Mergers & Acquisitions Analyst Interview Questions and Answers

Enterprise Value is the total value of a company, including debt and equity.

• Enterprise Value = Market Capitalization + Debt - Cash

• Market Capitalization = Total number of shares outstanding x current market price per share

• Debt = Total outstanding debt of the company

• Cash = Total cash and cash equivalents held by the company

• EV is used to determine the true value of a company, as it takes into account both debt and equity

• EV can be used to compare companies with different capital ...read more

Enterprise value is more important than equity value as it includes debt and cash, giving a more accurate picture of a company's total value.

• Enterprise value takes into account a company's debt and cash, while equity value only considers the value of the company's shares.

• Enterprise value is a more comprehensive measure of a company's total value, as it reflects the cost of acquiring the entire business.

• Equity value can be misleading as it does not account for a company's debt...read more

The forecast period in a DCF model depends on the nature of the business and the industry it operates in.

• The forecast period typically ranges from 5 to 10 years.

• For stable and mature businesses, a longer forecast period may be appropriate.

• For rapidly changing industries, a shorter forecast period may be more appropriate.

• The forecast period should be supported by reasonable assumptions about future growth rates, margins, and capital expenditures.

• The terminal value should accou...read more

Beta is a measure of a stock's volatility in relation to the overall market.

• Beta is used in the calculation of the cost of equity in the WACC formula.

• A beta of 1 indicates that the stock's price will move with the market.

• A beta greater than 1 indicates that the stock is more volatile than the market.

• A beta less than 1 indicates that the stock is less volatile than the market.

• Beta can be found by comparing a stock's returns to the returns of the market over a period of time.

DCF stands for Discounted Cash Flow, a valuation method used to estimate the value of an investment based on its future cash flows.

• DCF is a financial modeling technique used to estimate the value of an investment based on its expected future cash flows.

• It involves projecting future cash flows, discounting them back to their present value using a discount rate, and summing them up to arrive at a present value estimate.

• DCF is commonly used in M&A to determine the value of a tar...read more