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**MOIC** illustrates the total return of an investor's dollars over the life of an investment. Conversely, IRR considers the time value of money. When holding IRR constant, more time allows for a higher MOIC. When holding MOIC constant, less time results in a higher IRR.

MOIC is **a quick indicator of the return on your investment**. Another way to think about this is that it shows the total value of a portfolio. In quantifying this return, the metric focuses on how much rather than when.

Multiple of Investment Cost (MOIC) and **Return on Invested Capital** (ROIC) are other names for this ratio.

They each serve a different purpose. The best use of these metrics is together because **they're complementary to each other**. IRR accounts for the time it takes to earn the return while the Equity Multiple indicates how much an investment returns on an absolute basis.

IRR reflects **the performance of a private equity fund by taking into account the size and timing of its cash flows** (capital calls and distributions) and its net asset value at the time of the calculation.

Generally, **the higher the IRR, the better**. ... A company may also prefer a larger project with a lower IRR to a much smaller project with a higher IRR because of the higher cash flows generated by the larger project.

**Multiple on Invested Capital** (MOIC)

Also known as Gross MOIC, Book Value on Invested Capital, and Multiple on Money (MOM), MOIC compares the value of your current investment to the amount of money you put into it. For instance, let's say you invested $1 million, and the asset has now risen to $1.5 million.

**MOIC illustrates the total return of an investor's dollars over the life** of an investment. Conversely, IRR considers the time value of money. When holding IRR constant, more time allows for a higher MOIC.

Multiple on Invested Capital (MoIC) is calculated by dividing the fund's cumulative realized and unrealized value by the total dollar amount of capital invested by the fund. **Distribution to Paid**-In Capital (DPI) is a measure of the cumulative investment returned to the investor relative to paid in capital.

This study showed an overall IRR of **approximately 22%** across multiple funds and investments. This indicates that a projected IRR of an angel investment that is at or above 22% would be considered a good IRR.

MOIC can be expressed as **a gross or net metric**. Net MOICs are generally net of fees and carry (also called “carried interest”). Often best used at the end of a fund's life.

Multiple on invested capital, or MOIC, is an investment return metric that compares an investment's current value to the amount of money an investor initially put into it. ... In real estate, for example, this typically means the value of an **asset minus any debt you owe** (such as a mortgage).

**Cash-on-cash return is a closer conceptual cousin to MOIC**, but there's still a difference: while cash-on-cash return indicates return at a given point in time (say, one year into the investment lifecycle), MOIC evaluates the return over an investment's entire life without regard for when cash flows materialize.

What is a Good IRR For an Investment? Most venture capital firms aim for an IRR **of 20% or higher**. However, it's important to consider the length of a project when evaluating an IRR. Longer-term projects could result in more returns, even if the IRR is lower.

The **internal rate of return** (IRR) is a metric used in financial analysis to estimate the profitability of potential investments. IRR is a discount rate that makes the net present value (NPV) of all cash flows equal to zero in a discounted cash flow analysis. IRR calculations rely on the same formula as NPV does.

A widely accepted measure of performance is the **multiple of capital contributed** (MOC) or the multiple of distributions received relative to the capital invested.

Another term commonly associated with TVPI is MOIC (**multiple on invested capital**).

MOIC can be calculated using the following formula: For example, if you invest $1,000 and your return after 2 years is $10,000, then the MOIC for your investment is 10x. MOIC can sometimes be that straightforward; however, depending on investments, the MOIC formula can get more complicated.

The unrealized MOIC, which **factors in the current book value of the fund before any fees, expenses, carry, promote, and so on charged to LPs**. The realized MOIC, which only includes the distributions the fund has paid out to LPs.

For those who target MOIC, the average (median) MOIC target is **2.7 (2.6)**. PE firms with offices exclusively in the US have an MOIC target (2.8) that is significantly higher than that of other firms (2.5).

A disadvantage of using the IRR method is that it **does not account for the project size when comparing projects**. ... Using the IRR method alone makes the smaller project more attractive, and ignores the fact that the larger project can generate significantly higher cash flows and perhaps larger profits.

IRR is an annualized rate (e.g. 30%) that **would have discounted all payouts throughout** the life of an investment (e.g. 16 months and 21 days) to a value that equals the initial investment amount.

**NPV**: the preferred technique

Whenever an NPV and IRR conflict arises, always accept the project with higher NPV. It is because IRR inherently assumes that any cash flows can be reinvested at the internal rate of return.

A: It depends on the investor, the local market, and your expectations of future value appreciation. Some real estate investors are happy with a safe and predictable CoC return of **7% – 10%**, while others will only consider a property with a cash-on-cash return of at least 15%.

In general, most experts agree that **between 8-12%** is a good cash on cash return. This, however, is calculated based on an individual property. City level averages might not show a cash on cash return in this range, so it's important to do calculations for each specific income property that you consider buying.