Recall that when we last looked at our income statement, we had only calculated up to EBITDA. To get to operating income (i.e. EBIT), we need to compute depreciation expense associated with existing fixed assets. We calculated incremental depreciation expense from purchase accounting adjustments in the last step. Rather than simply plugging in Wall Street analyst estimates, let’s make things a bit more complex. We will build a depreciation schedule that computes depreciation expense for existing fixed assets, categorized into buckets, and add to that the depreciation associated with capital investments in the next step.
