How would you value a company?

I'd use three core methodologies—comparable companies analysis for market-based relative value, precedent transactions for M&A-based value including a control premium, and a DCF for intrinsic value based on projected free cash flows—then triangulate the ranges on a football field chart.

Given a set of selected comparable companies and their median multiples for valuing a private fraud prevention company, which multiple do you use to value the company and why?

Use EV / NTM Revenue because fraud prevention is a high-growth software sector where many companies are unprofitable, making revenue the most consistently positive and comparable metric across the comp set. If the company is meaningfully EBITDA-positive, you can use EV / EBITDA as a secondary cross-check, but EV / NTM Revenue should be the primary multiple.

Walk through the 3 financial statements when PP&E sells for $150mm when book value is $100mm. Assume a 20% tax rate.

A $50mm pre-tax gain increases net income by $40mm after $10mm taxes; on the CFS, the gain is reclassed from CFO to CFI (+$150mm proceeds), raising cash $140mm; PP&E falls $100mm, so assets and equity each rise $40mm.

Tell me four reasons a company would trade at a higher P/E than another company.

A company trades at a higher P/E due to (1) higher expected earnings growth, (2) lower risk or cost of equity, (3) a higher payout ratio, or (4) temporarily depressed current earnings deflating the denominator.

Would a lower P/E company acquiring a higher P/E company be accretive or dilutive (assume all stock, but can talk about consideration)? Is this always the case, and what could change that answer?

In an all-stock deal, a lower P/E acquirer buying a higher P/E target is dilutive because each share issued carries more earnings than the target's earnings received; however, sufficient synergies, switching to cash consideration, or rapid target earnings growth can flip the result to accretive.

Why do we use EV/Revenue as a valuation multiple?

We use EV/Revenue when earnings-based multiples like EV/EBITDA are meaningless—typically for unprofitable or early-stage companies—because Revenue is almost always positive and capital-structure-neutral, though it implicitly embeds assumptions about future margins.

Suppose you invest $100 upfront for the chance to flip a coin once every year for 10 years, where heads earns you $100 and tails earns nothing. After valuing this coin using a DCF approach, a client asks: why do we need to apply a discount rate when valuing this coin? How do you explain it to them?

The discount rate accounts for the time value of money, a risk premium for the uncertainty of each coin flip, and the opportunity cost of deploying capital here instead of the next-best alternative investment.

What happens to valuation when we move from straight-line depreciation to an accelerated depreciation schedule?

Valuation increases because accelerated depreciation front-loads tax shields into earlier periods, and due to the time value of money, receiving the same total tax benefit sooner results in a higher present value of free cash flows.

Company A has EV/EBITDA 8x, EBITDA 200, leverage ratio 3x, and 100 shares outstanding. Company B has EV/EBITDA 6x, EBITDA 100, leverage ratio 4x, and 50 shares outstanding. If Company A buys Company B in an all-stock deal and pays 7x EBITDA, what is the price per share?

The price per share is $6.00, calculated as the deal equity value of Company B [(7 × $100 EBITDA) − $400 debt = $300] divided by its 50 shares outstanding.

Suppose you have a company that is generating $50mm in EBITDA and trades at 4x. It has $100mm in senior debt and $200mm in junior debt. What is the equity value? What do you think the debt is trading at? Why?

Equity value is zero since the $200mm TEV cannot cover $300mm in total debt; senior debt trades at par (fully covered), while junior debt—the fulcrum security—trades around 50 cents on the dollar.

Why do we not take Price/Revenue or Equity Value/EBITDA?

Price/Revenue and Equity Value/EBITDA are mismatched because Revenue and EBITDA are pre-interest metrics available to all capital providers, so they must pair with Enterprise Value, not Equity Value, which excludes debt holders' claims.

Company A has 10 shares outstanding, a share price of $25, net income of $10, and a 40% tax rate. Company B has a $150 market cap, net income of $10, and a 40% tax rate. If A buys B and finances the acquisition with 100% stock, is the deal accretive or dilutive?

The deal is accretive: pro forma EPS rises to $1.25 from $1.00 because Company A's P/E (25×) exceeds Company B's P/E (15×), meaning A issues fewer shares per dollar of acquired earnings.

How would you value a company?

I'd use three core methodologies—comparable companies analysis for market-based relative value, precedent transactions for M&A-based value including a control premium, and a DCF for intrinsic value based on projected free cash flows—then triangulate the ranges on a football field chart.

Given a set of selected comparable companies and their median multiples for valuing a private fraud prevention company, which multiple do you use to value the company and why?

Use EV / NTM Revenue because fraud prevention is a high-growth software sector where many companies are unprofitable, making revenue the most consistently positive and comparable metric across the comp set. If the company is meaningfully EBITDA-positive, you can use EV / EBITDA as a secondary cross-check, but EV / NTM Revenue should be the primary multiple.

Walk through the 3 financial statements when PP&E sells for $150mm when book value is $100mm. Assume a 20% tax rate.

