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Goldman Sachs NYC and Morgan Stanley San Francisco/Menlo Park | GFC Technical Interview Series

San Francisco Goldman Sachs

[if !supportLists]1. [endif]Walk me through an LBO.

[if !supportLists]· [endif]See M&I guide

[if !supportLists]2. [endif]What characteristics make an ideal LBO candidate? See M&I guide – know all six characteristics

[if !supportLists]3. [endif]If a company has $1B market cap, 200M cash, and 100 EBITDA, what does its capital structure look like? (follow up questions: give a number range, what happens with the cash)

[if !supportLists]· [endif]I said take comparable companies, find their Debt/EBITDA multiples, take a median, and then apply it to your company’s multiple. Cash can be used to lower the amount of equity the PE firm has to contribute

[if !supportLists]4. [endif]Why would you use a DCF over the other methodologies?

[if !supportLists]· [endif]Another valuation method strength question

[if !supportLists]5. [endif]What are some problems with a DCF?

[if !supportLists]· [endif]Based on biased assumptions

[if !supportLists]6. [endif]Tell me about a time you tried to do too much and failed, or didn’t follow through on a commitment?

[if !supportLists]· [endif]Remember to show what your learned through this experience and how you improved

[if !supportLists]7. [endif]How are you prepared to work for the hours at I-banking, where you have to always give up your plans and social life for your job as an analyst?

[if !supportLists]8. [endif]If Google was acquiring Playboy in an LBO, what debt/equity ratio would you re-lever the Beta to in the DCF model?

[if !supportLists]· [endif]Know the typical LBO leverage ratio

[if !supportLists]9. [endif]Pitch a stock (follow up questions: what are its multiples, debt on balance sheet and etc.)

Singapore Goldman Sachs

[if !supportLists]1. [endif]PE of debt and cash?

[if !supportLists]· [endif]Debt: 1/ (1-T)*interest rate; Cash: 1/ (1-T)*foregone interest on cash

Los Angeles/San Francisco Morgan Stanley

[if !supportLists]1. [endif]What is the beta of a lottery ticket? Near 0 because there’s no relevance to benchmark index

[if !supportLists]2. [endif]You are buying $100ml of PPE using cash 10 yr asset straight line depreciation, walk through all 3 statements? Now book depreciation is 10ml, tax depreciation is 15ml, walk through all 3 statements?

[if !supportLists]3. [endif]What is the average R-squared co-effcient for a beta?

[if !supportLists]· [endif]It measures the relevance of the company to the market

[if !supportLists]4. [endif]What does beta truly represent?

[if !supportLists]5. [endif]Why do you get enterprise value and not equity value from a DCF?

[if !supportLists]6. [endif]Walk me through a levered DCF?

[if !supportLists]· [endif]Know the difference between levered and unlevered cash flow

[if !supportLists]7. [endif]Walk me through WACC?

[if !supportLists]8. [endif]Now an LBO has an asset write up of 100ml and the same portfolio company has 25MM of debt written down, walk me through all 3 statements?

[if !supportLists]9. [endif]Lever and unlever a beta? What does that process represent?

[if !supportLists]10. [endif]How do I value an analyst?

[if !supportLists]11. [endif]If a company can increase return by using leverage in an LBO, why not leverage a deal 99 to 1?

[if !supportLists]12. [endif]I have three companies, a newspaper with a strong Internet presence, a furniture business, and a software company. They are family owned. You are my banker and I want to sell one for liquidity, what do you tell me?

Menlo Park Morgan Stanley

[if !supportLists]1. [endif]How would you value a start-up pharmaceutical company with no earnings? What trading multiples would you utilize in your analysis?

[if !supportLists]2. [endif]In an acquisition scenario, if the shareholders of the target company wanted to monetize their equity position, what share price would they use as a benchmark?

[if !supportLists]3. [endif]Why are you interested in healthcare?

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