Investment Banking Interview Questions Company Valuations

During your investment banking interviews, it is likely you will be asked to, "explain how companies are valued?"

The valuation methodologies you should be familiar with include:

  • Discounted Cash Flow (DCF)
  • Comparable Companies
  • Precedent Transactions
  • Multiples Method
  • Market Valuation

These are the top ten valuation method questions.

  • Name some valuation methods.
  • What are some of the multiples used in valuation?
  • Can you use Equity Value / EBITDA as a multiple?
  • What are some other invalid multiples?
  • How do the valuation methods work?
  • Which valuation method gives the highest valuation? Comparable companies, DCF, Precedent transaction, or LBO?
  • If you use numerous valuation methods that produce different results, how do you come up with on final value?
  • A company similar to mine has a P/E ratio of 10. My EPS is $4. What should my share price be?
  • Three Precedent Transactions had EBITDA multiples of 12x, 8x, and 10x. My company has EBITDA of $1 Billion. What is my company’s Enterprise Value?
  • A comparable company has an equity value / EBITDA multiple of 14x. My company’s EBITDA is $40 million. What’s the value of my company?

To be familiar with a valuation means:

  • Be able to walk someone through the steps/process of performing this type of valuation
  • Know and understand any and all related finance equations
  • Know which method gives the highest or lowest valuation
  • Have a minimum of three pros and cons of each type of valuation