DCF Question - What would the discount period be?
When doing a DCF for a company with an April 30 fiscal year end, and applying the mid-year convention, what would the discount period be (given that it's currently February)?
Are you projecting cash flows for the next 5 years?
FY2013E (Apr 2013) thru FY2017P
I would think you would discount it, using .625, 1.625, 2.625, 3.625 periods, which would give you the PV of cash flows discounted to Feb.;
Here's why: You have the norm mid year periods of .5 (2014), 1.5 ('15), 2.5 ('16), 3.5 (2017), which will discount back to April of this year. Now, I'm not sure when you using the mid-year convention if we would do it this way, but since feb to april is ~3 months, it would be an addition of .125, since .25 would be 3 months and since the cash if building up 'during' the 3 months (feb-april), the period would be .125 -- add that to your norm periods and you get the aforementioned periods.
Not sure if this would be correct, so if anyone else more experience can comment, that'd be great.
Also, this would be from beginning of Feb. to April 30th (3 months), so just adjust for today's date or whatever your valuation date is.
Calendarize in case you have to compare multiples later dude, best practices
Quisquam qui voluptatem voluptas rerum quasi unde. Qui aut dolore dolor qui temporibus consequatur. Qui tempora inventore occaecati.
Dolorem odio voluptate aspernatur voluptas. Repellendus omnis assumenda nihil veniam eligendi rerum. Laborum voluptas quia suscipit corrupti quia optio.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...