Draw a payoff diagram for a carried interest expressed

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Question: Assume that the initial Committed Capital equals the Net Investment Capital and the initial value of the fund's portfolio is $200M, the holding period is eight years, the hurdle rate of return is compounded 8% per annum, the carry level is 20%, and the expected investment return is 20% per annum. Solve carried interest for LP and GP and show your solution procedure in detail for the following three scenarios (i) no hurdle rate and no catch-up provision; (ii) with hurdle rate and no catch-up provision; (iii) with hurdle rate and with catch-up provision, respectively.

(2 points). Using the above problem #19, draw a payoff diagram for a carried interest expressed as a function of the terminal fund asset value under Three Alternative Structures: (i) no hurdle rate of return and no catch up, (ii) compounded hurdle rate of return without GP catch up, and (iii) compounded hurdle rate of return with GP catch up. Show the exact value of net investment capital, the value of the hurdle (the minimum asset value to meet the preferred return at the date of exit), and the value of the hurdle and catch up respectively in the payoff diagram and show your solution procedures.

Reference no: EM132954873

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