User Account

All Pages

Case study-capital provider inc

Assignment Help Finance Basics
Reference no: EM133109974

Capital Provider Inc. (CPI) invests $30 million in a real estate project and Developer Inc. (DI) invests $2 million. CPI receives a non-cumulative preferred return of 6% from operating cash flow, after which DI will receive a non-cumulative return of 5%. Once these returns are met, any remaining cash flow is split 50/50. When the property is sold, each party will receive their principal investment from the proceeds. Next, CPI will receive a 12% IRR preference and any remaining cash is split 50/50. Assuming the cash flow shown below, what are the IRRs earned by each party?

Time

Operating CF

Sale CF

Inception

(32,000,000)

 

Year 1

1,000,000

 

Year 2

1,500,000

 

Year 3

1,800,000

 

Year 4

2,500,000

 

Year 5

2,500,000

47,500,000

Group of answer choices

  • DI will earn 14.8% and CPI will earn 12.4%
  • DI will earn 13.2% and CPI will earn 12.0%
  • DI will earn 17.0% and CPI will earn 12.7%
  • DI will earn 18.2% and CPI will earn 13.6%
  • DI will earn 15.3% and CPI will earn 12.0%
  • DI will earn 16.0% and CPI will earn 13.2%

Reference no: EM133109974

Questions Cloud

What is the cost of equity : What is the cost of equity now? If the market risk premium is 4% and the ß of the shares was 1.2, what is the new ß of the shares after capital reduction?
Positive impact on your career : Explain why you chose this area and how working on it will have a positive impact on your career.
Write the conditional orifice flow equations : Write the capacitance equations for the fluid in the cylinder and Write the conditional orifice flow equations for flow through the valve
Ability of a fixed income portfolio manager : List and briefly explain three factors that limit the ability of a fixed income portfolio manager to replicate a bond index such as the Barclay's Aggregate US B
Case study-capital provider inc : Capital Provider Inc. (CPI) invests $30 million in a real estate project and Developer Inc. (DI) invests $2 million. CPI receives a non-cumulative preferred ret
Describe firm external environment : Describe the firm's external environment. Describe firm's most critical resources and capabilities. Select at least one resource and at least one capability.
Current year after-tax cash flow from the property : A property has $610,000 of annual net operating income. The depreciable basis for the property is $6,000,000, with an annual depreciation rate of 2.564% per yea
Comparison to efficient performance organization : Why is shared information so important in a learning organization in comparison to an efficient performance organization?
Potential stock investment : Wally wants your advice on a potential stock purchase. There is excess capital on the balance sheet - and he wants to put it to good use.

Reviews

Write a Review

Finance Basics Questions & Answers

  Financial reporting and analysis

Finance is about Gunns Ltd, a company in dealing with forestry products in Australia. The company has also been listed in Australian Stock Exchange. As many companies producing forestry products, even Gunns Ltd is facing various problems. Due to the ..

  A report on financial accounting

This report is specific for a core understanding for Financial Accounting and its relevant factors.

  Describe the types of financial ratios

Describe the types of financial ratios and other financial performance measures that are used during venture's successful life cycle.

  Differences between sole proprietorship and corporation

Briefly describe the major differences between a sole proprietorship and a corporation

  Prepare a cash budget statement

Calculate the expected value of the apartment in 20 years' time. What is the mortgage loan repayment at the beginning of each month

  What are the implied interest rates

What are the implied interest rates in Europe and the U.S.?

  State pricing theory and no-arbitrage pricing theory

State pricing theory and no-arbitrage pricing theory

  Small business administration

Identify the likely stage for each venture and describe the type of financing each venture is likely to be seeking and identify potential sources for that financing.

  Effect of financial leverage

The Effect of Financial Leverage and working capital management

  Evaluate the basis for the payment to the lender

Evaluate the basis for the payment to the lender and basis for the payment to the company-counterparty.

  Importance of opps, ipps, mpfs and dmepos

Research and discuss the differences and importance of : OPPS, IPPS, MPFS and DMEPOS.

  Time value of money

Time Value of Money project

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

Submit Assignment

Academics

Major Subjects

Majors

Get In Touch

whatsapp: +1-415-670-9521

Phone: +1-415-670-9521

Email: [email protected]

TERMS & POLICIES

HELP & SUPPORT

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd