Using NPV/FV to Calculate Promotes/Waterfall?
How common is it for people to use the NPV/FV formulas to calculate promotes and waterfalls?
I'm looking at a sponsors model and they seem to use NPV/FV formulas to calculate their promotes and waterfalls instead of a more traditional holding an "accrual" account/line to distribute cash flows.
Any reason to do one way over the other?
I've seen it before too. I prefer the accrual method because it seems more transparent with the Contributions, Acrrual, Distributions broken out.
I had only ever seen the accrual capital account method until the other day. Personally, I think the accrual method is simpler to follow, more dynamic to different waterfall structures and less complicated formulas so less room for error. I’d love to be educated if I’m missing something.
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