Illustration of methodology for equity return waterfall calculation

Note: for convenience of simple illustration, this spreadsheet does not conform to some elements of basic good practice for cash flow modelling,
Prepared by Penelope Lynch to illustrate calculation principals for this question only!

Inputs
Target 1
Target 2
Target 3

% share of free
cash
80%
60%
40%

Dates of equity investment

Equity as paid by investors

IRR limit
15%
25%
n/a

1/1/2012
15

317

Dates of free cash flows

Free cash flow to investors (at end period)

3/3/2013
25

To calculate the cash to investors required at any given date in order to achieve a given IRR, remember that the NPV of cash flows discounted at
Choose a convenient base date for the NPV calulations
Caluclation base date

1/1/2012

Calculate NPV of investment at the two IRR rates at the base date
NPVof investment at 15% p.a.
NPVof investment at 25% p.a.

Cash required to give target 15% IRR at given date

Cash utilised toward 15% IRR

291
277
1/1/2012
291
399.07

Remaining share of free cash

0.0

Cash required to give target 25% IRR at given date

Further Cash utilised toward 25% IRR
Remaining free cash to investors

73.2

277

359.9
0.0

77.69623201

0.00

Dates for IRR calc

Equity for 1st XIRR calc

Cash to investors for 1st XIRRcalc
First XIRR cross check
Equity for 2nd XIRR calc
Cash to investors for 2nd XIRRcalc
2nd XIRR cross check
Equity for TOTAL XIRR calc
Cash to investors for TOTAL XIRRcalc
Final XIRR

3/3/2013
343.0
20.0

1/1/2012
3/3/2013
-15
20.0
15%
-15
20.0
25%
-15
20.0
33%

e elements of basic good practice for cash flow modelling, especially with regard to layout of timelines etc!!

2/8/2012
50

3/24/2012
12

4/5/2012
32

8/21/2012
18

9/28/2012
90

1/2/2013
100

6/11/2013
50

9/19/2013
60

12/28/2013
70

4/7/2014
80

7/16/2014
40

10/24/2014
100

2/1/2015
110

IRR, remember that the NPV of cash flows discounted at the IRR equal zero, or alternatively, discounting at the IRR%, the NPV of the equity input = the NPV of the r

6/11/2013
335.6
40.0

9/19/2013
307.1
48.0

12/28/2013
269.2
56.0

4/7/2014
221.6
64.0

7/16/2014
163.7
32.0

10/24/2014
136.8
80.0

2/1/2015
59.1
59.1

0.0

0.0

0.0

0.0

0.0

0.0

36.2

361.3
0.0

341.6
0.0

312.1
0.0

272.3
0.0

221.4
0.0

201.3
0.0

129.0
21.7

0.00

0.00

0.00

0.00

0.00

0.00

0.00

2/8/2012
6/11/2013

3/24/2012
9/19/2013

4/5/2012
12/28/2013

8/21/2012
4/7/2014

9/28/2012
7/16/2014

1/2/2013
10/24/2014

1/2/2013
2/1/2015

-50
40.0

-12
48.0

-32
56.0

-18
64.0

-90
32.0

-100
80.0

0
59.1

-50
40.0

-12
48.0

-32
56.0

-18
64.0

-90
32.0

-100
80.0

0
80.8

-50
40.0

-12
48.0

-32
56.0

-18
64.0

-90
32.0

-100
80.0

0
80.8

5/12/2015
80

8/20/2015
90

11/28/2015
110

3/7/2016

6/15/2016

9/23/2016

1/1/2017

IRR%, the NPV of the equity input = the NPV of the returns to investors.

5/12/2015
0.0
0.0

8/20/2015
0.0
0.0

11/28/2015
0.0
0.0

3/7/2016
0.0
0.0

6/15/2016
0.0
0.0

9/23/2016
0.0
0.0

1/1/2017
0.0
0.0

80.0

90.0

110.0

0.0

0.0

0.0

0.0

51.3
48.0

3.5
3.5

0.0
0.0

0.0
0.0

0.0
0.0

0.0
0.0

0.0
0.0

0.00

33.70

44.00

0.00

0.00

0.00

0.00

1/2/2013
5/12/2015

1/2/2013
8/20/2015

1/2/2013
11/28/2015

1/2/2013
3/7/2016

1/2/2013
6/15/2016

1/2/2013
9/23/2016

1/2/2013
1/1/2017

0
0.0

0
0.0

0
0.0

0
0.0

0
0.0

0
0.0

0
0.0

0
48.0

0
3.5

0
0.0

0
0.0

0
0.0

0
0.0

0
0.0

0
48.0

0
37.2

0
44.0

0
0.0

0
0.0

0
0.0

0
0.0

4/11/2017

7/20/2017

10/28/2017

2/5/2018

5/16/2018

8/24/2018

12/2/2018

4/11/2017
0.0
0.0

7/20/2017
0.0
0.0

10/28/2017
0.0
0.0

2/5/2018
0.0
0.0

5/16/2018
0.0
0.0

8/24/2018
0.0
0.0

12/2/2018
0.0
0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0
0.0

0.0
0.0

0.0
0.0

0.0
0.0

0.0
0.0

0.0
0.0

0.0
0.0

0.00

0.00

0.00

0.00

0.00

0.00

0.00

1/2/2013
4/11/2017

1/2/2013
7/20/2017

1/2/2013
10/28/2017

1/2/2013
2/5/2018

1/2/2013
5/16/2018

1/2/2013
8/24/2018

1/2/2013
12/2/2018

0
0.0

0
0.0

0
0.0

0
0.0

0
0.0

0
0.0

0
0.0

0
0.0

0
0.0

0
0.0

0
0.0

0
0.0

0
0.0

0
0.0

0
0.0

0
0.0

0
0.0

0
0.0

0
0.0

0
0.0

0
0.0

3/12/2019

3/12/2019
0.0
0.0
0.0
0.0
0.0
0.00
1/2/2013
3/12/2019
0
0.0

0
0.0

0
0.0