perations and are accepting capital commitments. When the funds begin acquiring properties, capital calls will be made for cap ontributions during the investment period. Fund A will charge a fee of 45 BP on capital committed and 60 BP on capital investe e investment period ends. Fund B will charge a fee of 50 BP on capital committed and 55 BP on capital invested after the inve eriod ends. Both funds expect to have $506,000,000 in capital commitments when the fund commences operations and both five-year cycle for startup and acquisitions. Capital flows are expected as follows: und A Year 1 Year 2 Year 3 Year 4 Year 5 und B Contributed Capital Year 4 Year 5 $ 202,400,000 303,600,000 Contributed Capital Year 1 $ 303,600,000 Year 2 202,400,000 Year 3 Capital Returned Invested Capital $0 $ 202,400,000 506,000,000 506,000,000 404,800,000 354,200,000 101,200,000 50,600,000 Capital Returned Invested Capital $ 303,600,000 506,000,000 506,000,000 455,400,000 354.200.000 $0 0 0 50,600,000 101.200.000
perations and are accepting capital commitments. When the funds begin acquiring properties, capital calls will be made for cap ontributions during the investment period. Fund A will charge a fee of 45 BP on capital committed and 60 BP on capital investe e investment period ends. Fund B will charge a fee of 50 BP on capital committed and 55 BP on capital invested after the inve eriod ends. Both funds expect to have $506,000,000 in capital commitments when the fund commences operations and both five-year cycle for startup and acquisitions. Capital flows are expected as follows: und A Year 1 Year 2 Year 3 Year 4 Year 5 und B Contributed Capital Year 4 Year 5 $ 202,400,000 303,600,000 Contributed Capital Year 1 $ 303,600,000 Year 2 202,400,000 Year 3 Capital Returned Invested Capital $0 $ 202,400,000 506,000,000 506,000,000 404,800,000 354,200,000 101,200,000 50,600,000 Capital Returned Invested Capital $ 303,600,000 506,000,000 506,000,000 455,400,000 354.200.000 $0 0 0 50,600,000 101.200.000
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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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.
Question
Transcribed Image Text:An institutional investor is comparing management fees for two competing real estate investment funds. Both funds expect to begin
operations and are accepting capital commitments. When the funds begin acquiring properties, capital calls will be made for capital
contributions during the investment period. Fund A will charge a fee of 45 BP on capital committed and 60 BP on capital invested after
the investment period ends. Fund B will charge a fee of 50 BP on capital committed and 55 BP on capital invested after the investment
period ends. Both funds expect to have $506,000,000 in capital commitments when the fund commences operations and both project
a five-year cycle for startup and acquisitions. Capital flows are expected as follows:
Fund A
Year 1
Year 2
Year 3
Year 4
Year 5
Fund B
Year 1
Year 2
Year 3
Year 4
Year 5
Contributed
Capital
$ 202,400,000
303,600,000
Contributed
Capital
$ 303,600,000
202,400,000
Required A
Fund A
Fund B
Capital Returned
$0
0
0
Required B
101,200,000
50,600,000
Capital Returned
Total Fees
$0
0
Required:
a. What will total fees be for Fund (A)? For Fund (B)?
b. Would one of the fee structures cause the manager to want to hold the properties longer before selling than the other fee structure?
if so, which one?
50,600,000
101,200,000
Complete this question by entering your answers in the tabs below.
Invested Capital
$ 202,400,000
506,000,000
506,000,000
404,800,000
354,200,000
Invested Capital
$ 303,600,000
506,000,000
506,000,000
455,400,000
354,200,000
What will total fees be for Fund (A)? For Fund (B)?
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