1.4. Use of the contractual Kd
and end of year assumption
With this approach the assumption is
that there is not interest liquidation
in shorter periods within the year,
the calculation of interest charges is
based on the beginning balance of
debt and it occurs at the end of the
year (Day, 2001; Tham & Vélez-Pareja,
2004). Obviously, usually there
are principal payments during the
year and this approach overestimates
the interest paid.