easy · Investment Banking valuation-core

Why is the 'Mid-Year Convention' typically used in a DCF analysis?

1. Because WACC is always calculated using a simple mid-year weighted average of the company's debt and equity capital.
2. Because it allows the analyst to ignore the effects of seasonality in the underlying business when building the projection model.
3. Because most companies report their full-year results in June, which analysts treat as the natural midpoint of the calendar fiscal year.
4. Because cash flows are generated throughout the year, so discounting them from the end of the year would be too conservative.

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