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
018What is WACC and how do you calculate it?CitiGeneralist · New York · 2026
Say this
It is the blended after-tax cost of a company's capital, weighted by the market value of each piece. Cost of equity times the equity weight, plus after-tax cost of debt times the debt weight.
Then walk it
- Cost of equity comes from CAPM: risk-free rate plus beta times the equity risk premium, with a size or country premium if the situation calls for it.
- Cost of debt is the yield the company would pay on new debt today, not the coupon on its old debt, and you multiply it by one minus the tax rate because interest is deductible.
- Weights use market values, not book. Market capitalisation for equity, and market value of debt, which for most investment grade paper is close enough to book.
- Use target capital structure rather than today's snapshot if today's is temporarily distorted.
- The honest caveat is beta. It is estimated from noisy historical data, so I would cross-check against a peer set rather than trusting one regression.
Where candidates lose it
Using the coupon on existing debt as the cost of debt, or using book equity in the weights. Both are common and both are wrong. WACC is forward-looking and market-based.
Expect next
- Why do you unlever and relever beta?
- Can debt ever be more expensive than equity?
- What happens to WACC as you add leverage?
Reported by candidates at Citi (Generalist, New York, 2026). Source: Wall Street Oasis.
042What is the difference between management rollover and management incentives?CitiMergers and Acquisitions · New York · 2026
Say this
Rollover is management reinvesting its existing equity into the new deal instead of cashing out. Incentives are new equity granted to management going forward, usually options or a management incentive plan that vests on performance.
Then walk it
- Rollover is backward-looking value. Management already owns shares; instead of taking the cash, they roll some percentage into the new capital structure alongside the sponsor.
- It reduces the sponsor's cheque size, which is helpful, and it signals confidence, which buyers care about. It can also be tax-deferred, so management has a reason to want it.
- Incentives are forward-looking and dilutive to the sponsor. A typical management incentive plan is five to fifteen percent of equity, vesting on time and on a return hurdle.
- In a model they sit in different places. Rollover is a source of funds in the sources and uses table. The incentive pool is dilution to the sponsor's exit proceeds, so it reduces the sponsor's IRR, not the entry price.
- The reason both exist: rollover aligns management on the downside because their own money is at risk, and the incentive plan aligns them on the upside. A sponsor wants both.
Where candidates lose it
Conflating the two, or putting the incentive pool in sources and uses. Rollover funds the deal; incentives dilute the exit. Getting that placement right is what the question is actually testing.
Expect next
- How does the incentive pool affect the sponsor's IRR?
- How much rollover would you expect management to do?
- Where does rollover sit in the sources and uses?
Reported by candidates at Citi (Mergers and Acquisitions, New York, 2026). 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.