Hi all,
Hope all is well.
A buddy of mine recently did a 3hr modelling test for a large name REPE firm, which required him to plan out the development costs via an s-curve / bell-curve.
Is this normal in development modelling tests? See it used all the time in detailed models, but never knew some firms would expect it from candidates in a test. Makes me think I need to scratch up on my skills!
Thanks!
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That’s so unreasonable to think a candidate should know to write that formula from scratch. Is this test taken from home? If so just have it ready to copy paste from another model like how it’s done in the real world.
Hey there!
Ah, the good old S-curve or bell-curve in development modeling tests. It's not uncommon, but it's not always expected either. It's used to run the development costs through the cash flow based on when you think they're likely to occur. Some firms do indeed expect it in a test, especially if they're looking for a more detailed understanding of your modeling skills.
So, yes, it might be a good idea to brush up on your skills in this area. Remember, in the high finance world, you can never be too prepared! Keep swinging from those financial branches, my friend!
Sources: Case Studies & Modeling Tests: How Exactly Are They Administered?, Development vs. Acquisitions, https://www.wallstreetoasis.com/forum/corporate/breaking-into-corporate-development-from-non-traditional-backgrounds?customgpt=1, On cycle Modeling Test Difficulty
LMAO that is absolutely brutal, s-curve modeling isn't a particularly straightforward thing a normal person would have memorized...
Agreed that's not cool.
Useful tips to build a S-Curve without the huge formula from your classic pro model:
1. Memorize some BETA.DIST formula parameters (in that case 1.7 & 1.8)
If (Dev Flag = 1, BETA.DIST(Dev Period/Total Dev Period,1.7,1.8,TRUE),0)
2. Build it manually with percentage
Let's imagine a 24 months split:
Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12 1.0% 1.0% 2.0% 2.0% 3.0% 3.0% 5.0% 6.0% 6.0% 7.0% 8.0% 9.0%(From 12 to 24 you do the same but decreasing)
Hard costs split over 24 months = 100
Month 1 = Hard Costs Budget (lock that cell) * Month 1 %
Month 1 = 100 * 1% = 1
What I also like to do, is adding a Spark-line within the cell before the one showing total item amount, allowing a quick check
Does that look like a S-curve for my hard costs
Does that look flat for my soft costs
Does my financing cost grow through time as we draw more debt
(Alt - N - SL-)
If going for a dev modelling test then yeah, brush up on your s-curve. It is one of the only semi-difficult technical things (excel-wise) you can encounter that might catch you by surprise.
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