Preferred Return Calculator

Formula

The formula to calculate the Preferred Return (PR) is:

\[ PR = E \times \frac{PFR}{100} \]

Where:

$ PR $ is the Preferred Return ($)
$ E $ is the Total Equity ($)
$ PFR $ is the Preferred Rate (%)

What is Preferred Return?

Preferred return refers to the return that investors are promised before any profits are distributed to other equity holders. It is a common term in private equity and real estate investments, ensuring that investors receive a minimum return on their investment before the general partners receive their share of the profits.

Example Calculation

Let's assume the following values:

Total Equity (E) = $100,000
Preferred Rate (PFR) = 8%

Using the formula to calculate the Preferred Return:

\[ PR = 100,000 \times \frac{8}{100} = 100,000 \times 0.08 = 8,000 \text{ dollars} \]

The Preferred Return is $8,000.