Investment Banking
12 dcf questions of the kind asked in investment banking interviews. Each carries a model answer, the concepts a complete response must hit, and graded feedback on your own attempt.
Expect to be asked to compute this with numbers on a whiteboard.
Walk me through calculating WACC. Where does each input come from, and why do we use a target capital structure rather than the current one?
A WACC follow-up where candidates reach for the wrong number.
How do you estimate the cost of debt for a WACC? Why not just use the interest expense divided by total debt?
A standard DCF follow-up that separates builders from reciters.
What is the mid-year convention, why is it used, and roughly how much does it change a valuation?
What a VP does in ninety seconds before the analyst's model reaches a client.
You've built a DCF. What checks do you run before showing it to anyone?
Follows directly from the DCF walkthrough. Terminal value is where the value actually sits.
What are the two methods for calculating terminal value? Compare them, and explain how you'd sanity check one against the other.
The interviewer is checking whether you understand what your DCF actually values.
Define unlevered and levered free cash flow. Which do you use in a DCF, what discount rate pairs with each, and what does each produce?
Top-three most asked question in investment banking interviews.
Walk me through a discounted cash flow analysis from start to finish.
Tests modeling instinct, which levers actually matter.
You build a DCF and the output looks too high. Which assumptions would you interrogate first, and in what order?
Follows the WACC question when the interviewer wants to go deeper.
What does beta measure? Walk me through unlevering and relevering beta and explain why the process is necessary.
The core modelling test for investment banking and equity research superdays.
Value the business with a five-year DCF and bridge to an implied share price. Free cash flow for years 1–5 is given. Discount at the WACC using end-of-year convention. Calculate terminal value with the Gordon growth…
Separates candidates who memorised the formula from those who understand it.
Debt is cheaper than equity and tax-deductible. Does adding debt always lower WACC? Explain what actually happens.
Asked in cross-border M&A and emerging markets coverage.
How do you adjust a DCF for a company operating in an emerging market? Where does the country risk go?
Write your answer, get it graded on technical accuracy, completeness and communication, and see exactly which mechanic you missed.
Firm names indicate where a question type is commonly reported in interviews. They are not sourced from, endorsed by, or affiliated with the firms named.