Valuation · Corporate Finance Theory
Relative Valuation Assumption Dependence
This question asks whether relative valuation is actually less subjective than other valuation methods.
Interview question
- Difficulty
- Medium
- Topic
- Valuation
- Subtopic
- Corporate Finance Theory
What this question trains
This problem practices a core corporate finance idea, how relative valuation works and where its assumptions really come from. Candidates need to understand that using trading multiples does not remove judgment, it shifts judgment into the market prices and peer group selection, so interviewers can test whether you can compare comps with DCF at a conceptual level and explain why the two methods can differ. It matters in interviews because bankers want to see that you understand both the mechanics of valuation and the economic assumptions behind each approach, not just the formulas.