Question

The Manufacturer Company “Pulse” would like to expand its business by opening a new branch in...

The Manufacturer Company “Pulse” would like to expand its business by opening a new branch in other City. Pulse did investment appraisal and came up with total initial investment cost of Rs.700, 000. However, the budget of the company is limited, they are able to invest only 40% of investment cost and they decided to go with Musharakah agreement which is given by Islamic Bank. In that type of agreement, all parties agreed that profit ratio is exactly proportional with the investment of each partner. At the end of maturity of this project, they realized $60,000 as a profit.
• What is investment cost in Rupees of Islamic Bank and Manufacturer Company “Pulse” respectively?
• What is profit of Islamic Bank and Manufacturer Company “Pulse” correspondingly?
• How much in total Islamic Bank will get at the end of maturity of the project? Manufacturer Company “Pulse”?


Homework Answers

Answer #1

Initial cost = 700,000

Manufacturer Company “Pulse” able to invest only 40% ,Remaining 60% investment made buy Islamic Bank .

Profit ratio is exactly proportional with the investment of each partner( 4:6 )

  • Investment cost of Islamic Bank is 420,000 and Manufacturer Company “Pulse” cost is 280,000.
  • Profit of Islamic Bank is 36,000  and Manufacturer Company “Pulse” is 24,000.
  • Islamic Bank will get 60% and Manufacturer Company “Pulse” will get 40%.
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