Interview Question - Two companies have an enterprise multiple

Company with lower capex requirements will have a higher value based on DCF because it will have higher free cash flows.

All of the free cash flows will be discounted back to present value (along with terminal value). Assuming both companies discount future free cash flows (and tv) at the same rate, company b (with lower capex requirements) will have a higher value.

model21 is right. Another way to answer it without pointing to a specific valuation method is to say company B is a better value because company A will have to reinvest more cash to sustain those ebitda levels in the future

I think it's a good idea to dot your i's and cross your t's too. As model mentioned, put in some assumptions to prove your point. For instance, telling them "assuming the same discount rate" shows them you understand that companies with similar capital structures, etc. could have wildly different costs of capital, even within the same industry. It also makes your main point more clear.

Isn't A the better relative value? Lower enterprise multiple = better value; enterprise multiple = EV/FCFF; when calculating FCFF you subtract capex; right now company A has a multiple of 8 (as does B); however, if company A simply decreases its capex (which is a positive factor likley to yield future economic benefits) to that of B its FCFF would rise and it would have a lower multiple, making it a better value (relatively speaking). Accordingly, now you can buy A (a company that is plowing more money back into its business to improve future earnings) at the same valuation as B.