Definition
A CapEx budget is a plan for capital spending on long-lived assets over a period, split into maintenance and growth projects.
Formula
CapEx budget = maintenance CapEx + growth CapEx
Example
If maintenance CapEx is $300k and growth CapEx is $500k, the annual budget is $800k.
How to use it
- Review expected ROI and payback before approving growth projects.
- Match CapEx timing to cash flow seasonality to protect runway.
Common mistakes
- Treating all CapEx as discretionary and delaying required maintenance.
- Approving projects without a post-investment review plan.
Measured as
CapEx budget = maintenance CapEx + growth CapEx
Misused when
- Treating all CapEx as discretionary and delaying required maintenance.
- Approving projects without a post-investment review plan.
Operator takeaway
- Review expected ROI and payback before approving growth projects.
- Match CapEx timing to cash flow seasonality to protect runway.
- Tie CapEx Budget to the same balance-sheet date, scenario, and decision memo you are using elsewhere in the model.
- Document which claims, costs, or adjustments your team includes before comparing numbers across forecasts, covenants, or valuation work.
Next decision
- Read Investment decision metrics: NPV vs IRR vs payback vs PI if the decision depends on interpretation, policy, or trade-offs beyond the raw formula.
- Decide whether CapEx Budget belongs in cash planning, valuation, or debt monitoring so the number is used in the right model.
Where to use this on MetricKit
Guides
- Investment decision metrics: NPV vs IRR vs payback vs PI: A practical guide to investment decision metrics: when to use NPV, when IRR misleads, and how payback and profitability index fit in.
- Capital budgeting hub: NPV, IRR, payback, and investment decisions: A practical hub for capital budgeting: use NPV, IRR, discounted payback, and profitability index together (and avoid relying on a single metric).