The Investment Banking Analyst Interview

Investment banking interview questions split cleanly into three buckets: the technicals, the fit questions, and "why this group." For an IB analyst interview, the technicals are non-negotiable. You need to value a company three ways, explain a merger model, and do it quickly with clean logic. This guide walks through each valuation method precisely, plus the behavioral and group-fit questions that decide most offers once the technical bar is cleared.

The technical screen is unforgiving because the answers are knowable. Interviewers ask the same core questions every cycle, and a wrong formula signals you did not prepare. The good news is the same: master the building blocks below and you can handle almost anything an analyst interview throws at you.

Discounted Cash Flow

A DCF values a company by projecting its future cash flows and discounting them to present value. The standard intrinsic-value method discounts unlevered free cash flow at the weighted average cost of capital (WACC), which produces enterprise value.

Be precise on the formula. Unlevered free cash flow = EBIT x (1 - tax rate) + depreciation and amortization - capital expenditures - change in net working capital. You add back D&A because it is non-cash, subtract capex and working capital changes because they consume real cash, and you start from EBIT (not net income) because this is cash available to all capital providers, debt and equity alike.

You discount unlevered cash flow at WACC because both are capital-structure-neutral: the cash flow ignores financing, and WACC blends the cost of debt and equity. A classic trap is "why discount unlevered cash flow at WACC and not cost of equity?" The answer is consistency, unlevered flows match the all-capital WACC, while levered flows would match cost of equity.

Terminal value is the other half. Calculate it either with the perpetuity growth method (a small constant growth rate applied to the final year's cash flow) or the exit multiple method (applying a market EV/EBITDA multiple to terminal-year EBITDA). Be ready to sanity-check one against the other.

Comparable Companies and Precedent Transactions

These are the two relative-valuation methods.

• Comparable companies (trading comps): value a business against similar public companies using multiples like EV/EBITDA and P/E. If peers trade at 10x EBITDA and your company earns $100M of EBITDA, that implies roughly $1B of enterprise value. Comps reflect current market values of minority stakes.
• Precedent transactions: value a company off prices actually paid in past M&A deals. The basis is the acquisition price, not the trading price.

The interview point that separates strong candidates: precedent transactions usually produce higher valuations than trading comps because the transaction price includes a control premium, the extra value an acquirer pays to direct strategy and cash flows. Crucially, do not then add a separate control premium on top of a precedent multiple. The premium is already embedded, and stacking another one double-counts it.

LBO and Why It Sets a Floor or Ceiling

A leveraged buyout model values a company from a financial sponsor's view. Unlike a DCF, an LBO uses levered free cash flow, because private equity investors care about cash after debt service. The model is highly sensitive to the debt repayment schedule and interest costs.

The sponsor solves for the internal rate of return (IRR), the annualized return on their equity, often targeting roughly 20 to 25 percent. Because the IRR target is fixed, the LBO tells you the maximum price a sponsor can pay and still hit their return. That is why bankers say an LBO establishes a valuation floor in the sense of the price a financial buyer can justify, which often sits below what a strategic acquirer with synergies would pay.

Accretion / Dilution

Accretion/dilution analysis measures whether an acquisition raises or lowers the acquirer's earnings per share. The deal is accretive when pro forma EPS exceeds the acquirer's standalone EPS, and dilutive when it falls.

A rule of thumb interviewers love: in an all-stock deal, the transaction is accretive if the acquirer has a higher P/E than the target, and dilutive if its P/E is lower. For a cash or debt-financed deal, compare the target's after-tax earnings contribution plus after-tax synergies against the after-tax cost of the financing (interest on new debt, or forgone interest on cash used) plus any incremental D&A from a write-up. If the earnings added beat the financing cost, the deal is accretive. Cash and debt deals are generally more accretive than stock deals because debt is cheaper than equity.

Fit and "Why This Group"

Once technicals are clear, fit decides it. Expect "Walk me through your resume," "Why investment banking," and "Why our group over the others." Have a specific, honest reason for the group: deal type, sector, the people you met, the work you want to learn. Generic answers read as a backup plan.

Behavioral favorites include a time you handled a heavy workload, a mistake you made and fixed, and how you handle competing deadlines. Tie each to the reality of analyst life: long hours, attention to detail, and ownership of the model.

Rehearse Out Loud

The DCF and accretion/dilution explanations have to come out clean and fast, which only happens by saying them aloud, not rereading them. Practice your three valuation methods as spoken answers until the formulas are automatic. Mythic Intel, a voice-driven interview trainer, can research the specific bank and group, then grade your spoken technicals on accuracy, completeness, structure, and proof, so a wrong WACC explanation gets caught in practice rather than in the room.