Well, the 75-25 allocation between WF 1 & 2 is not correct. As noted in
our previous conversations, WF is between 10-13 percent of the total
investment. For the example you gave of $300, there would be an $100
from that for the required return for the preferred investor. The first
WF comes after that $100 is paid. From here since we have 10-13 percent
for the first WF and an 80/20 split for the between the preferred and
secondary investors just on that amount, which would be $300 CF minus
$100 preferred investor's RR equals $200. The $200 is calculated at 1st
WF rates and splits which would give us basically just 3% of the total
investment or $30 to be split amongst the investors ($24 for preferred
and $6 for secondary). We then move to the second WF since our first WF
has already been max'd out remembering that we still have $170 to be
dispersed from that CF ($300-100-24-6 = 170). Our second WF is from
13-20 percent or 7 percent of the total investment which is to be split
50/50. 7% of investment would give us a figure of $70, giving $35 to
each investor. This amount again is subtracted from the leftover amount
from the CF leaving us with only $100 that is spilled over to the 3rd
waterfall ($300-100-24-6-35-35 = 100). For the 3rd WF we used 20% and
above with an 80/20 split. Since we have $100, its rather easy to
figure this one out...$80 dollars going to the preferred investor and
$20 going to the secondary. At the end we should have something like
the following:

TO PREFERRED INVESTOR
Preferred return = $100
1st waterfall = $24
2nd waterfall = $35
3rd waterfall = $80
TOTAL FOR PREFERRED INVESTOR = $239

TO SECONDARY INVESTOR
1st waterfall = $6
2nd waterfall = $35
3rd waterfall = $20
TOTAL FOR SECONDARY INVESTOR = $61

TOTAL FOR CF DISBURSED = $239 + $61 = $300 (This amount is original CF
of $300)

Believe it or not, this is one of the easier projects that I have to
work on. It gets a lot more complicated than this when you include IRR,
NPV, compounding interest on carryover amounts, etc... I know this is a
tough one to work on and believe me when I tell you that I REALLY do
appreciate the time and effort you are putting into this.
Thanks again,
Cal