easy · Investment Banking valuation-core

In a DCF analysis, why is the 'mid-year convention' typically used when discounting projected free cash flows?

1. To account for the fact that cash flows are received evenly throughout the year.
2. To align the DCF output with the higher valuations found in Precedent Transactions.
3. To ensure that terminal value accounts for more than 80% of the total enterprise value.
4. To simplify the complex exponent math in Excel-based valuation models.

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