How is MOIC calculated?

The multiple of invested capital (MOIC) is a financial metric used to measure the total return on an investment relative to the amount of capital that was initially invested. It essentially provides insight into how much value has been generated from the original investment.

The calculation of MOIC is done by taking the total equity returned and dividing it by the equity invested. This means that if an investor puts in a certain amount of money into a project, at the end of the investment period, they will compare the total amount of money they've received back to how much they spent originally. This ratio indicates how many times the invested equity has been returned.

Choosing the correct method of calculating MOIC is vital in assessing the overall performance of an investment. Focusing on total equity returned versus equity invested provides a straightforward way to evaluate success, as it encapsulates the raw performance without getting into nuances like time value of money or operational complexities of annual profits. The MOIC is particularly valuable for investors in the real estate sector, where assessing long-term return on investments is crucial for decision-making and strategy planning.

Other options do not accurately represent the MOIC calculation. For example, the first option looks at the equity invested rather than the total returned, and the third option blends returns with