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Gordon Dyal & Co. Interview Questions

10 past firm prompts from the certified 61-prompt workbook. Three fully worked examples are open below; use the reveal drill for the rest. No signup.

Recorded roundTechnical topicsWorked answers

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See the reasoning, not just the result

Each answer starts with the setup, shows the steps, and closes with the interview takeaway.

First RoundDCF & WACC

Separate the two WACC effects

Which has a bigger effect on valuation: a 1% change in the perpetuity growth rate or a 1% change in WACC?

Both move the terminal-value denominator by one percentage point. WACC also changes every discount factor.

Terminal value

In the Gordon growth formula, TV = FCF × (1 + g) / (WACC - g). A 1% move in either WACC or g changes the denominator by the same absolute amount.

Discounting

WACC also discounts each forecast cash flow and the terminal value back to today. The growth rate does not change those discount factors.

Conclusion

The 1% WACC change has the larger total valuation effect, holding the rest of the setup constant.

Interview check: mention both the terminal-value denominator and present-value discounting.

First RoundAccounting

Walk $10 of depreciation

$10 of depreciation with a 40% tax rate - walk through the three statements.

Depreciation lowers earnings but is non-cash, creating a tax shield.

Income statementEBIT -$10; taxes -$4NI -$6

Cash flow statementNI -$6 + D&A $10Cash +$4

Balance sheetCash +$4; PP&E -$10Assets -$6

Balance: retained earnings falls by $6, matching the $6 net decline in assets.

First RoundDCF & WACC

Clarify the cash-flow timing

$45 of free cash flow with a 12.5% discount rate - how much would you pay for it?

The answer changes completely depending on whether $45 is a one-time cash flow or a perpetuity.

Perpetuity$45 / 12.5%$360 present value

One year only$45 / 1.125$40 present value

Best response: ask whether the cash flow repeats, grows, and when it is received before calculating.

Keep drilling

Seven more prompts stay closed until you commit to an answer. Round labels come from the workbook source, not a fixed interview script.

First RoundDCF & WACC

1. Rank from highest to lowest beta: S&P 500, a utilities company, a tech startup, a single dollar bill.

Check the worked answer

Tech startup (>1, for example 1.5-2+) > S&P 500 (1.0 by definition) > utilities company (<1, often around 0.3-0.6) > dollar bill (0). Beta measures sensitivity to the market, not total risk.

First RoundDCF & WACC

2. What is the CAPM formula?

Check the worked answer

Cost of equity = risk-free rate + beta × (expected market return - risk-free rate), or risk-free rate + beta × equity risk premium.

First RoundDCF & WACC

3. If interest rates go down by 25 bps, what happens to WACC?

Check the worked answer

WACC generally falls. The risk-free rate in CAPM declines, lowering cost of equity, and pre-tax cost of debt can fall. The exact change need not be 25 bps because credit spreads, capital structure, and the equity risk premium can also move.

First RoundDCF & WACC

4. How would you account for stock-based compensation in a DCF and a cash burn model?

Check the worked answer

SBC is non-cash but economically dilutive. In a DCF, either keep it as an expense or add it back and capture future dilution in share count, but do not take both favorable treatments. In a cash burn model it is added back because it does not consume cash, while dilution is tracked separately.

First RoundM&A

5. Company A has a P/E of 25x and Company B 20x. A buys B at a 30% premium - accretive or dilutive?

Check the worked answer

For an all-stock deal, B's purchase P/E is 20x × 1.30 = 26x. Because A trades at 25x and issues lower-earnings-yield stock to buy a 26x target, the deal is slightly dilutive before synergies and other adjustments.

First RoundEV & Equity Value

6. How do you get from enterprise value to equity value per share? Do you use basic or diluted shares outstanding?

Check the worked answer

Equity value = enterprise value - debt - preferred stock - noncontrolling interest + cash and non-operating assets. Divide by diluted shares outstanding, using the treasury stock method for in-the-money options and other dilutive securities as appropriate.

First RoundDCF & WACC

7. EBIT to unlevered free cash flow.

Check the worked answer

Unlevered FCF = EBIT × (1 - tax rate) + D&A - capital expenditures - increase in net working capital. It excludes interest because the cash flow is available to all capital providers.

Keep going

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