easy · Investment Banking
In a Discounted Cash Flow (DCF) analysis, how does the 'Mid-Year Convention' affect the present value of cash flows compared to year-end discounting?
- It decreases the present value because it assumes higher risk in the middle of the year.
- It increases the present value because cash flows are assumed to be received sooner.
- It has no numerical impact but is used to satisfy GAAP accounting standards.
- It only affects the terminal value calculation, not the discrete projection period.
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