hard · Investment Banking valuation-core

A PE firm targets a 20% IRR over a 5-year hold. If they expect a 2.5x MOIC, are they meeting their target?

1. No, a 2.5x MOIC over a 5-year period implies only a 15% IRR.
2. Yes, a 2.5x MOIC over 5 years implies an IRR of approximately 20.1%.
3. Yes, a 2.5x MOIC over a 5-year hold corresponds almost exactly to a 25% IRR.
4. No, the firm would need a 3.0x MOIC over 5 years to hit their 20% IRR target.

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