Private Equity & Exit OppsHard

Deal A returns 2.0x in 3 years; Deal B returns 3.0x in 6 years. Which is the better deal? Argue it properly.

Model answer

IRRs: A = 2^(1/3) − 1 ≈ 26%; B = 3^(1/6) − 1 ≈ 20% (3^(1/6) = √(3^(1/3)) ≈ √1.442 ≈ 1.20). A wins on IRR; B wins on MOIC (3.0x vs 2.0x) and total dollars per dollar invested. The real answer is 'it…

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