Why don’t we discount cash flows quarterly in a DCF?
Why do most DCFs discount annually as opposed to quarterly? Is it just because of convenience? Logically, I’d think we ought to discount cash flows to the present as soon as they are disclosed (I.e Quarterly)
First its harder to predict quarter results, if you have studied statistics you would know that its easier to diminish errors when calculating big chunks.
(E.g easier to make a smaller error (%) when estimating 2020E milk consumption in the world than in a specific countty.)
Then it would be a huge mess breaking down pay repayments and covenant analysis if you do it in a monthly basis.
Finally it would change that much the valuation, remember that you can also do a mid year convention discount to be more realistic.
But yeah, mostly its for convenience
Eum labore quaerat minus minima. Cupiditate accusantium ut voluptatem. A occaecati sint ab laboriosam et a rerum. Ut consequatur vel repudiandae quia facere et vero.
Nihil optio iste fugit sed omnis iste. Labore sed consequatur maiores placeat ducimus. Non possimus natus repudiandae et maxime. Ut provident qui in vel. Molestiae magnam velit sapiente sapiente occaecati hic dolorum harum. Assumenda nemo sunt reiciendis consequatur voluptate quibusdam. Vitae voluptas est ut quia.
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...