For this question, the interviewer wants to see how well you support your answer. Since there is no right or wrong answer, you can say:

“I’d rather have it from increased pricing. This is because it's 100% pass through and selling additional volume has some margin on it that goes to Cost of Goods Sold (COGS).”

Knowing the difference between leasing and buying is important to answer this question. Leasing impacts selling, general, and administrative expenses (SG&A), while buying impacts depreciation and amortization (D&A). Below is an example of how best to answer:

“Since Depreciation and Amortization don't matter for EBITDA, buying a vending machine would give a lower multiple.”

Your answer here depends on several factors. However, the most important ones to consider are the size, maturity of the company, and the industry that it’s in. Here is what a WSO user said:

“I said that a higher multiple has more growth potential since lower EBITDA.”

Pensions are like debt since it's a liability, so they would decrease WACC.

The interviewer is looking for two things by asking you this question: 

1. If you’re keeping up with the markets and 
2. Your understanding of RX deals. You can pick any deal, but you must know what points you need to cover. 

Below is a sample answer. 

“I chose to talk about a deal that Evercore previously worked on. The reason I chose to do so is that it would show the interviewer that I follow the news about the company.

As for the description of the deal, I discussed several things, including how the company became distressed, its capital structure, and the outcome of the process.”

The valuation methodologies are Discounted Cash Flow Analysis (DCF), Comparable Company Analysis, and Precedent Transactions.

As debt increases, WACC will decline up to a certain point when the risk of bankruptcy increases. Then the cost of both debt and equity increases, thereby raising WACC.

There is no right or wrong answer to this question. All you have to do is share with the interviewer what measures you took to prepare. You could do many things, so share the ones that may add value to your application. 

This is how a WSO user approached this question:

“I answered the interview prep question with a standard answer of reading about the group and how the group differed from other private funds groups at other banks.”

Switching to LIFO would decrease a company's valuation since FCF would be cheaper. But really, it would be the opposite because of the taxes. LIFO stands for “Last In First Out,” and FIFO means “First In First Out.” 

“In this case, I had to make assumptions since I wasn’t provided with any numbers. And so, I asked about their leverage ratio, interest coverage ratio, and other metrics to get a better sense of what the interviewer wanted.”

The interviewers at Evercore like asking questions that cause you to think. This includes riddles and market estimation questions. The best way to approach these questions is by thinking outside of the box. 

These questions don’t have one right answer, so try your best to provide a reasonable one. 

Here is what a WSO user said:

“All the birds would fly away because of the loud noise the gun would make when you shoot it, and so no birds would remain.” 

You have to walk through each part of the question slowly. First, calculate the diluted shares outstanding by factoring in the convertible debt, RSUs, and options.
Then multiply that by (X*(1+Y)) to find the equity value. To that, you add debt minus convertible debt and subtract cash. That's the enterprise value.

Firstly, you should know what a J-Curve is. If not, you can learn more about it here. Essentially, the rationale behind this question is to approach it as you would for tail-end secondaries.

For example, a WSO user answered by saying, “I would invest later to shorten the hold period.”

While this did answer the question, providing an explanation to support your answer is advised.

You want higher leverage to send your IRR higher, but you must return low-interest rates.
For sectors with higher yields, you can produce higher interest rates and because of that, higher leverage. But with low-yield assets, you need a low interest, which might, in turn, give you a low leverage rate comparably.

Market estimation questions can seem intimidating. All you have to do is provide a reasonable average. It helps to share your thought process with the interviewer. The interviewer is more interested in how you got to your answer. 

Here is how a WSO user approached and answered the question. 

“I estimated it to be 18 million balls. I counted the horizontal and vertical row counts and height of the plane, then multiplied it by the volume of a ping pong ball.”

Compared to retail companies, software companies have more intangible, unearned revenue.

You can check the terminal value by doing one of the following:
1) Implied exit multiple
2) Compare the percentage of value from a terminal value vs. projection value
3) Benchmark perpetual growth rate vs. GDP growth

You can reduce equity value outlay in three ways: purchase multiple, earnout, and increase debt. For more information on equity value, you can research it here

The answer to this question depends entirely on you. Ideally, there is no right or wrong answer. All the interviewer wants to know is how you are prepared. So be sure to highlight any information that would help answer the question. 

Here is a sample answer:

“I talked about keeping up with the markets, networking, and getting involved with clubs on campus. Ideally, you can answer this question by sharing whatever methods you used to prepare.”

Below is the formula for UFCF:

UFCF = EBITDA - CapEx - Changes in Working Capital - Taxes

Where:

UFCF = Unlevered Free Cash Flow

EBITDA = Earnings Before Interest, Taxes, Depreciation, and Amortization

CapEx = Capital Expenditure 

Don’t stress it and just think through it like this: 100² = 10,000 and 150² = 22,500, so the square root of 16,000 must be between 100² and 150². Therefore, you should answer with a range. In this instance, an appropriate range would be between 120 and 130.

DTA would reduce goodwill, whereas DTL would increase it.

You calculate the maximum allowable NOL for each year, then discount the predicted tax savings obtained from NOL each year and treat it as a cash-like item.

This is another example of a market estimation question. Here is what a WSO user said:

“I estimated the demand for drivers assuming a certain percentage of meals were ordered, separated into age groups, and then used the final number to backsolve for supply, assuming Supply=Demand in an efficient market.”

While this is a good example of the thought process, the user did not answer. You should always provide a numerical answer if you are asked any market estimation questions. Once the question asks for one, of course.

Questions where you are asked to define a term are usually the easiest ones to answer, so be sure to brush up on the financial terms. The best way to approach these questions is to just give the definition.
To answer this question, you can use this definition:
“Quantitative easing is a monetary policy in which the central bank continuously lowers interest rates.”