Waterfall example: Money-losing investment

- Okay, now we've looked at the four examples,…the no waterfall, the two-tier, three-tier,…and the four-tier, and we compared the results here earlier,…looking at the sample project, okay.…Now I want you to go back to the sample project worksheet…and find the yellow highlighted cell here on the top left…that says Multiplier.…What this little number does is it allows us…to change the sample project numbers.…So at a hundred percent,…it is the same as the examples we've gone over,…but let's look at what happens if,…let's say, it does a little less well.…

Let's say it only does 85% as well…in terms of the cash flow and the profits.…So it makes a little less money, all right.…When that happens, you see the numbers have gone down.…We'll look at the summary and we'll see…that now the two-tier waterfall is the best case…for Albert, the project manager,…when the project is not quite as profitable…as what we looked at earlier.…The reason for that is now the project,…while it surpasses the preferred return…in all of these two, three, and four-tier scenarios,…