 ]+[Cash inflow 3rd year ÷ (1.1)^3] so
on - [Cash outflow ÷1]...
That's why we say cashflows not cashflow ...

Note- cash flow specified may be considered as net cashflow