You've identified a potential acquistion which, after accounting for the mortgage financing you have secured, requires...

Transcribed Image Text:

• You've identified a potential acquistion which, after accounting for the mortgage financing you have secured, requires a bit more than $5M in equity to close the deal. Rather than drain your Christmas account, you decide to structure the acquistion as a partnership. You will contribute 5% of the required equity, your investors will supply the rest. The before-tax cash flows and return are as follows: 0 CF op CF sale BTCF 1 2 3 4 292,000 320,495 349,655 379,690 5 410,625 6,972,485 12.67% (5,059,000) 292,000 320,495 349,655 379,690 7,383,110 You decide to structure the deal as a simple Parri Passu w/promote. Cash flows are distributed on a parri passu basis up to a 10% hurdle rate. Cash flows in excess of the 10% return are distributed based on a 75/25 distribution. Set up a capital account to keep track of the outstanding equity and determine the cash flows you and your investors. receive. What distribution of cash flow in year 5 settles the capital account? What is the - cash flow you receive based on the promote? What is the cash flow your investors receive based on the promote? • You've identified a potential acquistion which, after accounting for the mortgage financing you have secured, requires a bit more than $5M in equity to close the deal. Rather than drain your Christmas account, you decide to structure the acquistion as a partnership. You will contribute 5% of the required equity, your investors will supply the rest. The before-tax cash flows and return are as follows: 0 CF op CF sale BTCF 1 2 3 4 292,000 320,495 349,655 379,690 5 410,625 6,972,485 12.67% (5,059,000) 292,000 320,495 349,655 379,690 7,383,110 You decide to structure the deal as a simple Parri Passu w/promote. Cash flows are distributed on a parri passu basis up to a 10% hurdle rate. Cash flows in excess of the 10% return are distributed based on a 75/25 distribution. Set up a capital account to keep track of the outstanding equity and determine the cash flows you and your investors. receive. What distribution of cash flow in year 5 settles the capital account? What is the - cash flow you receive based on the promote? What is the cash flow your investors receive based on the promote?

Answer rating: 100% (QA)

To set up a capital account we need to determine the initial investment amounts for each partner You will contribute 5 of the required equity which is ... View the full answer