1 Corporate Finance Interview Prep - Finance Mark Pacyna / Manoj Ramnani VP’s for Corporate Finance Ross Business School Finance Club

2 Corporate Finance Intern Recruiting Roadmap  Company Presentations and Events  Beginning September 20  OCD Resume Reviews / Career Counseling  September & October  Meet The Interns  November  Corporate Finance Forum  November 5  OCD Mock Interviews / Interview Preparation  October through early December – Start EARLY! Finance Club Mock Interviews Finance Club Mock Interviews Early January Early January Internship Interviews Internship Interviews Beginning mid-January Beginning mid-January

3 Interviewing Basics - Finance This review is NOT all encompassing This review is NOT all encompassing Use this ONLY as a guide Use this ONLY as a guide Provided to set expectations for technical Interviews Provided to set expectations for technical Interviews Will not go into details of accounting and finance Will not go into details of accounting and finance Follow Accounting and Finance classes for best results Follow Accounting and Finance classes for best results Refer to Wet Feet, Vault guides for detailed technical questions Refer to Wet Feet, Vault guides for detailed technical questions

4 Discounted Cash Flow (DCF)

5 Free Cash Flow

6 CAPM - Re Re = Cost of Equity Capital / Expected rate of return on equity Re = Cost of Equity Capital / Expected rate of return on equity Rf = Risk Free Discount Rate Rf = Risk Free Discount Rate 10 Year Note: 4.3% 10 Year Note: 4.3% Beta = Equity Beta Beta = Equity Beta Definition: Variation with benchmark Definition: Variation with benchmark Source: Bloomberg or Yahoo Source: Bloomberg or Yahoo Rm – Rf = Risk Premium Rm – Rf = Risk Premium

7 WACC E: Market value of equity E: Market value of equity D: Market value of debt D: Market value of debt Re = Cost of equity capital (CAPM) Re = Cost of equity capital (CAPM) Rd = Discount rate of firm’s debt Rd = Discount rate of firm’s debt t = Tax rate t = Tax rate

8 Terminal Value FCF: Terminal Free Cash Flow FCF: Terminal Free Cash Flow g : Long term growth rate (2.5% to 5%) g : Long term growth rate (2.5% to 5%) Re = Cost of equity capital (CAPM) Re = Cost of equity capital (CAPM) r d = Expected rate of return r d = Expected rate of return

9 Remember: Discount TY FCF to PV

10 Firm Value +

11 Other Questions Economic Value Added (EVA) Economic Value Added (EVA) Adjusted Present Value (APV) Adjusted Present Value (APV) NPV Vs. IRR NPV Vs. IRR Financial metrics relevant to the company Financial metrics relevant to the company R&D/Sales for technology company R&D/Sales for technology company How to decide to undertake a project How to decide to undertake a project

12 Internship Interviews Resume Drops – 12/30 Resume Drops – 12/30 Check Impact for exact dates Check Impact for exact dates DO NOT wait till drop deadline DO NOT wait till drop deadline Some companies have early deadlines Some companies have early deadlines Some companies close drops early Some companies close drops early Write and Review Cover Letters Write and Review Cover Letters Reach out to contacts / alumni in companies as appropriate Reach out to contacts / alumni in companies as appropriate

13 Internship Interviews Interviews Begin – 01/18 Interviews Begin – 01/18 Know your resume Know your resume Know your story Know your story Research companies Research companies Know the technical stuff Know the technical stuff Finance Club Super Saturday in January Finance Club Super Saturday in January

14 Elective Recommendations Finance Finance 580 – Options & Futures 580 – Options & Futures 615 – Valuations 615 – Valuations 621 – Corporate Financial Policy 621 – Corporate Financial Policy 622 – Financial Engineering 622 – Financial Engineering 609 – Fixed Income Analysis. 609 – Fixed Income Analysis. Accounting Accounting 564 – Corporate Financial Reporting 564 – Corporate Financial Reporting 624 – M&A Accounting 624 – M&A Accounting 712 – Capstone Course 712 – Capstone Course CSIB 669 – Advanced Competitive Analysis Marketing 601 – Strategic Market Planning (Links) MO 512 – Bargaining and Influencing

15 Final 2004 Meeting Best of luck on finals and have a great break! Best of luck on finals and have a great break!