How to calculate the capital expenditures to derive Free Cash Flow change, internet, capital, 2010, google

metoyoushe

Dear all,

Under Session 8 in the schweser notes, it covers on Free Cash Flow.
how do i calculate the capital expenditures to be use in the calculation of Free Cash flow?
FCF = Operating Cash Flow - Capital Expenditures

I have google the internet and seen a few formulas to calculate capital expenditures.

The first method is :

Year 2009
Total Assets= 2000
Total Liabilities=1000

Year 2010
Total Assets= 4000
Total Liabilities=2000

The change in assets is 2000 (4000-2000) and the change in liabilities is 1000 (2000-1000). Subtract the two and you get a CAPEX (capital expenditure) of $1000.

The 2nd method is :

Assets at Year End = Assets at Beginning of Year + CAPEX – Depreciation
rearranging will be:
CAPEX = Assets at Year End - Assets at Beginning of Year + Depreciation

Lastly in the cash flow in investing, the cash outflow for plant & equipment, can i consider that as capital expenditures?

Which one is the appropriate one to use?

Thanks for the help

soddy1979

Capex = change in total assets - change in total liabilities