What amount is paid to gar in each year

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Great Auto Repair (GAR) wants to expand its business significantly by adding an auto assembly plant at a cost of €100 million. The land for the plant, valued at €10 million, will be provided by GAR. When GAR approaches Islamic Bank (IB) for financing of the balance of €90 million the bank suggests a Musharaka Sukuk. The bank sets up the SPV which would raise the amount by issuing tradable Musharaka Sukuks offering an expected 5% annual return. The SPV plans to set up a reserve fund from years of above expected return to compensate for years of below expected return. Profit and loss sharing will be as per capital contribution. The GAR assembly plant makes a net profit after all expenses, including SPV management expenses, at the rate of 8%, 5% and 4% in the next 3 years.

Calculate the below:

a. In each year how much return is earned in euros?

b. What amount is paid to GAR in each year?

c. What amount is paid to the Sukuk holders in each year?

d. What amounts are added into the reserve fund or allocated to Sukuk holders from the reserve fund?

Reference no: EM132575059

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