Section 4: Application (10 Marks).

Multi-Period Mudharabah Financing

1. Company (A) has entered into a mudharabah contract with Islamic Bank in which the company provides monetary capital of $4,000,000 to be managed and invested by the Bank.
2. The Bank provides Mudharabah Al-Muqayadah investment account facility whereby the Bank will invest in a specific project as agreed by the client. For this project there is another investor, Company B who had agreed to invest $2,000,000.
3. The profit sharing between three of them is 4:2:2 for Company A, Company B and the Bank respectively.
4. The Bank then entered into another mudharabah contract (Re-Mudharabah) with Company C to undertake a housing development project and they had agreed on the profit sharing ratio of 70:30 (Bank: Company C).
5. The Bank had agreed to contribute the $6,000,000 as monetary capital based on a five-year mudharabah financing contract (mudharabah muqayaddah).

Assume the following results of the venture:

Year	Profit / (Loss)
Year 1	$ (500,000)
Year 2	$ 1,000,000
Year 3	$ 3,000,000
Year 4	$ 1,500,000
Year 5	$ 2,000,000

Required:

Determine the profit/loss of the above transactions. Show how profit/loss will be allocated for all parties involved based on:

1. Each Period method