A $50mm pre-tax gain increases net income by $40mm after $10mm taxes; on the CFS, the gain is reclassed from CFO to CFI (+$150mm proceeds), raising cash $140mm; PP&E falls $100mm, so assets and equity each rise $40mm.

Tell me four reasons a company would trade at a higher P/E than another company.

A company trades at a higher P/E due to (1) higher expected earnings growth, (2) lower risk or cost of equity, (3) a higher payout ratio, or (4) temporarily depressed current earnings deflating the denominator.

Would a lower P/E company acquiring a higher P/E company be accretive or dilutive (assume all stock, but can talk about consideration)? Is this always the case, and what could change that answer?

In an all-stock deal, a lower P/E acquirer buying a higher P/E target is dilutive because each share issued carries more earnings than the target's earnings received; however, sufficient synergies, switching to cash consideration, or rapid target earnings growth can flip the result to accretive.

Why do we use EV/Revenue as a valuation multiple?

We use EV/Revenue when earnings-based multiples like EV/EBITDA are meaningless—typically for unprofitable or early-stage companies—because Revenue is almost always positive and capital-structure-neutral, though it implicitly embeds assumptions about future margins.

Suppose you invest $100 upfront for the chance to flip a coin once every year for 10 years, where heads earns you $100 and tails earns nothing. After valuing this coin using a DCF approach, a client asks: why do we need to apply a discount rate when valuing this coin? How do you explain it to them?

The discount rate accounts for the time value of money, a risk premium for the uncertainty of each coin flip, and the opportunity cost of deploying capital here instead of the next-best alternative investment.

What happens to valuation when we move from straight-line depreciation to an accelerated depreciation schedule?

Valuation increases because accelerated depreciation front-loads tax shields into earlier periods, and due to the time value of money, receiving the same total tax benefit sooner results in a higher present value of free cash flows.

Company A has EV/EBITDA 8x, EBITDA 200, leverage ratio 3x, and 100 shares outstanding. Company B has EV/EBITDA 6x, EBITDA 100, leverage ratio 4x, and 50 shares outstanding. If Company A buys Company B in an all-stock deal and pays 7x EBITDA, what is the price per share?

The price per share is $6.00, calculated as the deal equity value of Company B [(7 × $100 EBITDA) − $400 debt = $300] divided by its 50 shares outstanding.

Suppose you have a company that is generating $50mm in EBITDA and trades at 4x. It has $100mm in senior debt and $200mm in junior debt. What is the equity value? What do you think the debt is trading at? Why?

Equity value is zero since the $200mm TEV cannot cover $300mm in total debt; senior debt trades at par (fully covered), while junior debt—the fulcrum security—trades around 50 cents on the dollar.

Why do we not take Price/Revenue or Equity Value/EBITDA?

Price/Revenue and Equity Value/EBITDA are mismatched because Revenue and EBITDA are pre-interest metrics available to all capital providers, so they must pair with Enterprise Value, not Equity Value, which excludes debt holders' claims.

Company A has 10 shares outstanding, a share price of $25, net income of $10, and a 40% tax rate. Company B has a $150 market cap, net income of $10, and a 40% tax rate. If A buys B and finances the acquisition with 100% stock, is the deal accretive or dilutive?

The deal is accretive: pro forma EPS rises to $1.25 from $1.00 because Company A's P/E (25×) exceeds Company B's P/E (15×), meaning A issues fewer shares per dollar of acquired earnings.

Question Bank

Valuation Interview Questions

Q: What is the most common valuation question in IB interviews?

"Walk me through a DCF" is asked at almost every bank. The OFFERGOBLIN structured answer format covers the 60-second interview script plus the deeper mechanics so candidates can handle follow-ups about WACC, terminal value, and free cash flow.

Q: Do I need to memorize multiples for IB interviews?

Yes. Candidates should know EV/EBITDA, EV/Revenue, P/E, and a few sector-specific multiples cold. OFFERGOBLIN's valuation category has dedicated cards for each multiple covering when to use it, what it tells you, and what to watch for.

Q: How is terminal value tested in IB interviews?

Interviewers typically ask candidates to explain both the Gordon Growth and Exit Multiple methods, when each is appropriate, and why terminal value usually represents 60-80 percent of enterprise value in a DCF. OFFERGOBLIN drills these questions in adaptive sequences.

DCF, comps, multiples, terminal value, and how to triangulate a defensible price range. The valuation questions OFFERGOBLIN sees across bulge bracket, elite boutique, and middle-market interviews.

Valuation is the centerpiece of every banking technical round. "Walk me through a DCF" and "What multiples do you use?" are the entry-level versions. The harder versions — when does WACC break, why is terminal value 70 percent of enterprise value, why is EV/EBITDA the default versus EV/Revenue — separate strong candidates from weak ones.

OFFERGOBLIN's valuation category covers DCF construction, free cash flow, WACC components, CAPM, terminal value methodology, trading comps, transaction comps, and every major multiple. Questions are sourced from candidate-reported interviews at firms across the street.

Sample Valuation Interview Questions

A short sample from the full bank. Tap an answer to reveal it.

