Centerview Partners IB Interview Questions

IRR (internal rate of return) is the annual discount rate at which the net present value (NPV) of all of an investment's cash flows is zero. A discount rate is the yearly rate you use to turn future cash into today's dollars. NPV is the sum of every cash flow after that conversion. To calculate IRR, list the cash out at entry as a negative and the cash back each year and at exit as positives. Then solve for the rate where their present values add up to zero. There is usually no direct formula. You try rates and interpolate between them, or you use Excel's IRR function.

The sun would rise in the West. Sunrise comes from the Earth spinning on its axis, and that spin carries you around to face the sun once a day. Reverse the spin and the sun appears to cross the sky the other way. Reversing the orbit changes almost nothing. The orbit moves the sun's apparent position by only about one degree a day, and the spin moves it by about 360 degrees a day.

Answer in three slots, in this order. Business: name the company and its sector, and say what it does in one line. Financials: give its approximate market cap (the total value of its shares) and its valuation multiple, such as EV/EBITDA (enterprise value, meaning the value of the whole business to all its investors, divided by EBITDA, a measure of operating cash profit) or P/E (share price divided by earnings per share), and compare it with its peers. Interest: give two reasons, one tied to an M&A (mergers and acquisitions) deal and one tied to a macro trend. That way either follow-up lands on ground you have prepared.

A DCF (discounted cash flow) is intrinsic. It values the business on its own projected cash flows, but the result leans hard on assumptions like the discount rate and terminal value. Comparable companies (comps) are market-based and fast. They reflect minority trading prices with no control premium, and they inherit any market mispricing. Precedent transactions include the control premium paid in real acquisitions, but the data is often stale, sparse, and shaped by deal-specific conditions.

Year 5 free cash flow rises by 100 × the tax rate. At a 25% tax rate, that is +25. Depreciation is a non-cash expense. It cuts operating income by 100, which cuts taxes by 25. You then add the full 100 back, so the net cash gain is the 25 of tax saved. That 25 is the depreciation tax shield.

Start with EBITDA. Subtract taxes calculated on EBIT (EBIT times the tax rate), subtract capital expenditures (CapEx), and subtract the increase in net working capital. Then add back any other non-cash charges that reduced EBITDA, such as stock-based compensation if your model treats it as a non-cash add-back. What you have left is unlevered free cash flow (ULFCF), the cash the business produces for all capital providers, debt and equity, before any interest or debt repayment.

A pre-revenue pharma company has drug candidates in clinical trials but nothing approved for sale yet, so there is no revenue history to grow. You build revenue drug by drug, from the bottom up. Estimate peak sales (the highest annual revenue the drug should reach) from the number of treatable patients and the net price. Spread those sales over a launch ramp and a decline after patents expire. Then multiply each year by the probability the drug is approved from its current trial phase. The sum across the pipeline (all the company's drugs in development) is the risk-adjusted revenue forecast that feeds a risk-adjusted net present value (rNPV) valuation.

The P/E falls to about 12.4x. At a $10 share price, EPS is $10 / 15 = $0.67. When the tax rate drops from 30% to 15%, the company keeps 85% of pre-tax income instead of 70%. So EPS rises by a factor of 0.85 / 0.70, to about $0.81, and $10 / $0.81 is about 12.4x.

An M&A deal is accretive when it raises the acquirer's earnings per share (EPS). EPS is net income divided by shares outstanding, so the deal is accretive when the combined company's EPS comes out higher than the buyer's EPS on its own. That happens when the target's earnings yield beats the after-tax cost of the money used to buy it, before synergies and deal adjustments such as extra depreciation from asset write-ups. Earnings yield is the target's net income divided by the price paid: the inverse of the purchase P/E, or price-to-earnings ratio. The cost of the money depends on the source. Cash costs the interest it would have earned. New debt costs its after-tax interest. New shares cost the acquirer's own earnings yield. A low purchase P/E, cheap financing and synergies (cost savings or extra revenue from combining the two companies) all push a deal toward accretion.

Name one specific deal and defend it from the buyer's side. Show that the strategic logic is clear, that the value the buyer can create (synergies: the extra profit or growth the combined company gets that neither could get alone) is larger than the premium it paid (the amount above the target's standalone value, which for a public target is its undisturbed share price), and that the funding did not strain the buyer. One defensible pick is Google's March 2025 agreement to buy the cloud-security company Wiz for about $32 billion in cash, as long as you also name its main risk: the high price.

Go top-down and talk about the trend across years, since one year alone tells you little. Start with revenue growth and what drives it. Then cover gross margin against the sector norm, operating expenses as a percent of revenue (R&D above all), and EBIT margin. Close with a view: is profit growth coming from a stronger business, or from cost cuts and one-off items? For a healthcare company, tie each line to the drivers that matter there: product launches, patent expiries, pricing and the pipeline (the drugs or devices still in development).

Value it with a discounted cash flow, or DCF. Project what the tree earns each year over its productive life, then convert each of those future amounts into today's money using a discount rate that reflects how risky and how delayed they are. Annual cash flow is the harvest volume times the price per apple, less the cost of water, fertiliser, pruning and picking. It follows the tree's biology: roughly nothing for the first few years, a ramp to peak bearing, then decline. The tree eventually stops producing and dies, so the forecast ends at a finite horizon with at most a small salvage value for the wood or the land underneath. Then cross-check the result against what comparable trees or orchard acreage actually change hands for.