1. $100 revenue, 20% EBITDA margin, costs 50/50 fixed vs. variable; volume increases 10%. Find EBITDA.
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Costs $80: fixed $40, variable $40. Volume +10%: revenue $110, variable $44, fixed $40 -> EBITDA $26 (+30%).
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Blackstone Investment Banking Interview Questions
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2. $150M EBITDA at 10x, 60% debt; $300M of debt is repaid with no extra cash; EBITDA grows to $200M in 5 years; exit at 9x. What are MOIC and IRR?
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Entry EV $1,500M; debt $900M; equity $600M. Exit EV = 9 x 200 = $1,800M; debt $600M -> equity $1,200M -> MOIC 2.0x -> IRR ~15%.
3. What is 17 x 23? What is the angle between the hour and minute hands at 2:50?
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17 x 23 = 391 (20^2 - 3^2). 2:50: minute hand at 300 degrees; hour hand at 60 + 25 = 85 degrees -> difference 215 degrees -> smaller angle 145 degrees.
4. You have an asset worth $80 (book value) that you sell for $100 - walk me through the statements (assume 20% tax).
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Gain = $20. IS: gain +20, taxes +4, NI +$16. CFS: NI +16, less gain -20 (CFO), proceeds +100 (CFI) -> cash +$96. BS: cash +96, asset -80 -> assets +16; retained earnings +16 -> balances.
5. A game: you roll a die and earn the dollar value shown. You can keep the roll or roll once more (and then must keep the second roll). How much would a rational investor pay to play?
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Expected value of a single roll = $3.50. Strategy: after the first roll, keep it if it's 4, 5 or 6 (greater than 3.5), otherwise reroll. EV = P(4-6) x avg(4,5,6) + P(1-3) x 3.50 = 0.5 x 5 + 0.5 x 3.5 = $4.25. Pay up to $4.25.
6. If interest expense increases, how would that affect unlevered free cash flow?
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No effect. UFCF is calculated before interest (EBIT x (1 - t) + D&A - capex - change in NWC), so it is independent of capital structure. Higher interest reduces net income, levered FCF and equity value, and a higher cost of debt could raise WACC.
7. What makes a good business?
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Durable competitive advantage (brand, network effects, switching costs, scale, IP), pricing power, recurring and diversified revenue, high margins and returns on invested capital, low capital intensity and strong FCF conversion, reinvestment runway in a growing market, resilience through cycles, and strong management/capital allocation.
8. What are 3 key questions you would ask before you invest in a business?
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(1) How durable and defensible are the cash flows - what is the moat, customer retention and pricing power? (2) What is the downside - what could go wrong (cyclicality, competition, leverage, key-person risk) and how much could we lose? (3) What are we paying vs. what we can realistically exit at - entry valuation, value-creation plan, returns and management alignment?
9. Two deals: one has entry and exit at 7x and the other at 12x - which would you rather buy? What if there's no growth?
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All else equal (same leverage turns and growth), the 7x deal typically produces higher IRRs because cash flow yield relative to price is higher and debt paydown represents a larger share of the equity - though the 12x business may be higher quality, safer or faster growing, justifying its price. With no growth, returns come only from cash generation and deleveraging, so the 7x deal is clearly better (higher FCF yield on purchase price).
10. Why has the S&P 500 outperformed GDP over the last 10 years?
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The index isn't the economy: it's dominated by global mega-cap companies (especially technology) earning revenue worldwide, not just from U.S. GDP; profit margins expanded (asset-light business models, globalization, the 2017 corporate tax cut, low interest costs); valuation multiples expanded with low rates; buybacks increased EPS; secular winners compound while GDP includes slow-growing, non-listed sectors (government, small businesses). Survivorship/index reconstitution also favors winners.
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