Here we have a timeline, at time period zero (that's now), that's our valuation date I'm trying to find the value of a company I've then got year end 1, year end 2 and year end 3 What I'm thinking about is when cash flows occur? Cash flows happen evenly throughout the year Not just at the end of the year. I've got some of my year one cash flow happening at the start year Some of it happening at the end of year, some of it happening in the middle of the year So on average my cash flow from year 1 happens at half year point Similarly for cash flow in year 2, it actually happens at 1.5 Cash flow in year 3 happens at year 2.5 So what difference does this make to our DCFs? Well it's the discounting that's going to have to change If we look at the bottom of this table at the discount factors. In period 1, the discount factor is 1 over 1 plus WACC To the power of 0.5, so that is the new time period, it's now at the half year point Period 2, it's discount factor is one over one plus the WACC to the power of 1.5 And period 3? It's one over one plus WACC to 2.5 Therefore do be careful, this is the mid year adjustment and it changes when our discounting happens