How does D&A differ from normalized capex in the terminal value of a DCF?

terminal-year capex = terminal-year D&A.

In steady state, growth and the asset base stay constant — replacement capex matches depreciation exactly.

The terminal year ≠ a mid-forecast year. In forecast years 1–5, capex can be > D&A (a growth phase building up PP&E) or < D&A (a consolidation phase reducing assets). But in the terminal year the two must converge — otherwise it implies perpetual asset build-up or shrinkage. Common junior mistakes:

• Extrapolating capex / sales flat from mid-forecast into the terminal → capex > D&A → unrealistic.
• Holding D&A flat while capex rises → balance-sheet PP&E diverges. Clean mechanics: (a) capex (terminal) = D&A (terminal). (b) D&A (terminal) consistent with net PP&E (terminal) and the long-term average useful life. (c) PP&E growth in the terminal equals sales growth (= long-term g, typically 1.5–2.5%).