a) What is a limited partnership agreement (LPA)? (b) There is a compensation rule in the LPA called carried interests. Please explain this rule. What is the purpose of the rule? There are two LBO funds set up for ten
Dividend Policy
A dividend is a part of the profit paid to the shareholder in an organization. The management of the organization has the right to decide the policy for giving a dividend from the earnings to the shareholder. However, an organization is not in the obligation to declare a dividend for the investor. Dividend policy differs from organization to organization. As the management has the only authority to decide dividend rate, dividend amount, and time of dividend payout by considering all other elements that create an impact on the payment of a dividend.
Stocks And Dividends
Stock or equities are generally sold and bought in the Stock Exchange or which is popularly known as the stock market. Stocks are issued in the Stock Exchange for the sole purpose of raising funds for the Corporation or the company itself. Now since an individual has purchased a portion of the Corporation or company, he or she may claim to be a part of the earnings or profit of the company.
(a) What is a limited
(b) There is a compensation rule in the LPA called carried interests. Please explain this rule. What is the purpose of the rule?
There are two LBO funds set up for ten years with $1 billion committed capital each. Fund A has the following characteristics: A constant management fee of 2% and carried interest of 80-20. Fund B is as follows: Preferred return of 8% per year. A decreasing management fee (2% in the first 4 years, 1% for the rest) and carried interest of 70-30.
(c) What is the investment capital of fund A and B, respectively?
(d) Suppose all investment capitals are invested at t=0 and both funds have the same
(e) What is the total payoff (including all fees) for the GP of fund A and B, respectively?
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