Valuation interview questions
DCF, WACC, terminal value, multiples and the bridge from equity value to enterprise value.
23 questions
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Questions are shown in English, as they are asked in London. You can practise every one of them in English, Spanish, French, German or Italian.
Valuation
1What are the main ways to value a company?Core
What a strong answer covers
- Intrinsic: discounted cash flow
- Relative: trading comparables and precedent transactions
- Mentions LBO analysis as a floor and when each method is most useful
2What is the difference between enterprise value and equity value?Core
What a strong answer covers
- Equity value: value to shareholders only
- Enterprise value: value of core operations to all capital providers
- EV = equity value + debt + preferred + minority interest - cash
3How do you choose comparable companies?Core
What a strong answer covers
- Same sector and business model
- Similar size, geography, growth and margins
- Use median or mean multiples and remove outliers
4A company has EBITDA of 50, net debt of 100 and trades at 8x EV/EBITDA. What is its equity value?Core
What a strong answer covers
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5What happens to a DCF valuation if WACC rises by one percentage point?Core
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6Walk me through a DCF.Intermediate
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7How do you calculate WACC, and what happens to it if a company takes on more debt?Intermediate
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8Why would precedent transactions usually give a higher valuation than trading comps?Intermediate
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9Why do we use unlevered free cash flow in a standard DCF?Intermediate
What a strong answer covers
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10How do you calculate the terminal value, and which method do you prefer?Intermediate
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