easy · Investment Banking valuation-core

What is the primary purpose of the 'Mid-Year Convention' in a DCF model?

1. To synchronize the fiscal year with the calendar year across all multinational reporting subsidiaries worldwide.
2. To adjust for seasonal swings in the company's quarterly revenue, gross margins, and net working capital needs.
3. To reduce the impact of the Terminal Value on the total Enterprise Value that is ultimately derived from the completed model.
4. To account for the fact that cash flows are received steadily throughout the year rather than in a lump sum at year-end.

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