Question

I am a taking a finance course and need guidance on how to estimate future depreciation to use to calculate the free cash flow to prepare a company valuation using DCF

Answer 1

Depreciation is an estimated allocation of the cost of wear and tear of the asset's through its useful life. Hence, depreciation follows a schedule. For instance, the most common straight line method just charges the same depreciation expense throughout all the years of the asset. Usually, people do not estimate future depreciation. You might try to predict an impairment, which is a write down of an asset. But even that's rare and hard to do. Hope this is helpful~