Citi DCF Walkthrough: Key Assumptions to State (2027)

A strong Citi walk me through dcf key assumptions answer is commonly reported by candidates as a Citi technical staple, and the trick is stating one key assumption at each step of the walkthrough. Framework: project unlevered free cash flow (assumption: revenue growth and margins), discount at WACC (assumption: target capital structure and beta), terminal value via Gordon growth (assumption: perpetual growth below long-run economic growth), sum to enterprise value, bridge to equity per share. Naming assumptions unprompted is what separates strong answers from rote ones.

What This Question Assesses

Interviewers ask for assumptions because a DCF is only as good as its inputs — anyone can recite steps, but judgment lives in the assumptions. Stating them proactively shows you understand that valuation is estimation under uncertainty, and it preempts the follow-ups that sink candidates who memorized the mechanics.

How to Answer: Citi Walk Me Through Dcf Key Assumptions

• Cash flow projections — assume revenue growth and margins. State your growth trajectory and margin path explicitly, tied to the company’s history and industry logic — not pulled from air.
• WACC — assume capital structure and risk. Name the target debt/equity mix, the beta source logic, and the risk-free anchor conceptually.
• Terminal value — assume perpetual growth. Keep it at or below long-run nominal economic growth and say why; note that the terminal value often dominates total value, so this assumption carries the most weight.
• Mid-year vs year-end discounting — assume timing. Mention the convention briefly to show completeness.
• Bridge — assume net debt and share count. State what you subtract and divide by to reach per-share value.

Sample line: “I’d project five years of free cash flow assuming revenue growth fading toward a sustainable rate, discount at a WACC built on a target capital structure, and use a Gordon terminal value with perpetual growth below long-run economic growth — that last assumption drives most of the value, so I’d sensitivity-test it.”

Common Mistakes: Citi Walk Me Through Dcf Key Assumptions

• Walking the steps with zero assumptions stated — technically complete, intellectually empty.
• A terminal growth rate above economic growth, which implies the company eventually owns the economy.
• No sensitivity awareness — strong candidates volunteer that small assumption changes move the answer a lot.

Assumption questions are where DCF interviews are actually decided — the walkthrough gets you in the door, but the assumptions determine whether you stay. Candidates who never practiced stating them get exposed within seconds.

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FAQ

Which assumption matters most?

The terminal value inputs — perpetual growth and the discount rate — because the terminal value typically dominates enterprise value.

Should I mention sensitivity tables?

Yes, briefly: noting you would sensitivity-test growth and WACC shows professional-grade judgment in one sentence.

Gordon growth vs exit multiple — which to lead with?

Lead with the one suited to the business: Gordon for stable, exit multiple for cyclical — and say why you chose it.

What if I’ve never built a real DCF?

Be honest about your level, but the conceptual walkthrough with assumptions is exactly what interviews test — textbook understanding, clearly expressed, is enough.

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