The Private Equity Chronicles: The Tale of Multiples (With Formulas Explained!)
In the grand financial kingdom of Capitalia , the legendary investor Lord Ardent had launched a private equity fund, Golden Returns , investing in various merchant guilds. But he needed a way to measure how well his fund was doing. To solve this, he called upon his four trusted financial advisors , each a master of a crucial performance metric: 1️⃣ Investment Multiple (TVPI - Total Value to Paid-In Capital) 2️⃣ Realization Multiple (DPI - Distributions to Paid-In Capital) 3️⃣ RVPI Multiple (Residual Value to Paid-In Capital) 4️⃣ PIC Multiple (Paid-In to Committed Capital) They each explained their importance and formulas in detail. 1️⃣ Investment Multiple (TVPI - Total Value to Paid-In Capital) First, Sir Investus , the keeper of the Investment Multiple , stepped forward. 🔹 Formula: T V P I = Realized Value + Unrealized Value Paid-In Capital TVPI = \frac{\text{Realized Value} + \text{Unrealized Value}}{\text{Paid-In Capital}} 🔹 Explanation of terms: Realized Value →...