URGENT Duff & Phelps Valuation Analyst Interview Help

*facepalm*

You have an interview with them tomorrow and you're only NOW prepping for it?

Not to be a jerk, but if they're asking you those questions and you literally have no idea what to say or where to look then you're screwed. I can understand being a little fuzzy on WACC and a DCF valuation, but if you don't even know where to look to refresh your memory then you're going to be in trouble. The fact that you're asking what FCF means is a big indication that you're beyond overnight help.

My advice is to just be yourself and use the interview as practice. If they ask you technical questions about valuation then you're not going to be able to fool them into thinking you know what you're talking about. If they are more interested in personality, work ethic, etc. then you may have a shot. Don't stay up all night trying to cram for something that you can't cram for though.

With most of your comments, but know that I am an Economics major and do not focus on the Finance/Accounting curriculum.

Never intended to go into a banking interview, so I've just barely went through these topics.

Interview preselects were only 1 week...probably still not ample time to get this stuff down

Was just seeking any tips/shortcuts/what to make points on regarding typical valuation questions?

(I may know the formulaes, but may have more trouble defining the true meaning behind the numbers)

http://www.ibankingfaq.com/category/interviewing-technical-questions/

This should help you with the basics...

try www.investopedia.com and look up FCF (free cash flow). as for dcf valuations, search this forum. Ive read a couple of good posts here that have explained it nicely. Or else google will lead you in the right direction. I would list it all here for you, but I havent passed a banking interview myself yet so you're better off looking for replies and info from more qualified people.

I interviewed with them last year and these are the questions I got;

1) Tell me how you would do a DCF
2) What is WACC
3) Would you prefer a firm with all equity and no debt or a firm with some debt and the rest as equity
4) Tell me about your past work experience
5) How do the different statements link to each other

value company through multiples or dcf
FCF = ebit(1-t) + deprec - capex - increase in wc

get terminal value similar to a growing perpetuity
discount fcfs and the terminal value using the discount rate you get through the capital asset pricing model which is Rd = risk free return + beta(return of market - risk free return)
wacc = weighted average cost of capital
wacc = e/d+e times cost of equity + d/d+e times cost of debt times (1-tax rate)
to put in very simple terms

for all the help so far. Much appreciated!

Just to help you understand the concepts behind those formulas as well:

In a nutshell, FCF is the leftover cash that flows to the debt and equity holders after the expenditures for growing the business (e.g. CAPEX). So say if you invested in company A, the value that accrues to you as an investor would be these FCFs in the future. But since these are cashflows in the future, you need to discount them because money today is worth more than the money tomorrow. You discount them using the WACC. The WACC is basically the debt holder's and equity holder's (you included) required return, given the perceived RISK of the investment. It's essentially saying, if $110 will go to you a year from now, how much would you invest in to get a 10% return? You would put in a $100. The discounting formula is just a way to "back out" to the amount that you're investing based on your required rate of return.

I think it's easier to remember the steps and the formula if you understand the underlying concept. Hope this helps.

for 3) Would you prefer a firm with all equity and no debt or a firm with some debt and the rest as equity?

I would have said...

Mixture of Debt + Equity
Easier to raise capital (EQ would dilute share price)
Debt w/ interest expense can be deducted from Taxable Income
Leverage?
Ability to better secure short term funding (CP) - Usually based on ratings

Any obvious ones that I missed? (probably alot)

Went in today, dressed to impress and definitely did a solid job.

Asked the questions posted by indian banker except for linking the 3 financial statements.

Started w/ talking about work experience, team related, solving conflicts, the usual.

I downplayed my analytical skills saying I was Econ major, enjoyed the markets, the macroeconomy, how the small parts make up the big picture

then asked if i knew anything about dcf...walked her through. got a lot of "thats correct yesyesyes"

she asked about Beta, what it meant, how to get it, CAPM model application...asked if I would want company w/ debt + equity or no debt...asked which company would have higher Beta (all equity)

Essentially, I was ready for this thanks to you all. Appreciate the help from you all and I will let you know when I hear back.

Cheers