An investor pays $500 in year 0 for an asset and receives $1,100 in year 5. What is the base cash-on-cash multiple (MOIC) for this investment?

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Multiple Choice

An investor pays $500 in year 0 for an asset and receives $1,100 in year 5. What is the base cash-on-cash multiple (MOIC) for this investment?

Explanation:
The main idea here is cash-on-cash multiple (MOIC), which measures how much cash an investment returns relative to the cash invested, without accounting for the time value of money. It’s simply total cash received divided by total cash invested. In this case, you invest 500 now and receive 1100 later. The MOIC is 1100 divided by 500, which equals 2.2x. So the base MOIC is 2.2x. The fact that the return happens in year 5, rather than sooner, doesn’t affect the MOIC—it affects the IRR, not the multiple. The other options correspond to different total cash receipts: 900 would be 1.8x, 1250 would be 2.5x, and 1500 would be 3.0x; none match the actual 1100 return.

The main idea here is cash-on-cash multiple (MOIC), which measures how much cash an investment returns relative to the cash invested, without accounting for the time value of money. It’s simply total cash received divided by total cash invested.

In this case, you invest 500 now and receive 1100 later. The MOIC is 1100 divided by 500, which equals 2.2x. So the base MOIC is 2.2x. The fact that the return happens in year 5, rather than sooner, doesn’t affect the MOIC—it affects the IRR, not the multiple.

The other options correspond to different total cash receipts: 900 would be 1.8x, 1250 would be 2.5x, and 1500 would be 3.0x; none match the actual 1100 return.

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