Money Multiple Calculation

This article explains how money multiple is calculated in Model Reef.

You will learn:

Money multiple is a simple measure of how many times the original equity investment has been returned.

1. Money multiple definition

In Model Reef, money multiple is usually expressed as MOIC (multiple on invested capital).

The basic formula is:

Money multiple
= Total equity cash returned ÷ Total equity cash invested

For example, if investors put in 10 and receive 30 back over time, the money multiple is 3.0 times.

Model Reef computes money multiple from:

Equity invested
- Equity injections modelled with Equity variables.
- Purchase price or initial equity commitment where specified.
Equity returned
- Dividends and other equity distributions.
- Exit proceeds or terminal equity cashflow where relevant.
- Net of any additional capital injections later in the timeline.

You can configure which cashflow series count as equity in and equity out for the calculation.

Money multiple and IRR are related but different:

Money multiple ignores time and focuses only on the ratio of total out to total in.
IRR incorporates timing and time value of money.

Examples:

A 3 times multiple over three years is very different from 3 times over ten years in IRR terms.
Two scenarios may have similar money multiples but very different IRRs if the timing of exits and distributions is different.

Model Reef encourages you to look at both metrics side by side.

You can compare money multiples across scenarios to answer questions such as:

This is especially useful for private equity, venture capital and project finance style evaluations where investors are familiar with MOIC language.

Last updated 1 month ago