Jefferies & Company
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www.jefferies.com New York, NY 1000 to 5000 Employees

Jefferies & Company Investment Banking Analyst Interview Question

I interviewed in San Francisco, CA and was asked:
"What if FCF's are negative in your terminal year?"
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Part of a Investment Banking Analyst Interview Review - one of 53 Jefferies & Company Interview Reviews

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Firm is probably not stable yet - DCF assumes a stable company so if FCF's are negative, DCF is probably not best approach.
- Interview Candidate on Oct 3, 2011 Flag Response
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You would probably want to wait and extend your planning period until your free cash flow levels out - a terminal value multiple is no good if it is not based on a stable or somewhat stable cash flow. Remember that applying a terminal value multiple, or even a growth rate to your FCF is best at these scenarios:

1. Your company comes out of a business cycle
2. Your company realizes whatever investments they've undertaken
3. Your earnings stabilize (either from a peak or trough)
- Anonymous on Oct 6, 2011 Flag Response

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