Valuation – Finance Technical Interview Questions

  • What are the different ways to value a company?
  • Walk me through a DCF valuation. What is free cash flow and how is it calculated? What would you use for a discount rate? How do you determine the terminal value?
  • How do you calculate WACC?
  • What is the formula for CAPM?
  • What is beta? How and why do you unlever a beta?
  • What is the current market risk premium? What is the current risk-free rate?
  • What kinds of multiples do you think are most important when valuing a company and why? What are some reasonable ranges for these multiples?
  • What makes a good comparable company for valuation purposes?
  • What is the difference between enterprise value and equity value?
  • Why should the fair market value of a company be the higher of its liquidation value and its going-concern value?
  • What is an LBO? Why leverage up a firm?
  • Lets say I want to value a natural gas pipeline, how would you suggest I do that? What do you think is the appropriate risk free rate to use with this pipeline?  How would you finance buying a pipeline like this?
  • What do you think an investment banker does?
  • As a manufacturing firm, assume you are producing at full capacity.  Marketing comes to you with a great new product idea and says the firm needs to begin producing it.  What analysis would you do, and what things would you look at in response to marketing’s request?