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>>If, over the long term, CAPEX spendings do not produce profits, it means that the purchased assets did not produce enough payoff to compensate for their depre
by otoburb 7y ago
>>If, over the long term, CAPEX spendings do not produce profits, it means that the purchased assets did not produce enough payoff to compensate for their depreciation charges.
Even if CAPEX generates profits, if the returns were lower than your capital cost then company would have been better off not investing and returning that instead to shareholders.
- H8crilA 7y agoYes, that's the 101 of being a capital allocator, like a CEO or a CFO. Only invest into anything if the returns exceed your cost of capital. Presentation on this very topic: https://youtu.be/c20_S-QgvsA?t=730 https://youtu.be/c20_S-QgvsA?t=730
- gowld 7y agoShareholders would be better off, not company better off. Wage earners in the company got paid.