【文章內(nèi)容簡介】 reet interviewers ask. (Other variations of this question are: how would you value a stock you were considering buying, taking public, etc.) Wall Streeters use this question to separate the finance jocks from the neophytes. Here39。s a basic answer that should impress your interviewer: One answer to this question is to discount the pany39。s projected cash flows by a riskadjusted discount rate. After projecting the first five or 10 years, you add in a Terminal Value, which represents the present value of all the future cash flows that are too far into the future to project. You can calculate the Terminal Value in one of two ways: (1) you take the earnings of the last year you projected, say year 10, and multiply it by some market multiple like 20 times earnings, and that39。s the terminal value。 or (2) you take the last year, say year 10, and assume some constant growth rate after that, perhaps 10%. The present value of this growing stream of payments after year 10 is the Terminal Value. Note: To figure out what discount rate you would use to discount the pany39。s cash flows, tell your interviewer you would use the Capital Asset Pricing Model (or CAPM). (In a nutshell, CAPM says that the proper discount rate to use is the riskfree interest rate adjusted upwards to reflect this particular pany39。s market risk or beta.) Finally, you should also mention other methods of valuing a pany, including looking at parables, that is, how other similar panies were valued recently as a multiple of their sales, net ine, or some other measure. 2. Walk me through the major line items on a Cash Flow statement.A question to test your accounting skills. The answer: First the Beginning Cash Balance, then Cash from Operations, then Cash from Investing Activities, then Cash from Financing Activities, and finally the Ending Cash Balance. 3. What is EBITDA? Also known as cash flow, EBITDA is Earnings Before Interest, Taxes, Depreciation, and Amortization. 4. Say you knew a pany39。s net ine. How would you figure out its cash flow?A basic answer: You start with the pany39。s net ine. Then you add back depreciation and amortization. Then you subtract the pany39。s Capital Expenditures (called CapEx for short, this is how much money the pany must invest each year on plants and equipment). The number you get is the pany39。s cash flow: 5. Company A is considering acquiring Company B. Company A39。s P/E ratio is 55 times earnings, whereas Company B39。s P/E ratio is 30 times earnings. After Company A acquires Company B, will Company A39。s earnings per share rise, fall, or stay the same?Company A39。s earningspershare will rise, because of the following rule: when a higher P/E pany buys a lower P/E pany, the acquirer39。s earningspershare will rise. The deal is said to be accretive, as opposed to dilutive, to the acquirer39。s earnings. Defeating the 12Ball QuestionSome interview questions are notoriously difficult. This particular logic problem has made its appearance at various consulting, investment banking and tech firms (including McKinsey and Microsoft). Will you be prepared if your interviewer springs upon you the knotty 12 ball dilemma? Thanks to Vault Reports, you can answer in safety! Here39。s the question: You have 12 balls. All of them are identical except one, which is either heavier or lighter than the rest it is either hollows while the rest are solid, or solid while the rest are hollow. You have a simple twoarmed scale, and are permitted three weightings. Can you identify the odd ball, and determine whether it is hollow or solid? This logic problem is sure to put your analytical ability on display! First, we39。ll examine what thought processes an interviewer is looking for, and then we39。ll discuss one solution. Start with the simplest of observations. The number of balls you weigh against each other must be equal. Yeah, it39。s obvious, but why? Because if you weigh, say three balls against five, you are not receiving any information. In a problem like this, you are trying to receive as much information as possible with each weighing. For example, one of the first mistakes people make when examining this problem is that they believe the first weighing should involve all of the balls (6 against 6). This weighing involves all of the balls, but what type of information does this give you? It actually gives you no new information. You already know that one of the sides will be heavier, and by weighing 6 against 6, you will simply confirm this knowledge. Still, you want to gain information about as many balls as possible (so weighing 1 against 1 is obviously not a good idea). Thus the best first weighing is 4 against 4. That way, you reserve 4 balls, and can obtain some information about each subset of 4. Secondly, if you think through this problem long enough, you will realize how precious the information gained from a weighing is: You need to transfer virtually every piece of information you have gained from one weighing to the next. Say you weigh 4 against 4, and the scale balances. Lucky you! Now you know that the odd ball is one of the unweighed 4. But don39。t give into the impulse to simply work with those balls. In this weighing, you39。ve also learned that the eight balls on the scale are normal. Try to use this information. You must be both creative and analytical. Most people who work through this problem consider only weighing a number of balls against each other, and then taking another set and weighing them, etc. This won39。t do. There are a number of other types of moves you can make you can rotate the balls, from one scale to another, you can switch the balls, etc. Let39。s look at one solution. For simplicity39。s sake, we will refer to one side of the scale as Side A, and the other as Side B. Step 1: Weigh 4 balls against 4 others Case A: If, on the first weighing, the balls balance If the balls in our first weighing balance we know the odd ball is one of those not we