Use the information in the following questions to determine the cash flow distributions to partners using a parri passu distribution with a promote. You are putting together a deal to fund the acquisition of a medium-sized multi-family property in Morristown, NJ and require another $850,000 in financial capital to close the deal. You set up a partnership agreement in the form of a parri passu distribution with a promote where you provide 5% of the required equity and your limited partners provide the rest. Cash flows are distributed on a parri passu basis until reaching a 10% return. Any cash flow remaining after reaching this goal is distributed on an 80/20 promote. What is your contribution to the required equity as the sponsor of the deal?
Partnership Accounting
A partnership is a kind of arrangement between two or more people whereby they agree to manage the business operations and share its profits and losses in an agreed ratio between them. The agreement that is drafted and signed by the partners of the firm is termed as partnership deed and contains various important clauses agreed between the partners such as profit/loss sharing, interest on capital, remuneration allocation of each partner, drawings, admission of a new partner, etc.
Partner Admission and Withdrawal
A partnership is a kind of arrangement between two or more people whereby they agree to manage the business operations and share its profits and losses in an agreed ratio between them. The agreement that is drafted and signed by the partners of the firm is termed as a partnership deed and contains various important clauses agreed between the partners such as profit/loss sharing, interest on capital, remuneration allocation of each partner, drawings of a partner, etc.
Use the information in the following questions to determine the cash flow distributions to partners using a parri passu distribution with a promote.
You are putting together a deal to fund the acquisition of a medium-sized multi-family property in Morristown, NJ and require another $850,000 in financial capital to close the deal. You set up a
What is the distribution that you, the sponsor, receives from the retirement of the capital account?
What is the cash flow that you, the sponsor, receive due to the promote?
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