Schweser Exam 1 AM Book 2 question, getting, change, doesnt, option

anish

Just wondering, volume 2, exam 1, am, question 15. Why do they multiply change in revenues by .04 to get capex? I ended up getting the question right as it was the only negative option... but if all 3 options were negative I might not have taken that answer so its good to know but the book doesnt explain it.

yalo

The question says capex will equal depreciation plus approx 4% of the firm's incremental revenues. Capex = 1% * (22M*1.07) + 4% * (22M*1.07 - 22M)

thecfawannabe

wow I must have stopped reading at the 4% part.... thanks!