hard · Investment Banking
In the 'Great Debate' over whether to use mid-year convention, which argument is most commonly cited by practitioners against its use?
- WACC is specifically designed to work only with year-end exponents.
- The IRS does not allow mid-year conventions for tax-basis valuations.
- It is mathematically impossible to calculate a mid-year terminal value using an exit multiple.
- It adds complexity without significantly changing the investment conclusion, and year-end discounting is more conservative.
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