Question of the day
2026-08-28
LBO
Estimate IRR for a 2.5x MOIC over a 4-year hold, in your head.
Answer it out loud first — like you would in the room. Then check yourself:
Reveal the model answer
Model answer
IRR = 2.5^(1/4) - 1. 2.5^(1/4) = sqrt(sqrt(2.5)). sqrt(2.5) ≈ 1.58; sqrt(1.58) ≈ 1.257. So IRR ≈ 25.7%, ~26%. Sanity: 2.5x in 5yr is ~20%, so a shorter 4yr hold for the same multiple should be higher — ~26% checks out.
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