Valuation Tools Webcast #5: Capitalizing R&D
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- čas přidán 20. 08. 2024
- R&D is really capital expenditures (for technology and pharmaceutical companies) but accountants treat it as operating expenses. In this webcast, I look at the process of capitalizing R&D and how it affects earnings and reinvestment rates. I use Microsoft to illustrate the process.
Microsoft 10K (2012): www.stern.nyu.e...
Microsoft 10K (2011): www.stern.nyu.e...
Spreadsheet: www.stern.nyu.e...
Thanks Professor...you may not realise how helpful your videos are, but I do...
Keep Doing the great work...!!
Your videos are so wonderful Sir, which inspire me a lot - You are so amazing and I really love your course, hoping one day I could come to your class. Hoping you have plenty of health - My awesome Professor ^^
Thanks for sharing Professor! Great as always!....by the way, 2012 cash&cash equivalents is 6,938$ and not 8,938$. Anyway, great lesson!
my goodness you’re an incredible teacher. Thank you so much.
Why cant you just use the RnD as listed in that years expenses and subtract it from net operating income as you do CAPEX to get FCF?
Great video. Thanks for sharing.
Thank you! :)
thank you for this great video
Sir I have a doubt,
The research and development expenditure you are capitalising because, the economic benefits will flow to entity for more than one period/operating cycle period.
But sir what is the guarantee that the reasearch will give the expected outcome or result. What if we couldn't able to draw outcome from research?. How to deal with such situations. Because future economic benefits from research will depend upon the probability of getting outcome from research. Please explain
What is guarantee that a capex will make the money. In both cases you have to just see what is company trying to doing. Is it possible? And if the management is good in capital management.
Hello professor, I don't speak English, would there be a possibility that you could activate the subtitles so that I could learn from you. Thank you
@Aswath Damodaran Hello professor. Can you enlighten me on the following: I am trying to make the adjustments linked with capitalizing certain expenses; I've successfully capitalized R&D and some portion of advertising. This leaves me with a Negative Net Capex, i.e. my current year D&A expense is greater than my CapEx. But the company I am valuing has made its biggest acquisition to date in their previous fiscal year (i.e. it was accounted as Acquisition CapEx into their previous 10K), and the amount is very substantial (10x Net Income). I'm not sure how to handle this using your Capitalizing R&D spreadsheet. Intuitively, I feel that some adjustment has to be made to account for that acquisition and in doing so, allow for Net CapEx to become positive. Can you please help? Thank you very much.
In that case, you gotta normalize capital expenditure by using historical data like cyclical companies.
@Aswath Damodaran:
Dear Professor Damodaran,
Thank you for all your work, you have been doing all these years. I hope, you will just keep on.
I have a question regarding the topic: In your paper "Research and Development Expenses: Implications for Profitability Measurement and Valuation" you write, that we have to cumulate the after-tax R&D expenses. I went through your spreadsheet and unfortunately, I did not understand, if this moment had been captured in the excel file?
I thought, if we take just the after-tax portion of our R&D expenses, the value of the research asset will be lower than USD 18'744.33.
Thank you and everyone else for clarification!