Walk Me Through a DCF - Investment Banking Interview Question
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- Опубликовано: 12 июн 2024
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In this video, we tackle one of the most common Interview Questions in Investment Banking...Walk Me Through a DCF. We offer a simple, 5-step process to master the question, nail the interview and land the job!
Aiming for Investment Banking, Private Equity, or Investment Management Roles? Ramp up faster with our (free) Finance Analyst Starter Kit! - finance-able.com/analyst-star...
Learn how to answer interview questions from a former Investment Banking (UBS LA), Private Equity (Golden Gate Capital + HIG Capital) and Investment Management ($200B Mutual Fund / $2B Hedge Fund) practitioner…and Adjunct Professor in Columbia Business School’s Value Investing Program who has trained thousands of current IB/PE/HF/MF professionals. If you'd like to see more of our content, please subscribe and follow us on Twitter (@financeable1).In this video, we walk through one of the most common Finance interview questions...."Walk Me Through a DCF". The trick with answering this question is having a simple framework (which we provide here) so you don't get lost in the weeds. Hope you find it helpful!
Contents:
00:00 - Intro
00:08 - Subscribe & More Coming Soon!
00:31 - Interview Question Context
00:40 - 5 Step Framework
01:39 - Unlevered vs Levered DCF
02:04 - Step 1: Stage 1 Cash Flow - Formula Review
03:22 - Step 1: Stage 1 Cash Flow - Stage 1 vs Stage 2 Concept
04:18 - Step 2: Calculate Terminal Value
06:52 - Step 3: Discount by WACC - WACC Concept Review
07:58 - Step 3: Discount by WACC - WACC Formula Review
08:59 - Step 3: Discount by WACC - Cash Flow Discounting
09:56 - Step 4: Calculate from Enterprise Value to Equity Value
10:43 - Step 5: Calculate Price Per Share
11:48 - How to Answer in an Interview
12:49 - Wrap-Up
Hope this is helpful and let us know if you have any questions in the comment section below.
#InvestmentBanking #PrivateEquity #Valuation #HedgeFunds #FinanceInterviews #DCF
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Hands down the clearest video I have seen on this topic. Well done 👏👏👏
Thanks so much. For daily content just like this, check out our Instagram (@survivefinance) instagram.com/survivefinance?igshid=YmMyMTA2M2Y=
This was a tremendously helpful video! I have completed numerous DCF models, but when describing how to walk through a DCF I tend to run into the issue of going too far into the weeds. This helped simplify my thinking drastically.
Glad you found it helpful Will!
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Investors should be cautious about their exposure and be wary of new buys, especially during inflation. Such high yields in this recession is only possible under the supervision of a professional or trusted advisor.
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I’ve been looking to switch to an advisor for a while now. Any help pointing me to who your advisor is?
Angela Lynn Shilling a highly respected figure in her field. I suggest delving deeper into her credentials, as she possesses extensive experience and serves as a valuable resource for individuals seeking guidance in navigating the financial market.
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The best DCF explanation that i've ever watched. Perfectly structured and detailed. Thank you so much
Glad it was helpful!
Excited to launch our Walk Me Through a DCF video which boils the question down to 5 simple steps!
thank you sir. Up until now I knew the pieces of a DCF , this explanation helped to solidify my understanding of the process of a DCF.
Really glad you found it helpful!
The best video on DCF on RUclips !
Thanks so much Davide!
This really was great! I've watched tons of videos on DCFs and what I benefited greatly from in this video was how precise you were in describing Financial Concepts that (as a former Business Student) never had a solidified understanding of. The drawings were great and informative and honestly were made with such great simplicity that I honestly think anyone could learn. Thank you so much ! Peace be with you
Thanks so much. Glad you found it helpful!!
Best walk-through of DCF I've watched! Really breaks things down. Super simple to understand.
Thanks so much Priyanka! Really appreciate the kind words and glad you found it helpful
Best walkthrough I’ve seen, perfect refresher before interviews.
Glad you found it helpful. Best of luck with the interviews!
OMG! Never seen such a master class explanation for the most complicated stuff in finance. Thank you Sir!
