Projecting Capex and D&A

This problem practices a core financial modeling skill, building forward assumptions for a company’s reinvestment and non cash expense profile. Candidates need to know the simple approach, where capex and D&A are tied to revenue or capex using percentage assumptions, as well as the more detailed approach, where depreciation is built from underlying asset lives and expected future spending. Interviewers ask this because these inputs affect free cash flow, the balance sheet, and valuation, and they want to see whether a candidate understands how operational activity flows through the financial statements and how to use historical trends, management guidance, and industry data to support assumptions.