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To: tyc:> who wrote (11820)	1/11/2001 6:39:58 PM
From: TimbaBear	Respond to of 78476

I wonder if one could treat ALL current and future capital expenditures as "self supporting". In a perfect world, where all business and finance managers made only the best decisions regarding purchases, capital expenditures, etc.....then maybe I'd go along here. However, rarely does the "Depreciation and Amortization" equal the CAPEX. In fact, it usually exceeds it by a wide margin which leads the suspicious part of my personality to suspect that there might be motives other than pure accuracy or need at play. It is in the estimation of the actual balance of "wear and tear" and "refurbishment" and "expenditures needed to stay competitive" that I find the greatest challenge. For the adjustment amounts to income can often make the difference between an acceptable flow of cash from an enterprise and one that is marginal or worse. Timba

To: tyc:> who wrote (11820)	1/12/2001 11:11:16 AM
From: Bob Rudd	Read Replies (1) \| Respond to of 78476

wmchen: >I wonder if it is necessary to differentiate between cash flow and FREE cash flow.< Assuming by 'cash flow' you refer to CFO, I think it is necessary. For example take 2 firms: The first must reinvest a substantial portion of it's operating cash flow to MAINTAIN existing cash flows - whether by spending on R&D, replacing obsolete equipment, or other investment necessary to keep cash flows coming at current levels. The second, because the earnings power of it's capital base either doesn't deteriorate or deteriorates far more slowly, is free to invest nearly all it's operating cash flow in new projects offering returns greater than the cost of capital. If these firms had identical CFO, which would be more valuable?