Valuation – Valuation Techniques (Advanced)
Articles
What Is the Residual Income Model (EVA) in Valuation?
Why the Residual Income / EVA model often beats a DCF for valuing banks and capital-intensive businesses, and how the capital charge and cost of equity drive it.
How to Calculate Residual Income (EVA) in a Finance Interview
A step-by-step walkthrough for answering a Residual Income Model interview question: book value roll-forward, capital charge, discounting, and terminal value.
What Is a Convertible Bond? Conversion Premium, Bond Floor and Why Issuers Use Them
What is a convertible bond and why do issuers use them? Conversion premium, bond floor, option value and dilution explained for finance interviews.
How to Price a Convertible Bond in an Interview: Conversion Ratio, Parity and Bond Floor Step by Step
How do you price a convertible bond in an interview? Seven steps from conversion price to dilution, with worked numbers and the traps to avoid.
Cases
Residual Income Model
As a valuation analyst, you are tasked with building a Residual Income (Economic Value Added) valuation for a bank and explaining why this approach can outperform a standard discounted cash flow (DCF) model for banks and other capital-intensive businesses.
Convertible Bonds
As an equity-linked origination analyst, you are tasked with pricing a five-year convertible bond for a mid-cap technology issuer, splitting the instrument into its straight-debt and equity-option components, and explaining why the issuer chose a convertible over either plain vanilla debt or a follow-on equity offering.