Oct 08, 2026 by Offer

Macquarie Interview Questions 2027: DCF Valuation (How to Answer)

Walk through a DCF in five steps: project free cash flows (typically 5-10 years), choose a discount rate (WACC), calculate terminal value (perpetuity growth or exit multiple), discount everything to present value, and sum to get enterprise value — then bridge to equity value.

What Macquarie Interview Questions Like This Assess

The DCF walkthrough is the canonical investment-banking technical question. The interviewer is testing whether you understand valuation from first principles — not just the mechanics, but the judgment calls: why each input matters and where the model is sensitive. Hesitation here is costly because it is so fundamental.

How to Answer Macquarie Interview Questions: The Five-Step DCF

Project free cash flow: "I start by projecting unlevered free cash flow — EBIT × (1 − tax rate), plus depreciation and amortisation, minus capex and changes in net working capital — typically over 5 to 10 years."
Determine the discount rate: "I discount at WACC, which blends the cost of equity (often via CAPM) and the after-tax cost of debt, weighted by the target capital structure."
Calculate terminal value: "Two common methods: the Gordon growth model, applying a perpetual growth rate to the final year's cash flow, or the exit multiple method, applying an EV/EBITDA multiple from comparable companies."
Discount to present value: "I discount each projected cash flow and the terminal value back at WACC to get present values."
Sum and bridge: "The sum is enterprise value. To get equity value, I add cash and subtract debt and minority interests — then divide by diluted shares for a per-share value."

Sample line: "A DCF values a company on its expected cash generation: project unlevered free cash flows, discount them at WACC, add a terminal value, and the sum is enterprise value. The key sensitivities are the growth assumptions and the discount rate — small changes there move the valuation materially."

Always mention sensitivity: interviewers love asking "what's the DCF most sensitive to?"

Common Mistakes

Forgetting the enterprise-to-equity bridge: Stopping at enterprise value is the classic error. The walkthrough is not complete without it.
Using levered cash flows with WACC: Mismatching cash flows and discount rate (unlevered FCF with WACC; levered FCF with cost of equity) is a fundamental error.
No mention of terminal value weight: In many DCFs the terminal value dominates — acknowledging this shows you understand the model's limitations.

Among all technical Macquarie interview questions, the DCF walkthrough carries the most weight — rehearse it until it is fluent. This question is commonly reported by candidates.

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FAQ

How long should the walkthrough take? Two to three minutes, steady and structured. Rushing signals memorisation without understanding.

Gordon growth or exit multiple for terminal value? Know both. Gordon growth suits stable, mature businesses; exit multiples tie the valuation to market comparables. Many bankers triangulate with both.

What is unlevered free cash flow? Cash flow available to all capital providers (debt and equity) — before interest payments — which is why it pairs with WACC.

What discount rate for a highly levered company? Still WACC, but the weights and costs reflect the leverage — higher leverage typically raises the cost of equity. The exact treatment may vary by role and region.

Preparing for Macquarie's interview? Our 2027 Macquarie Online Psychometric Assessment Tutorials has practice questions and answers — $79 one-time, instant download.