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Exercise 1: Suppose there is a 2-year project valued at USD 1,000,00. The IFI decide to invest USD 700,000 in the project based on a Musharakah agreement with party A. The profit sharing ratio is 60:40 (60% IFIa d40 art A At the end of the first year, the project value declined by 10% resulting in capital loss of USD 100,000. 1. What will be the loss share of each party? 2. Calculate the amount of outstanding capital share of each party if the Musharaka is terminated after Year 3. The IFI and party decided to continue the business despite the losses in first year. What will be the profit share of each party in 2nd year if project gives a profit of USD 200,000 at the end of Year 2? 4. Calculate the amount of outstanding capital share of each party at the end of the Musharakah Contract?
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Answer #1

1) Loss share to each party is :

For IFI USD 60000

and for A USD 40000

2) out standing capital for each party if Musharaka is terminated and the 1st year

For IFI USD 640000

and for A USD 260000

3) profit share  share to each party is at the end of the 2nd year :

For IFI USD 120000

and for A USD 80000.

4) out standing capital for each party at the end of the  Musharaka contract, 2st year end

For IFI USD 760000

and for A USD 340000

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