This question is quite tricky by giving out the information that the annual distribution represents 5% (10% or 20%, does not matter for part A) of operating expenses. Anybody else got caught on this one?
Ya, that was a bit awkward at first and had to re-read it, but if I recall correctly it’s 5% of the whatever’s operating budget.
jamespucyk Wrote: ------------------------------------------------------- > Ya, that was a bit awkward at first and had to > re-read it, but if I recall correctly it’s 5% of > the whatever’s operating budget. It’s 5% but you don’t use. What you need is spending req, the 3.75% growth of the 5%, and of course mgmt fee. so this 5% and 2.5% inflation are totally distractors.
I got caught… I used 4% in the return requirement calculation and should have used the 5%. I guess what that taught me is that if the operating budget of the organization you’re supporting requires more than your spending rule, use the organization’s number.