LBO & Paper LBO
What IRR corresponds to a 2.0x MOIC over a 5-year hold? Show the shortcut.
Model answer
IRR = 2.0^(1/5) - 1 ≈ 14.9%, so ~15%. The rule of thumb worth memorizing: a 2x over 5 years is ~15% IRR. Related anchors: 2x over 3 years ≈ 26%; 2x over 4 years ≈ 19%; 2x over 7 years ≈ 10%. Doubling…
The full, human-reviewed answer is in the bank.
Sign up free and Daily 10 serves you 10 questions a day from all 2,300+ — or go Pro for unlimited reps.
Pro unlocks every model answer — $19.99/mo.
More from LBO & Paper LBO
- What is a leveraged buyout?
- What makes a company a good LBO candidate?
- What drives returns in an LBO?
- Why does using more leverage increase equity returns (when it works)?
- At a high level, how do you calculate the IRR or money multiple on an LBO?
- Name the three primary value-creation (returns) drivers in an LBO.
Try the real thing
1 / 3M&A & Merger Models
What makes an acquisition accretive or dilutive to EPS?
Superday coming up? Take the cheat sheet.
The technicals and stories to have cold before you walk in — free, one email, no mailing list.
Free tier: 20 cards + 10 daily reps + ALL drills — no credit card required.