This was beyond helpful! As a senior graduating in the Fall of this year I am preparing to apply for FT applications in August/September. So this video is giving me a great head start. Thank you again for providing content like this for FREE!
For Q5 should the WACC be higher for a 100 million company or a 100 billion company. I see where your answer is coming from but isn't assuming a risk comes from market cap alone lacks depth? Like for example TSLA has a huge market cap but Ford is a less risky company (according to beta at least)? I might be missing something - Love the video!
The answer to Q5 is wrong. The WACC for the larger company would be higher. Since it states that all other things remain equal, the cost of debt, cost of equity, tax and the debt of both firms remain the same. Therefore, since it is generally true that debt is cheaper than equity and the more expensive equity now carries a larger weight in the larger company, the WACC would be higher.
Q5: if we consider the WACC formula then wouldn’t it be fair to conclude it’s possible that these two companies have the same WACC? If everything we say everything else remains the same besides market cap we can assume they both have the same cost of equity and debt and the same relative % split of each
I'm pretty new to finance so I might be wrong but wouldn't the bigger company be able to get a lower interest rate on loans(because it should be more stable), so a smaller cost of debt and therefore a lower overall WACC than the smaller one?
@@bp15128 I guess the question is just very unclear. We can't really know what the "all else equal" means because there is definitely something different if both WACCs aren't equal
bruh...the number of ratios you can "also include" in that question is close to infinity, from the simplest to the super-complex. That question is not about naming all of them, but choosing. Every analyst has his own favorite ratios and the key here is to be able to justify which ones you pick and why.
Ok….Just because I’m not ready now does not mean I won’t be ready in the future. Thats what school is for. Have some compassion and worry about what your high finance job and not my career.
I am a Chartered Accountant from India and could easily answer your questions. its interesting how finance is similar across the globe. let me know how to get into financial analyst and future opportunities in this field.
Im taking a basic upper-division corporate finance class at my school... I love it. Thinking of switching to a finance degree from Business/Data analytics. The finance class I am in we have covered all these questions so far
Q1 is bit misleading for me, as it never asked you to choose 10K or the discount rate it’s asking you just about the discount rate so I would negative discount as it never implied if negative values would be allowed or not.
Hi thank you for nice video. 7 years ago I had market sizing question from a consulting company. It was exactly the same questions but the sales in my country. I did the approach you mentioned. However, the interviewer keep questioning me where do you get the population number? Where did you get 75% assumptions? What is the reason behind that 75%? And basically he keep questioning the validity behind the assumptions. So i am wondering how exactly do we need to answer it?
I’m in a situation where I’m almost done with my degree but because I chose to do one of those pay as you go schools I can’t get my degree till it’s paid but I do get a completion letter. My question to is can I land an entry level position while I’m still paying off my degree?
A combination of both, but while in school, a lot of what I learned came from outside the traditional classroom (friends, upperclassmen, and others who have gone through multiple finance interviews)
Gonna graduate next year with a business economics degree. Should I be worried if I plan on becoming a financial analyst, but not quite have the concepts mentioned in this video down?
I would think as long as you are savvy with Excel you should be ok. The jargon will come with experience. Financial analysts are mostly concerned with categorizing the data, then understanding what of the data is important, then turning the data into visuals, and lastly explaining the visuals of the data to your colleagues or team.
I think the top-down approach for the # of cups of Starbucks sold a day is too optimistic, or simplistic, as it has ignored affordability and propensity to spend on coffee. I would go bottom-up, looking at capacity and how fast it can sell. Assuming that a typical outlet is able to dish out 2 cups every 5 minutes, thus making it 2X12x15(hr/day)x5000(outlets)=1.8m cups a day. I’ll Google and share the result if I can find.the answer, I’ll provide it here. Or if anyone has the answer, please kindly share. Thanks.
Ok, turned out I was wrong and too conservative, as Google says "According to a USA Today Article dated 2006, they sell over 4 Million cups of coffee a day.17 Jan 2011”. So, the guy in the video was spot on!
