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You formed a joint venture with another investor five years ago. Over the last five years, your partner has received the following cash flows: (year)
You formed a joint venture with another investor five years ago. Over the last five years, your partner has received the following cash flows:
(year) | 0 | 1 | 2 | 3 | 4 | 5 |
Cash flow | (7,000,000) | 100,000 | 200,000 | 300,000 | 400,000 | 8,400,000 |
As part of your partnership agreement, you have agreed to provide a lookback preferred IRR of 8.00% to your partner before any additional cash flow is distributed to yourself. Given this information, what amount of cash must you distribute to your partner today (end of year 5) such that her IRR is exactly 8.00%?
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