Problem
Suppose a general partner (GP) invests 20% of the required $6,000,000 equity funding into a real estate development, with a limited partnership (LP) investing the rest. Assume that there is a promote of 25% in case the equity entity receives a return above 8% (hurdle). Assume that the equity entity receives a total payoff of $6,600,000 one year after the investment (10% return). What is the total payoff for the LP investor?