Investment Banking interview preparation
Every question below is either traced to a named firm from a public candidate report, or tagged at desk level when we could not trace it. Answers are written the way you would actually say them out loud — answer first, then the mechanism, then the limitation.
100 questions, mapped to the firms that asked them
- Questions
- 100
- Traced to a firm
- 100
- Firms
- 46
- Updated
- September 2026
033How do you treat underfunded pensions in the bridge from enterprise value to equity value?BarclaysInvestment Banking · London · 2025
Say this
Treat the net deficit as a debt-like item and subtract it in the bridge, but on an after-tax basis, because the contributions that eventually close the gap are usually tax-deductible.
Then walk it
- The deficit is the projected benefit obligation less the fair value of plan assets. That shortfall is a real claim on the business that sits ahead of shareholders.
- So subtract it from enterprise value alongside debt. A buyer inheriting the plan inherits the obligation to fund it.
- Tax-effect it. If future contributions are deductible, the economic cost is the deficit times one minus the tax rate, not the gross number.
- Do not also leave pension service cost inside EBITDA and then subtract the deficit, or you have charged for it twice. Pick a lane and be consistent across every company in the comp set.
- The reason this matters in practice: for old industrials the deficit can be a meaningful fraction of market capitalisation, and it moves with discount rates. A falling rate environment inflates the obligation and can quietly destroy equity value.
Where candidates lose it
Ignoring it entirely, or subtracting it gross with no tax adjustment. Also double-counting by leaving service cost in EBITDA. Consistency across the comp set is the part that separates a real answer from a memorised one.
Expect next
- What if the plan is overfunded?
- How does a change in discount rates affect the obligation?
- Which sectors does this matter most in?
Reported by candidates at Barclays (Investment Banking, London, 2025). Source: Wall Street Oasis.
Firm tags come from public, anonymous candidate reports on Wall Street Oasis: strong signal, not sworn testimony. Firms are named as the places a question was reported, not as partners of Fin Maverick. Answers are written for this page to show how to think out loud; they are not scripts to recite.