In financial modeling, what is the implication of 'circularity' due to interest expense calculations on project finance models?
1
It can cause the model to be unstable and difficult to audit.
2
It enhances the accuracy of the model by reflecting the iterative process of financial planning.
3
It is required by GAAP for all financial statements.
4
It simplifies the assumptions required for initial investment evaluations.
5
It decreases the computational load on spreadsheet software.