Can you explain the 1st question? Why not say that on average you could earn 7% a year on your investment on something like the S&P500, so you'd ask a discount rate of at least that (7% compounded over two years)? A discount is always negative so I don't get why it's a trick question...
Oh is that because you don't want a discount, you want a bonus for waiting these two years because the value gone up? Is it that foolish of a question? Ofc the value goes up, it's too basic
Don't rreally agree wiith the wacc question. I suppose, yes the larger company will have lower default ratios per Damodaran datasets. But, things like cash and near cash equivalents will affect the lowering of beta more. Ceteris paribus - the larger company will have lower default ratios in the dataset of other similar companies..
Economist is there. Why not just ask Starbucks yearly operation revenue in the USA and divide into 5 us , assuming this is an average price of an average Starbucks cup?
You should use the income statment to estimate cups sold. If starbucks has a billion dolllars worth of revenue and the average cost of a coffee is $5 then we would expect 200 million coffee sales.
I'm more impressed with your not blinking skills than your financial skills. Holy Moly.
This was beyond helpful! As a senior graduating in the Fall of this year I am preparing to apply for FT applications in August/September. So this video is giving me a great head start. Thank you again for providing content like this for FREE!
How did it go, did you land the job?
Bravo! All these questions were mentioned two months ago during my interview with ADNOC!
You are a great instructor: clear, concise communication and precise questions and answers. Love your financial basics
Great video. You’re very smart as well; good thinking process.
please do one of these episodes every month!
Noted, glad you found it helpful!
Please! This is soo great. You have an incredible gift to explain concepts simply and concisely.
Bro im a student of 12th cbse commerce stream (in India) i can answer every question surprisingly 😀😊
Can you do part 2?
Noted! More videos coming!
@@careerprinciples That will be appreciated !!!
For Q5 should the WACC be higher for a 100 million company or a 100 billion company. I see where your answer is coming from but isn't assuming a risk comes from market cap alone lacks depth? Like for example TSLA has a huge market cap but Ford is a less risky company (according to beta at least)? I might be missing something - Love the video!
more of these pls!
Very nice video, I advice you to use the bottom up method rather than the top-down one when it comes to specific quests like the bonus one:)
The answer to Q5 is wrong. The WACC for the larger company would be higher. Since it states that all other things remain equal, the cost of debt, cost of equity, tax and the debt of both firms remain the same. Therefore, since it is generally true that debt is cheaper than equity and the more expensive equity now carries a larger weight in the larger company, the WACC would be higher.
true
Q5: if we consider the WACC formula then wouldn’t it be fair to conclude it’s possible that these two companies have the same WACC? If everything we say everything else remains the same besides market cap we can assume they both have the same cost of equity and debt and the same relative % split of each
i thought the same way
That’s completely true. I reached the same conclusion while reading the question.
I'm pretty new to finance so I might be wrong but wouldn't the bigger company be able to get a lower interest rate on loans(because it should be more stable), so a smaller cost of debt and therefore a lower overall WACC than the smaller one?
@@bp15128 I guess the question is just very unclear. We can't really know what the "all else equal" means because there is definitely something different if both WACCs aren't equal
An investment analyst interview question I got was: How much would you charge for insurance of shipping the Mona Lisa to New York?
Interesting interview question! Thanks for sharing.
Really helpful!
Glad you found it helpful!
Q3 Answer
Also include debt to equity ratio
bruh...the number of ratios you can "also include" in that question is close to infinity, from the simplest to the super-complex. That question is not about naming all of them, but choosing. Every analyst has his own favorite ratios and the key here is to be able to justify which ones you pick and why.
@@martysonn my favorite is debt to equity and ROE
also include what the formula for WACC
All of those were hard! Revenue Manager here, am I in over my head?!
Lol NONE of thee question were hard. If you think these were hard you are not cut out to work in high finance lol
Ok….Just because I’m not ready now does not mean I won’t be ready in the future. Thats what school is for. Have some compassion and worry about what your high finance job and not my career.
Ikr he is really into you 😂 lol@@Bodiedbyjessfitness
I am a Chartered Accountant from India and could easily answer your questions. its interesting how finance is similar across the globe. let me know how to get into financial analyst and future opportunities in this field.
