In this lesson, we are going to build a simple exit analysis worksheet. The primary output that we are targeting through the construction of this worksheet is expected return on investment, which is critical to understand in any process, since it is the ultimate measure of investment success. Expected rate of return is generally measured as both an internal rate of return (IRR) and multiple of invested capital (MOIC) under a variety of scenarios. The challenge is that these measures rely heavily on quite a few assumptions that can be difficult to predict at the time of acquisition.

Compounding this challenge is the fact that any calculation of expected return necessarily involves the use of an assumed EBITDA exit multiple, which is perhaps the most singlehandedly influential and difficult to predict variable in all of private equity investing. So, before we dive into the worksheet, we will first address this metric.