I recently interviewed for a 1st year analyst position at a middle market bank. I got a asked a question that came a bit out of left field, and I was hoping to see different approaches to answering odd questions like these. The question was:
How would you do a DCF analysis on yourself?
Thanks.
| +355 | Evercore Intern Seizure | 54 | 7h |
| +67 | JPM M&A is Gone??? Purely Coverage Banking??? | 31 | 6h |
| +58 | Is DCM actually underrated ? | 24 | 17h |
| +50 | How do I understand vs. just memorizing? | 5 | 16h |
| +48 | Losing my personality in Banking | 9 | 17h |
| +47 | Are all Tech / TMT groups sweaty? | 38 | 13h |
| +42 | Associate & Above IB exits | 16 | 3d |
| +32 | Incoming IB Analyst: Best Ways to Prepare? | 10 | 9h |
| +27 | Which groups are ideal for laterals? | 12 | 11h |
| +24 | The good and bad with Wells Fargo | 1 | 17h |
Career Resources
Get instant access to lessons taught by experienced private equity pros and bulge bracket investment bankers including financial statement modeling, DCF, M&A, LBO, Comps and Excel Modeling.
EP, two parts.
If your interviewer asked you would do a DCF without any lead up then they are likely looking for a high level walk through. Ie, "I would take their historical financials, decide on revenue, margin, etc assumptions to project out future years to a run-rate state for the company (5-10 years). Next, i would determine a terminal value, and then finally present value the terminal value and the projected year's cash flows back to present." At that point, they would likely ask you questions along the way or at the end of your answer to dive deeper. Usually this question is used to get you talking about finance to see how much you understand and how comfortable you are talking about it.
For a middle market 1st year analyst interview, i don't actually consider this an odd ball question or out of left field (especially if you come from a finance or business undergrad). Just wondering what makes you consider the question so?
Perhaps I wasn't clear enough, but what the interviewer asked me was: how would you do a DCF analysis to value yourself as a person.
I actually really like that question...interesting.
Yeah, LebronJordan nailed it the second time around. It goes a bit hand-in-hand with "What do you think you're worth?" When asked that, people typically give a salary estimate of what they think they are worth. Without getting specific on figures, for your question, you'd say something along the lines of your NOPAT (basically income minus expenses other than your debt expenses), I'd mention working capital is irrelevant (at least I think for now), CapEx would be your house and general improvements, and then you'd need to evaluate a discount rate for yourself. As a fresh college grad, you're probably a higher rate than an executive... Discount back to find your present value. Take into consideration your terminal value with the appropriate growth rate - what do you feel is appropriate considering your past experience and education?
I could be thinking too much into this...I'm a few whiskeys in
Oh gotcha. Completely my mistake in reading and missing the 'on'. Well, in case that i think the only interesting items would be to discuss estimates on 1. Career progression 2. A few differences from common DCF's (ie cost of wife, kids potentially as well as if you do an MBA) 3. The fact that you would have a finite age instead of a terminal value and then finally giving yourself a cost of capital.
Would probably be more about just sounding thoughtful with your approach then actually needing real content in the answer.
"The purpose of a discounted cash flow analysis is to calculate the intrinsic value of a company by discounting its future cash flows to present day. The same concept can be applied to a person-- however the intellectual property and value added is a better representation. Despite market value(street-level compensation) being pegged at 90k, I believe I am currently undervalued given that I went to H/S/W and reneged a FT offer with GS TMT to interview here. Adjusting for risk, I believe my intrinsic value should be 180k~ so my paycheck should reflect as such."
Eos accusantium distinctio exercitationem dolores animi dolorum ut. Aut quam qui nemo et laudantium non. Voluptatem et nulla aut quia debitis. Optio soluta architecto dolores ut esse autem possimus quia.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...