Tough GS analyst I-View Brainteaser - can you help solve it? USD 1m or GS offer?
Hi guys,
a friend of mine got following interview brainteaser at a GS internship interview:
If you had the choice between 1m USD in cash and an unconditional Job offer at GS - what would be the more attractive Option financially in your view? Please try to calculate an optimal solution.
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I think they would like to see the interviewee calculate the net present value of a an IBD career at GS and argue the assumptions with the interviewer; in my view this is not so straightforward as it seems.
Let's assume you're applying for an analyst role in LDN, where the tax rate is what - say 40%? You have to factor this in; then you have to somehow apply a discount factor with which to discount the different step-ups in salary levels (split this in base and salary) and decide on what would be a finaly salary Level you can transform into a TV.
In order to calculate the Discount factor one has to argue what the cost of capital or risk of yourself as a human resource asset should be. Ie. apply CAPM to yourself and argue that.
Lastly you would have to make assumptions regarding the potential that you get kicked out during each step of the career ladder, I think if one brings in some real Options and probability Valuation aspects at this Point - that would be great.
Any suggestions for how to solve it, step by step?
Best,
Paul
Easy answer: take the $1mm and go to MS/JPM/other BB lol
Brand value of GS NPV is never gonna be over $1mm if trading for a comparable firm.
@"Flake" @"thebrofessor" @anyoneelsewhowon'tstoplaughing.
Don't mind me, just trolling.
Take the 1 million and buy GS shares!
easy peasy lemon squeazy
I don't get how this is a challenging question. You're a moron if you don't take the $1MM. You can just work at another bank.
This is an example of a brain-teaser at Goldman Sachs? Are you sure it's not just a basic stupidity screen? For as little respect I have for GS, even I can't believe they believe this is a brain-teaser.
"But it is the best bank"
The net present value of a full time (IBD) role at GS will exceed $1mm. This assumes that there are no competing offers in play, etc.
Create a DCF using the after-tax salary + bonus figures for a 3-year analyst program and 3-year associate program, with an optimistic terminal growth rate (5% or 6%). The GS brand will improve long-term salary prospects, hence the optimistic growth rate. Even a discount factor of >10% (for the reasons you listed) will allow you to clear $1mm.
The $1m is not a static number. Be a baller, tell then that you could invest the $1m (in your own start up, in a friend's start up, on the market) and make a killer IRR that exceeds the IRR of a GS career.
Also, bear in mind that DCF runs on probability weighted cash flows. How long do you think you can stick it out at GS as an analyst (presumably in IB) before you're told it's time to move on? Normally 2-3 years before you're expected to get an MBA. The brand value of GS for your pre-MBA career and the contacts you make in 2-3 years analyst are not so great that NPV would be >$1m.
in what universe are analysts expected to get an mba to move on to an associate role or beyond at bbs??
What a bunch of cocky mofos
Discount rate is a measure of opportunity cost. That's a foundation of CAPM. You should be asking yourself what your next best alternative to GS is and basing the discount rate on that.
Maybe this is a complicated way of them working out what other offers you've got, as well as a test of whether or not you understand valuation theory.
Didn't even read the thread, just here to staunchly object to "I-view", fucking retarded.
If I was the person being interviewed I would have essentially shut down the whole process before even answering that question.
And if by chance I ever lose half of my IQ points and ask a kid, with zero experience, interviewing for an internship that question and he/she doesn't answer unequivocally, "Take the fucking money and run." then I'd assume they are literally retarded.
wow. just wow.
the question would be harder if it was Baupost, Sequoia, or Ruane Cuniff IMO. but then again, none of them are stupid or shallow enough to ask this question.
I can't stop laughing at this dumb question.
I'm not sure what's more stupid: either this question or the group of people who wouldn't take the money and run with it.
This didn't happen. /thread.
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