Growth CapEx
Short definition
Growth capex is spend for extra capacity, a new product or a new market. It does not protect current EBITDA; it creates incremental cash, working-capital and financing need.
Detailed explanation
The decision is a separate NPV file from the maintenance budget: incremental sales, margin, ΔNWC, learning and cannibalisation. Funding is tied to target leverage and SGR; growth capex without equity or extra debt above SGR opens a cash gap.
Cash leaves during construction; EBITDA arrives later. That timing can break DSCR; a bridge loan or equity bridge is a separate design. Booking growth as maintenance pollutes both management accounts and the bank pack.
Why it matters for the CFO
Firms that grow into insolvency usually try to fund growth capex plus receivables-inventory with “profit”.
How to read it
Growth capex / sales growth is capital intensity; low-margin volume cannot carry it. A project below the hurdle can grow EBITDA and shrink value.
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What to learn next
Definitions are educational. They are not investment, credit or tax advice.