Help Equity Waterfall Still has Ending Balance After All Distributions
I have a pretty simply Equity Waterfall that has 2 promotes
1: 7% IRR 10%/90%
2: 11% IRR 25%/90%
3: Remainder
The model has the cashflow sufficient to pass the first hurdle 7% but only by a smidge.
When it gets to the second hurdle, it distributes as much as it can, but the required return of 11% is greater than the cash flow and so I fall short and once all the distribution are gone, there is a remaining capital account balance that continues until the model ends.
It only reaches an 8%IRR on the second hurdle
Is this wrong? Should it never come out this way?
Here is an image of the watefall: See how there is an $8m balance ending after the capital event.
If there was a zero balance in a capital account for which the hurdle IRR had not been reached, you could be 100% sure that it was wrong. You should have a non-zero capital account balance if you're below the hurdle.
Ok thank goodnees. So i should just leave it hanging out there? it wont look weird to anyone?
Sed eum impedit rem corporis voluptate quisquam necessitatibus. Maxime labore amet ut est itaque iusto nisi. Recusandae nostrum excepturi consequuntur magnam quaerat dolores. Aspernatur rerum corrupti aliquid qui suscipit et. In cumque molestiae commodi sequi qui optio. Aliquid sunt ut ipsam ipsa maiores ut rerum voluptatem. Fugiat nisi rerum porro aut.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...