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
061Does PIK financing increase or decrease enterprise value?Moelis & CompanyInvestment Banking · Los Angeles · 2026
Say this
Neither, directly. Enterprise value is set by operating cash flows, and how you finance the business does not change them. PIK changes the split between debt and equity, and it grows the debt claim over time because the interest accrues.
Then walk it
- PIK means pay in kind: the interest is not paid in cash, it capitalises onto the principal. So the debt balance compounds upward.
- Enterprise value is unaffected in theory, because EBITDA and cash flow are unchanged. Financing does not create operating value.
- What changes is the bridge. Net debt grows every year as interest accrues, so at a constant enterprise value the equity value shrinks over time. The equity is being eaten from below.
- The genuine second-order effects: PIK preserves cash today, which can fund growth and therefore raise EBITDA, so it can indirectly support value. And PIK accretion may not be cash-tax deductible in the same way, which weakens the tax shield.
- The practical reason it exists: it lets a struggling or fast-growing borrower avoid a cash interest burden it cannot currently service. It buys time and it is expensive. If the business does not grow into it, the accreting balance is what wipes out the equity.
Where candidates lose it
Saying enterprise value falls because debt went up. Debt is not part of enterprise value; it is part of the bridge to equity. Confusing the two here is the exact error the question is designed to expose.
Expect next
- How much would you pay for 2x your money on a 12 percent PIK with no compounding?
- So what happens to the equity value over the hold?
- When would a lender insist on PIK?
Reported by candidates at Moelis & Company (Investment Banking, Los Angeles, 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.