A return metric which shows how much an investor earned on his or her invested capital. The equity multiple (EMx) is calculated by dividing the sum of all capital inflows (capital distributions) by the sum of all capital outflows (capital contributions). While the equity multiple does not account for the time value of money, it does describe the total cash returned to the investor and is thus often utilized alongside the internal rate of return in real estate investment analysis.
An alternative calculation method for traditional Equity Multiple is to add the total investment profit to peak capital invested and divide this by peak capital invested. This method generally produces the same resulting value as the total inflows divided by total outflows calculation.
The Equity Multiple is typically used in conjunction with other return metrics such as Internal Rate of Return, Cash-on-Cash Return, Free and Clear Return, and Average Rate of Return, among others. The equity multiple can be calculated before and after taxes and on an unlevered (without debt) or on a levered (with debt) basis.
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