I dont understand how a partners IRR can increase overtime while a projects IRR goes down.
In the attached case, I assume the partner contributes all the equity and gets a 50/50 split after his equity is paid back.
I have two scenarios: 4 year and 7 year. Project IRR goes down if I exit in Year 7 vs Year 4.
But Partner IRR under the above structure goes up! no preferred return or any other split.
I have pondered the case for a couple of days without avail.
I attached the cashflows below hoping that someone can show me the light….
- No luck?
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