Glad you found it helpful. We have SO much more free content here: finance-able.com/analyst-starter-kit/
This was so straightforward and digestible, everything clicked after watching this. Thanks so much !!
So glad to hear that Brett! As an aside, I think you’ll
love our courses if you liked this video: courses.finance-able.com/ 😉
Thank you for this video! It really helped me understand DCF better.
Glad it was helpful!
this is hands down the best DCF explanation ever - thank you!
Thank you so much! Glad you found it helpful!
That was cool and simple. Thank you for sharing
Explanation are beyond this world! Thank you very much.
You're very welcome!
Great video. Thank you 👍
Great video. Thanks for taking the time to make these!
Thanks so much. We have even deeper dives into this and walk me through an LBO in our Analyst Starter kit articles: finance-able.com/analyst-starter-kit/ definitely check these out when you have a sec @matt franks
Clear and concise video man. Helping me a ton
Glad it was helpful!
I really enjoyed all the explanation you gave. Very simplified and insightful.
I will.appreciate if you can through more ligjt in another video on the following:
1. Do a video on time period less than 1 year from the purchase date in discounting or calculating thr NPV
2. Calculate cost of equity for a private company, given Unlevered and levered beta of comparable companies.
Thank you.
Esther
The best DCF video !
Thanks so much Rachel. Let us know if you have any questions!
Awesome DCF interview answer strategy. Really appreciate the clear framework approach
Glad it was helpful!
this is great, really seniors like you and ashwath damadoran make investment banking bearable thank you
Glad it’s helpful…trying to make this stuff clearer
great explenations thank u bro
Hey man, thank you so much for this video, really helpful stuff. New subscriber 👍
Glad it was helpful. Btw, happy to give anyone a free copy of our monster IB prep guide…just follow us on Instagram (@survivefinance) and shoot me a dm with ‘IB Prep Guide’ as the message
This is amazing, please keep doing god's work. You will help someone land their dream job one day!
That’s the goal! 🙂
Loved this content!
Thank you so much!
This was really useful!
Thanks so much!
Nice video. Keep going!
Appreciate it Algier. If you liked this video, definitely check out our deep dive guide on the same topic here: finance-able.com/walk-me-through-a-dcf/
For more interview questions, check out our Twitter (@financeable1) where we post a daily interview question and a weekly challenge question!
Great video. Thank you
Glad you liked it!
Great video, really helpful
Really glad to hear it was helpful!
If you liked this video, you’ll love our courses: courses.finance-able.com/
nice video really helped me
Glad to hear!
Aiming for Investment Banking, Private Equity, or Investment Management Roles? Ramp up faster with our (free) Finance Analyst Starter Kit! - finance-able.com/analyst-starter-kit/ or check out our courses at courses.finance-able.com/
This is amazing
Glad it was helpful!!
Best video on dcf
Thanks so much! :)
Thanks
very good video
Thanks Joseph!
great video! Hopefully i crush my interview
Best of luck!
Awesome video!
Hello ~ quick question: to get to unlevered FCF, would you add back other non cash expenses besides D+A such as goodwill amortization or stock comp? Thanks a ton!
nice!
Thank Y🐱u
EBIT is profit before tax then why we subtract (1-Tax) again while calculating FCFF ??
That allows us to capture the tax deduction from the depreciation expense (ie the depreciation, tax shield)
I am not sure why we need to add cash back in step 5 as the enterprise value (Total Asset Value) already includes cash. It sort of violates the accounting equation of A = L + E. Please let me know if I am wrong. Thanks!
So, the enterprise value is the sum of all the cash flows present and future?
That’s correct
What are your personal thoughts on WACC and whether or not it should be used? I have heard many investors completely disregard WACC and say its a useless discount rate.
WACC is a super helpful conceptual framework, but it can result in false precision/confidence if taken at face value
shouldn't the step 3 be step 2? because step 2 requires 'r' (preptuity method) which is WACC which is being calculated in step 3
We’ve set this up to be the cleanest answer. You could provide an interview and it’s work for thousands and thousands of people.
Of course, there are always variations that you could come up with, but I think if you stick with this, you’ll be in a good spot
Cleeeaann
🙏🙏🙏
Just ask ChatGPT