Technical questions
Valuation questions
Answer DCF, WACC and multiples questions concisely, and do the quick calculations behind them correctly.
Learning objectives
- Give a structured spoken answer to 'walk me through a DCF' and 'how do you calculate WACC?'
- Calculate a Gordon terminal value, the exit multiple it implies, and the effect of a change in WACC
- Explain the direction of WACC and value changes, and when 'more debt' stops lowering WACC
Valuation questions come in two kinds. Process questions ("walk me through a DCF") test whether you can explain a method in a clear order in under a minute. Quick calculations ("what's the terminal value if…", "what happens to value if WACC rises by a point?") test whether you can do the arithmetic and know which way things move.
Good answers to both are short. Say the steps in order, give the formula in words, and for any "what happens if" question say the direction first, then the reason, then a number if you can.
Included with a Formula Quest membership
The rest of this lesson is for members. Members get the full lesson, including its 5 graded exercises, and every other Finance Quest lesson.