Reitmyer, Simon, and Trybus are partners in a real estate partnership. The partnership's balance sheet shows:

The partners are contemplating terminating their business, as they no longer wish to spend the time involved in managing the properties. Further, several properties are in need of renovation. They believe that the properties could be sold on a piecemeal basis for a total of $1,200,000. After paying off the mortgage debt, the remaining cash would be distributed to the partners.
Don and Mary Usher have approached the partnership with a proposal. Don is experienced at property maintenance and renovation, and Mary is experienced in property management. They are interested in getting into the real estate rental business. Both are currently employed, but they have little capital to invest. They offer $50,000 to be admitted as a 40 percent partner; the three existing partners would continue as partners, but would be relieved of all operating responsibilities. Each year for the next ten years,
each old partner would receive a "salary" of $40,000 out of partnership earnings, though they would not be expected to render any services.
Because they would retain a collective 60 percent ownership, they could block any actions by Don and Mary that they deemed inadvisable. Their interests would be further protected by a security interest in the rental properties, though it would be subordinated to any present and future mortgage debt. At the end of the ten years, their remaining partnership interests would be transferred to the Ushers for $l,000 each. The Ushers could accelerate the process at any time by prepaying the future payments, at a 10 percent discount rate. The existing partners could terminate the agreement at any time and buy out the Ushers for a price of $50,000 times the number of years the agreement had been in effect. However, if the existing partners did not receive their specified salaries for two years, they could terminate the agreement without any payment due the Ushers.
Required
For each of the following five scenarios, determine the amount to be received, in present value terms, by each partner. Use a 10 percent discount rate.
a. Ushers' offer is not accepted. The properties are sold and the partnership is liquidated.
b. Ushers' offer is accepted and the agreement is completely fulfilled over the ten-year time span.
c. Ushers' offer is accepted. Despite their efforts, the Ushers are not able to turn the properties into money-makers, and have defaulted on the payments due the old partners for years 3 and 4. At the end of year 4, the old partners invoke their termination rights. The mortgage debt has grown to $400,000, as money was borrowed to finance renovations. It is estimated that the sales value of the various properties has fallen to $950,000.
d. Ushers' offer is accepted, and the Ushers have been quite successful in making the properties profitable. All payments to the old partners have been made as scheduled. However, tensions between the Ushers and the prior partners have escalated, due to different approaches to property management. By the end of year 5, the old partners are ready to invoke their termination rights, pay the Ushers the required buyout, and liquidate the partnership. The properties have an expected resale value of $2,000,000, and mortgage debt stands at $650,000. However, before the old partners act, the Ushers borrow money and exercise their prepayment rights.
e. Same as part d above, except that the Ushers do not exercise their prepayment rights.

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Cash Rental properties, net . . . . . . . . . . . . . Capital, Reitmyer (40%) . . . . . . . . . . . 200,000 150,000 700,000 Total assets......$720,000 Total liabilities and capital ..$720,000