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
016What are the main drivers or sensitivities in a DCF?TD SecuritiesInvestment Banking · New York · 2026Moelis & CompanyInvestment Banking · New York · 2026
Say this
The discount rate and the terminal value assumption, by a wide margin. After those, the revenue growth and margin path in the forecast years, then CapEx and working capital intensity.
Then walk it
- WACC dominates because it compounds. A 100 basis point move in WACC can swing value 15 to 20 percent for a long-duration business.
- Terminal value is the other big one, since it is usually 60 to 80 percent of enterprise value. A 50 basis point change in perpetuity growth moves the answer materially.
- Inside the forecast, margin matters more than revenue for most mature businesses, because a margin point drops straight to cash.
- CapEx and working capital intensity matter most for capital-hungry or fast-growing companies, where growth consumes cash.
- The standard output is a two-way sensitivity table, WACC against exit multiple or against perpetuity growth. That grid is what actually goes in the deck, not a single point value.
Where candidates lose it
Listing revenue growth first. It feels intuitive but it is wrong for most businesses; discount rate and terminal value swamp it. Also, saying 'a DCF gives you the intrinsic value' as if it were one number, rather than a range you present as a football field.
Expect next
- Given a $10 change in revenue, COGS, or CapEx, which has the biggest impact?
- How do you pick the perpetuity growth rate?
- What would you do if the DCF value is miles above the trading price?
Reported by candidates at TD Securities (Investment Banking, New York, 2026); Moelis & Company (Investment Banking, New York, 2026). Source: Wall Street Oasis.
031Can debt ever be more expensive than equity, and in what scenario?TD SecuritiesCapital Markets · New York · 2025
Say this
Yes. In deep distress, debt yields can exceed any plausible cost of equity, because the debt is effectively pricing bankruptcy risk while the equity is a cheap out-of-the-money option on recovery.
Then walk it
- The usual ordering holds because debt is senior and its interest is deductible. But it is a tendency, not a law.
- In distress, existing bonds can trade at yields of 20 or 30 percent. New rescue financing can price higher still, sometimes with PIK toggles and warrants on top.
- Meanwhile the equity has almost no value left, so the required return the market demands on the residual stub can look modest in absolute dollars. Option-like equity behaves strangely.
- The tax shield also disappears when there is no taxable income to shield. A company with large losses gets no benefit from deductibility, so the after-tax cost of debt equals the pre-tax cost.
- Rescue and mezzanine financing is the clean real-world example. Sponsors regularly choose to issue equity rather than take a 15 percent PIK instrument, precisely because the debt is dearer.
Where candidates lose it
Answering flatly 'no, debt is always cheaper because it is senior and tax-deductible'. That is the textbook line and the question is designed to test whether you can break it. Name distress and the loss of the tax shield.
Expect next
- What happens to the tax shield if the company has no taxable income?
- Why would a sponsor prefer high yield over bank debt in an LBO?
- How would you price rescue financing?
Reported by candidates at TD Securities (Capital Markets, New York, 2025). Source: Wall Street Oasis.
053A PE firm bought a company for $1,000 and sold it for $1,000. How did they make money?TD SecuritiesInvestment Banking · Toronto · 2026
Say this
Debt paydown. Enterprise value did not move, but the debt inside it shrank, so the equity slice grew. Buy at $1,000 with $700 of debt and $300 of equity; if cash flow repays $300 of debt, you sell at $1,000 and the equity is now $600.
Then walk it
- Entry: $1,000 enterprise value, $700 debt, $300 sponsor equity.
- Over the hold, the company's free cash flow after interest pays down $300 of debt. Nothing else changes.
- Exit: $1,000 enterprise value less $400 remaining debt equals $600 of equity.
- That is 2.0 times the money. Over five years it is roughly a 15 percent IRR.
- Other routes to the same outcome: a dividend recap that returned cash mid-hold, or selling a division and returning proceeds while the remaining business held its value. Both put money in the sponsor's pocket without any change in headline enterprise value.
Where candidates lose it
Freezing because the entry and exit prices match. The question is testing whether you understand that the sponsor owns the equity, not the enterprise. Use round numbers immediately and show the two balance sheets.
Expect next
- What IRR is that over five years?
- What if they had used no debt at all?
- How else could they have made money at a flat exit?
Reported by candidates at TD Securities (Investment Banking, Toronto, 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.