Im taking a basic upper-division corporate finance class at my school... I love it. Thinking of switching to a finance degree from Business/Data analytics. The finance class I am in we have covered all these questions so far
Video was absolutely fantastic…however that last calculation included some wild assumptions😂
Q1 is bit misleading for me, as it never asked you to choose 10K or the discount rate it’s asking you just about the discount rate so I would negative discount as it never implied if negative values would be allowed or not.
Hi thank you for nice video. 7 years ago I had market sizing question from a consulting company. It was exactly the same questions but the sales in my country. I did the approach you mentioned. However, the interviewer keep questioning me where do you get the population number? Where did you get 75% assumptions? What is the reason behind that 75%? And basically he keep questioning the validity behind the assumptions. So i am wondering how exactly do we need to answer it?
I’m in a situation where I’m almost done with my degree but because I chose to do one of those pay as you go schools I can’t get my degree till it’s paid but I do get a completion letter. My question to is can I land an entry level position while I’m still paying off my degree?
Thank you very much❤
can I ask like when start video you said that" my friends and I work in....company" so you work there or just your friends work ?
Did you learn most of the in school? Or on the job?
A combination of both, but while in school, a lot of what I learned came from outside the traditional classroom (friends, upperclassmen, and others who have gone through multiple finance interviews)
Can I still be a financial analyst if I don't want to work on finalizing financial statements, a task typically handled by Big 4 accountants?
Can u do exel interview for finance analysist
Damn bro you dont blink
East Asian people dont have souls , thats why.
Gonna graduate next year with a business economics degree. Should I be worried if I plan on becoming a financial analyst, but not quite have the concepts mentioned in this video down?
I would think as long as you are savvy with Excel you should be ok. The jargon will come with experience. Financial analysts are mostly concerned with categorizing the data, then understanding what of the data is important, then turning the data into visuals, and lastly explaining the visuals of the data to your colleagues or team.
Short answer: yes. You should master at least the first 3 questions to be in a safe zone
thank you sir
No problem Will!
I think the top-down approach for the # of cups of Starbucks sold a day is too optimistic, or simplistic, as it has ignored affordability and propensity to spend on coffee. I would go bottom-up, looking at capacity and how fast it can sell. Assuming that a typical outlet is able to dish out 2 cups every 5 minutes, thus making it 2X12x15(hr/day)x5000(outlets)=1.8m cups a day. I’ll Google and share the result if I can find.the answer, I’ll provide it here. Or if anyone has the answer, please kindly share. Thanks.
Ok, turned out I was wrong and too conservative, as Google says "According to a USA Today Article dated 2006, they sell over 4 Million cups of coffee a day.17 Jan 2011”. So, the guy in the video was spot on!
make more plsss
Are you sure,that such easy type of questions are popular as interview questions in such successful and hardly accessible to be invited companies?
Can you explain the 1st question? Why not say that on average you could earn 7% a year on your investment on something like the S&P500, so you'd ask a discount rate of at least that (7% compounded over two years)? A discount is always negative so I don't get why it's a trick question...
Oh is that because you don't want a discount, you want a bonus for waiting these two years because the value gone up? Is it that foolish of a question? Ofc the value goes up, it's too basic
Please make it
Don't rreally agree wiith the wacc question. I suppose, yes the larger company will have lower default ratios per Damodaran datasets. But, things like cash and near cash equivalents will affect the lowering of beta more.
Ceteris paribus - the larger company will have lower default ratios in the dataset of other similar companies..
Economist is there. Why not just ask Starbucks yearly operation revenue in the USA and divide into 5 us , assuming this is an average price of an average Starbucks cup?
You should use the income statment to estimate cups sold. If starbucks has a billion dolllars worth of revenue and the average cost of a coffee is $5 then we would expect 200 million coffee sales.
Everything went over my head… im going to fail my interview 🙃🥲😭
How did your interview go? I have one on Thursday and this guys making me nervous! 😂
@@YeppersItsMe How did your interview go?
@@taquito.trasgo it went really well, but they ended up going with someone with more experience