CFA Level I · CFA Level I Exam · Investments in Private Capital: Equity and Debt
A buyout fund invested $50 million of equity in a company. After five years it sells the company for an enterprise value of $400 million. At exit, net debt is $250 million. The fund owns 80% of the equity, and ignoring interim cash flows, the fund's multiple of invested capital (MOIC) is closest to:
The MOIC is about 2.4x. Equity value at exit is 400 minus 250 net debt, or 150 million. The fund's 80% share is 120 million, and dividing by the 50 million invested gives 2.4 times.
- A1.9x
- B2.4xCorrect
- C3.0x
Explanation
Exit equity = 400 - 250 = 150 million. Fund share = 0.80 x 150 = 120 million. MOIC = 120/50 = 2.4x. Ignoring net debt gives 320/50 = 6.4x, and omitting the 80% gives 3.0x.
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