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The discounted cash flow analysis, commonly referred to as the DCF, along with the Leverage Buyout Analysis, commonly referred to as the LBO, are some of the most commonly used and complex financial modeling techniques on the Street today. investmentbanking, private equity , VC, etc.) and how our process works.
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Financial Modeling: Like private equity, 3-statement models are common, as are valuations and DCF models , but LBO models are less common since not all deals use debt. Many people still get in from investmentbanking and management consulting , but some also get in from VC and finance-related jobs at startups.
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For the purposes of this article, we will focus on valuation from the perspective of a merger and acquisition transaction, and specifically from the viewpoint of a buyer evaluating a business for sale. This means that the method evaluates the future cash flow of the company and then discounts those cash flows to the present day.
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No Right or Wrong Answers – Some technical questions have correct answers, but many market and investment ones do not. A: Assuming it is developing patent-protected products, you usually use a Sum-of-the-Parts DCF where you project revenue and expenses for each drug, discount the cash flows to Present Value, and then add them up.
So, your best option in most cases is to gain traditional investmentbanking or private equity experience and use that to move in. It is possible to move in from backgrounds like equity research , hedge funds , or asset management , but you should target groups that do asset allocation and public-market investments rather than deals.
Its more of an industry focus at the intersection of several other strategies , such as long/short equity , event-driven investing , and even merger arbitrage. You could come up with dozens of other potential trades if you also consider call and put options, biotech indices/ETFs, and merger arbitrage ideas.
This site has already covered investmentbanking interview questions , private equity interview questions , and venture capital interview questions , so the next topic on the list seemed to be growth equity interview questions. You could still use a DCF , but it would have to go far into the future (e.g.,
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