CapEx vs OpEx Tax Impact Analyzer
Compare buying vs leasing any asset class using NPV with depreciation tax shields and WACC discounting to find the lower total cost of ownership.
Worked Examples
Example 1: Equipment Purchase
Problem:Buy $100k (5yr life) vs Lease $2k/mo. 21% Tax, 8% WACC.
Solution:CapEx NPV: -$83k (due to tax shield). OpEx NPV: -$95k.
Result:CapEx Wins (Saves $12k)
Example 2: Software
Problem:Build $500k vs SaaS $15k/mo. 3yr life.
Solution:CapEx NPV significantly worse due to high upfront risk and short life.
Result:OpEx Wins
Frequently Asked Questions
What is CapEx?
Capital Expenditure. Money spent to acquire or upgrade physical assets (Servers, Buildings). It sits on the Balance Sheet and depreciates over time.
What is OpEx?
Operating Expenditure. Money spent on day-to-day operations (Rent, SaaS Subscriptions). It sits on the Income Statement and is fully deductible in the year spent.
Why do companies prefer OpEx?
It preserves cash flow (liquidity), reduces upfront risk, and makes financial ratios (like ROA) look better by keeping assets off the balance sheet.
Why do companies prefer CapEx?
It increases EBITDA (since depreciation is below the line) and provides long-term ownership/control of the asset.