Gallagher & Mohan Financial Analyst Interview Questions, Process, and Tips

They will provide you with several multiple-choice questions regarding finance.

They provide one case study related to real estate that you need to solve.

Q1. What is cap rate.
Ans. 
Cap rate, or capitalization rate, is a measure used to evaluate the potential return on investment for a real estate property.
• Cap rate is calculated by dividing the property's net operating income (NOI) by its current market value.

• It is expressed as a percentage and is used by investors to compare different investment opportunities.

• A higher cap rate indicates a higher potential return, but may also come with higher ris...read more
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Q2. What is levered and unlevered beta
Ans. 
Levered beta includes the impact of debt on a company's risk, while unlevered beta does not consider the effects of debt.
• Levered beta reflects the risk of a company with debt, while unlevered beta shows the risk without debt.

• Levered beta is calculated using the company's beta and its debt-to-equity ratio, while unlevered beta is calculated using only the company's beta.

• Levered beta is more relevant for companies with s...read more
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Q3. WACC
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Q4. IRR
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Q5. Hurdle rate
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Q6. NPV
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Q7. After the interview questions, you will need to complete an Excel exam that requires the use of various Excel functions such as SUMIF, SUMIFS, COUNTIF, and COUNTIFS?
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Q1. What is WACC and how is it used in Real Estate?
Ans. 
WACC stands for Weighted Average Cost of Capital and is used to determine the minimum return a company must earn on their investments to satisfy their shareholders and debt holders.
• WACC is calculated by taking the weighted average of the cost of equity and the cost of debt, with each component weighted by its respective proportion in the company's capital structure.

• In Real Estate, WACC is used to evaluate the feasibili...read more
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Q2. A word problem where you had to calculate IRR
Ans. 
Calculating IRR for a word problem
• Identify the initial investment and cash flows over time

• Use a financial calculator or Excel to calculate the IRR

• IRR is the discount rate that makes the net present value of all cash flows equal to zero
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I was given a set of assumptions on the basis of which I had to create a DCF model on real estate. It included topics like NNN lease, and I had to find the IRR of the project, the projected profit, Equity multiple and earnings.

Q1. How do you calculate Cash on cash returns?
Ans. 
Cash on cash returns are calculated by dividing the annual pre-tax cash flow by the initial investment.
• Calculate the annual pre-tax cash flow from the investment property.

• Divide the annual pre-tax cash flow by the initial investment amount.

• Express the result as a percentage to get the cash on cash return.

• Formula: Cash on Cash Return = (Annual Pre-tax Cash Flow / Initial Investment) * 100%
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Q2. Would you prefer a lower or a higher cap rate and why
Ans. 
I would prefer a lower cap rate as it indicates higher potential returns on investment.
• Lower cap rate implies higher potential returns on investment

• Higher cap rate may indicate higher risk or lower potential returns

• Investors typically prefer lower cap rates for safer investments

• Example: A cap rate of 5% may be preferred over a cap rate of 10%
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Basic real estate related questions

Q1. What is cap rate
Ans. 
Cap rate, or capitalization rate, is a measure used to evaluate the potential return on investment for a real estate property.
• Cap rate is calculated by dividing the property's net operating income (NOI) by its current market value.

• It is expressed as a percentage and is used by investors to compare different investment opportunities.

• A higher cap rate indicates a higher potential return, but may also come with higher ris...read more
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Q2. What is unlevered & levered irr
Ans. 
Unlevered IRR is the internal rate of return without considering debt, while levered IRR includes the impact of debt.
• Unlevered IRR is the return on an investment without taking into account the effects of debt financing.

• Levered IRR is the return on an investment that includes the impact of debt financing.

• Unlevered IRR is used to evaluate the return on an investment solely based on its own merits, while levered IRR cons...read more
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