Technical / Valuation
Walk Me Through a DCF: The 60-Second Interview Answer
The standard answer to "Walk me through a DCF" that works for every bank. We strip away the theory and give you the interview script.
"The value of any stock, bond, or business today is determined by the cash inflows and outflows, discounted at an appropriate rate, that can be expected to occur during the remaining life of the asset." — Warren Buffett
The Prompt
"Walk me through a DCF" is the most common technical question in existence. Stumble here, and you're done.
Deliver a 60-second, punchy answer.
Standard Framework
"A DCF values a company based on the Present Value of its Cash Flows and the Present Value of its Terminal Value."
Step 1: Project Free Cash Flow
"Project financials for 5-10 years using assumptions for growth, , and . Calculate Unlevered Free Cash Flow for each year."
Follow-Up Traps
"Why add back Depreciation?"
Non-cash expense. CapEx already captures the cash outflow; depreciation is an accounting charge that reduced taxes. Add it back to reflect true cash generation.
"Which Terminal Value method is better?"
Execution Notes
Memorize the four steps. Slow down deliberately when reciting the FCF formula—signals control.
Master Accretion/Dilution Analysis next.