easy · Investment Banking
In a DCF, the 'Mid-Year Convention' is used to account for the fact that:
- Tax payments owed to the IRS for operations are typically due in the month of July each year
- Most of the company's large capital projects are typically planned and completed midway through its fiscal year
- The company's fiscal year happens to end in June rather than December, unlike most of its industry peers
- Cash flows are typically received throughout the year rather than in a single lump sum at year-end
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