Bank of America
How would you value a company?
I'd use three core methodologies—comparable companies analysis for market-based relative value, precedent transactions for M&A-based value including a control premium, and a DCF for intrinsic value based on projected free cash flows—then triangulate the ranges on a football field chart.
Work full answer in app
FT Partners/ Superday/ FinTech
Given a set of selected comparable companies and their median multiples for valuing a private fraud prevention company, which multiple do you use to value the company and why?
Use EV / NTM Revenue because fraud prevention is a high-growth software sector where many companies are unprofitable, making revenue the most consistently positive and comparable metric across the comp set. If the company is meaningfully EBITDA-positive, you can use EV / EBITDA as a secondary cross-check, but EV / NTM Revenue should be the primary multiple.
Work full answer in app
Bank of America/ Superday/ Energy
Walk through the 3 financial statements when PP&E sells for $150mm when book value is $100mm. Assume a 20% tax rate.
A $50mm pre-tax gain increases net income by $40mm after $10mm taxes; on the CFS, the gain is reclassed from CFO to CFI (+$150mm proceeds), raising cash $140mm; PP&E falls $100mm, so assets and equity each rise $40mm.
Work full answer in app
Morgan Stanley
Tell me four reasons a company would trade at a higher P/E than another company.
A company trades at a higher P/E due to (1) higher expected earnings growth, (2) lower risk or cost of equity, (3) a higher payout ratio, or (4) temporarily depressed current earnings deflating the denominator.
Work full answer in app
Goldman Sachs/ Technology
Would a lower P/E company acquiring a higher P/E company be accretive or dilutive (assume all stock, but can talk about consideration)? Is this always the case, and what could change that answer?
In an all-stock deal, a lower P/E acquirer buying a higher P/E target is dilutive because each share issued carries more earnings than the target's earnings received; however, sufficient synergies, switching to cash consideration, or rapid target earnings growth can flip the result to accretive.
Work full answer in app
Moelis/ 1st Round/ Generalist
Why do we use EV/Revenue as a valuation multiple?
We use EV/Revenue when earnings-based multiples like EV/EBITDA are meaningless—typically for unprofitable or early-stage companies—because Revenue is almost always positive and capital-structure-neutral, though it implicitly embeds assumptions about future margins.
Work full answer in app
Goldman Sachs/ Superday/ Healthcare
Suppose you invest $100 upfront for the chance to flip a coin once every year for 10 years, where heads earns you $100 and tails earns nothing. After valuing this coin using a DCF approach, a client asks: why do we need to apply a discount rate when valuing this coin? How do you explain it to them?
The discount rate accounts for the time value of money, a risk premium for the uncertainty of each coin flip, and the opportunity cost of deploying capital here instead of the next-best alternative investment.
Work full answer in app
Credit Suisse
What happens to valuation when we move from straight-line depreciation to an accelerated depreciation schedule?
Valuation increases because accelerated depreciation front-loads tax shields into earlier periods, and due to the time value of money, receiving the same total tax benefit sooner results in a higher present value of free cash flows.
Work full answer in app
Morgan Stanley
Company A has EV/EBITDA 8x, EBITDA 200, leverage ratio 3x, and 100 shares outstanding. Company B has EV/EBITDA 6x, EBITDA 100, leverage ratio 4x, and 50 shares outstanding. If Company A buys Company B in an all-stock deal and pays 7x EBITDA, what is the price per share?
The price per share is $6.00, calculated as the deal equity value of Company B [(7 × $100 EBITDA) − $400 debt = $300] divided by its 50 shares outstanding.
Work full answer in app
Morgan Stanley/ Superday/ Generalist
Suppose you have a company that is generating $50mm in EBITDA and trades at 4x. It has $100mm in senior debt and $200mm in junior debt. What is the equity value? What do you think the debt is trading at? Why?
Equity value is zero since the $200mm TEV cannot cover $300mm in total debt; senior debt trades at par (fully covered), while junior debt—the fulcrum security—trades around 50 cents on the dollar.
Work full answer in app
Deutsche Bank
Why do we not take Price/Revenue or Equity Value/EBITDA?
Price/Revenue and Equity Value/EBITDA are mismatched because Revenue and EBITDA are pre-interest metrics available to all capital providers, so they must pair with Enterprise Value, not Equity Value, which excludes debt holders' claims.
Work full answer in app
Evercore/ 1st Round/ Generalist
Company A has 10 shares outstanding, a share price of $25, net income of $10, and a 40% tax rate. Company B has a $150 market cap, net income of $10, and a 40% tax rate. If A buys B and finances the acquisition with 100% stock, is the deal accretive or dilutive?
The deal is accretive: pro forma EPS rises to $1.25 from $1.00 because Company A's P/E (25×) exceeds Company B's P/E (15×), meaning A issues fewer shares per dollar of acquired earnings.
Work full answer in app

Frequently Asked Questions

What is the most common valuation question in IB interviews?

Do I need to memorize multiples for IB interviews?

How is terminal value tested in IB interviews?

Sample Valuation Interview Questions

Frequently Asked Questions

Other question categories