FRM Part II · FRM Exam Part II · Private Markets Investing
A buyout fund acquires a company for an enterprise value of USD 500 million, funded with USD 300 million of debt and USD 200 million of equity. After five years, the company's enterprise value is USD 600 million and debt has been repaid down to USD 150 million. Ignoring fees and interim distributions, what is the equity multiple (MOIC)?
The equity multiple is 2.25x. Exit equity value equals the USD 600 million enterprise value less USD 150 million of remaining debt, or USD 450 million, divided by the USD 200 million of equity invested. The 1.20x figure is the unlevered enterprise value growth, ignoring leverage.
- A2.25xCorrect
- B3.00x
- C1.20x
- D1.75x
Explanation
Exit equity = 600 - 150 = 450. MOIC = 450/200 = 2.25x. The 3.00x answer would come from ignoring the remaining debt in a different way (600/200), and 1.20x is the enterprise value multiple 600/500, which ignores leverage.
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