Question

A partnership agreement provides that, at sale, cash proceeds are distributed first to Mr. Smith in an amount equal to his original investment less any cash distributions previously received, then split 50-50 between Mr. Smith and Ms. Jones. Assume that the cash flows from sale are $1million. How much would Mr. Smith receive if his initial investment was $400,000 and he previously received $25,000 in distributions?
(a) $312,500
(b) $500,000
(c) $375,000
(d) $487,500
(e) $687,500

Answer

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