We’ve created moic to irr calculator for investors and analysts to bridge the gap between Multiple on Invested Capital and Internal Rate of Return using IRR = (MOIC^(1/t)) – 1 formula.
MOIC represents the total return on an investment, calculated by dividing the final value by the initial investment. For instance, if you invest $100,000 and it grows to $250,000, the MOIC is 2.5x (250,000 / 100,000).
IRR, on the other hand, measures the annualized rate of return, taking into account the time value of money. It’s the discount rate that makes the net present value of all cash flows equal to zero.
Moic To Irr Calculator
| Initial Investment | Final Value | Duration (Years) | MOIC | IRR |
|---|---|---|---|---|
| $50,000 | $125,000 | 4 | 2.5x | 25.74% |
| $100,000 | $180,000 | 2 | 1.8x | 34.16% |
| $75,000 | $300,000 | 6 | 4.0x | 25.99% |
| $200,000 | $400,000 | 3 | 2.0x | 26.00% |
| $1,000,000 | $1,500,000 | 1 | 1.5x | 50.00% |
| $150,000 | $450,000 | 5 | 3.0x | 24.57% |
| $250,000 | $600,000 | 7 | 2.4x | 13.98% |
| $300,000 | $900,000 | 10 | 3.0x | 11.61% |
| $60,000 | $180,000 | 4 | 3.0x | 25.74% |
| $90,000 | $270,000 | 6 | 3.0x | 25.99% |
| $120,000 | $240,000 | 2 | 2.0x | 41.42% |
| $80,000 | $160,000 | 3 | 2.0x | 26.00% |
| $500,000 | $1,200,000 | 8 | 2.4x | 12.19% |
| $350,000 | $700,000 | 5 | 2.0x | 14.87% |
| $200,000 | $500,000 | 4 | 2.5x | 34.16% |
MOIC to IRR Table
| MOIC | 1 Year | 3 Years | 5 Years | 7 Years | 10 Years |
|---|---|---|---|---|---|
| 1.5x | 50.00% | 14.47% | 8.45% | 5.95% | 4.14% |
| 2.0x | 100.00% | 26.00% | 14.87% | 10.41% | 7.18% |
| 2.5x | 150.00% | 35.72% | 20.11% | 13.98% | 9.60% |
| 3.0x | 200.00% | 44.22% | 24.57% | 16.95% | 11.61% |
| 4.0x | 300.00% | 58.74% | 31.95% | 21.83% | 14.87% |
MOIC to IRR Formula
The formula to convert MOIC to IRR is:
IRR = (MOIC^(1/t)) - 1Where:
- MOIC is the Multiple on Invested Capital
- t is the time period in years
Suppose you have an investment with an MOIC of 2.5x over 4 years.
- Insert the values into the formula: IRR = (2.5^(1/4)) – 1
- Calculate the exponent: IRR = (2.5^0.25) – 1
- Solve the equation: IRR = 1.2589 – 1 = 0.2589
- Convert to percentage: IRR = 25.89%
This means the investment yielded an annualized return of 25.89% over the 4-year period.
How do you calculate IRR using MOIC?
Calculating IRR using MOIC involves the following steps:
Compute the MOIC
Establish the investment duration
Apply the MOIC to IRR formula
Interpret the results
An investor puts $50,000 into a startup and after 6 years sells their stake for $200,000.
Calculate MOIC: MOIC = Final Value / Initial Investment
MOIC = $200,000 / $50,000 = 4x
Investment duration: 6 years
Apply the formula: IRR = (MOIC^(1/t)) – 1
IRR = (4^(1/6)) – 1
IRR = 1.2599 – 1 = 0.2599
Convert to percentage: IRR = 25.99%
The investment yielded an annualized return of 25.99% over the 6-year period.
What does 2x MOIC mean?
A 2x MOIC indicates that an investment has doubled in value, regardless of the time frame, meaning that the final value is twice the initial investment.
An angel investor invests $100,000 in a tech startup and three years later receives $200,000.
MOIC = Final Value / Initial Investment
MOIC = $200,000 / $100,000 = 2xThis 2x MOIC signifies that the investor has doubled their money; it doesn’t account for the time value of money or provide an annualized return rate—this is where converting to IRR becomes valuable:
IRR = (MOIC^(1/t)) - 1
IRR = (2^(1/3)) - 1 = 0.2599 or 25.99%While the investment doubled (2x MOIC) it provided an annualized return of 25.99% over three years.
How do you convert multiple to IRR?
Converting a multiple (MOIC) to IRR involves using the formula and following these steps:
- Identify the MOIC (multiple)
- Determine the investment duration
- Apply the formula: IRR = (MOIC^(1/t)) – 1
- Interpret the result
A private equity firm achieves a 3.5x multiple on an investment held for 5 years.
MOIC = 3.5x
Duration = 5 years
IRR = (3.5^(1/5)) – 1
= *1.2845 - 1* = *0.2845*IRR = 28.45%
The 3.5x multiple translates to an annualized return of 28.45% over five years.
Sources / Reference URLs
- Investopedia – Internal Rate of Return (IRR): https://www.investopedia.com/terms/i/irr.asp
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