4
Homework: REITs and RE Investment Performance Assignment
5
points
eBook
Lu Appraisal X
с
✰ ezto.mheducation.com/ext/map/index.html?_con=con&external_browser=0&launchUrl=https%253A%25
References
Mc
Graw
Hill
0
Problem 23-2
vo
annotate X
Year 0
Year 1
Year 2
Year 3
TOSHIBA
Equity
Investment
$ 3,600,000
Required A
A closed-end, commingled opportunity fund is being created with an expected three-year life. It expects to acquire properties that it
expects to turnaround and sell at the end of three years for a gain. It also plans a minimum target return of 10 percent to investors,
which will be based on cash distributions from operations and from the sale of properties at the end of the life of the fund. The
opportunity fund manager expects to receive a promote equal to 25 percent of cash flows remaining after sale of the assets and after
equity investors receive their minimum 10 percent target return. Cash flows are expected as follows:
Required B
Type here to search
Homewo X
Cash Distributions from Operations to
Equity Investors (After Management
Fees)
Cash Bows to equity investors
Complete this question by entering your answers in the tabs below.
Required C
$ 130,000
130,000
130,000
Required:
a. What must be the cash flows to equity investors at the end of year 3 in order to achieve their total target 10 percent return on equity
investment?
b. How much of the proceeds from property sales must the fund manager receive in order to earn its 25 percent promote?
c. After the equity investors earn their 10 percent target return (IRR) and the fund manager earns the 25 percent promote, how much
will be distributed to equity investors?
$
M Question X
3,964,817
Expected Sale
Proceeds
What must be the cash flows to equity investors at the end of year 3 in order to achieve their total target 10 percent return
on equity investment? (Do not round intermediate calculations. Round your final answer to nearest whole dollar amount.)
< Required A
$ 4,600,000
Bl
M Sign In X
Saved
Required B >
N
Adrian
Adrian W X
< Prev 4 of 7
Next >
W
7z
Fig: 1