The equity is owned by LP investors and MP in a ratio of 5 to 1. The total invested equity is $120. The outstanding mortgage balance at the end of 2019 is $240. The property sells for $400 net of all expenses at the end of 2019. The rules established for sales proceeds are, first pay the mortgage off, next return capital to equity partners and finally split all remaining proceeds 70 LP/30 MP. How much cash flow will the MP get from the sales transaction (do not put the $ sign in the answer)

Respuesta :

Answer:

MP will get a cash flow of:

$128

Explanation:

a) Data and Calculations:

Equity shares

LP = 5

MP = 1

Ratio of equity = 5 : 1

Invested equity = $120

Share of invested equity:

LP = 5/6 * $120 = $100

MP = 1/6 * $120 = $20

Mortgage = $240

Property Sales = $400

Sales Proceeds Rules:

Property Sales = $400

Mortgage             240

Remaining           160

Equity share:

LP                       (100)

MP                       (20)

Balance                40

Sharing Ratio:

LP = 70% * $40 = $28

MP = 30% * $40 = $12

MP's cash flow:

Equity = $100

Balance Shared = $28

Total = $128

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