UNIVERSITY OF GONDAR
COLLEGE OF AGRICULTURE AND RURAL TRANSFORMATION
DEPARTMENT OF AGRICULTURAL ECONOMICS
COURSE TITLE: AGRICULTURAL PROJECT PLANNING AND
ANALYSIS (532)
PROJECT PROPOSAL ON THE ESTABLISHMENT OF ANIMAL FEED
PRODUCING PLANT IN GONDAR ZURIYA WOREDA MAKSEGNIT
TOWN
SUBMITTED
BY
Endeshaw Gedefaw
SUBMITTED TO :- Abebe D (ass. prof. of agricultural economics)
JUNE 2018
GONDAR ETHIOPIA
Table of Contents
1. Executive Summary…………………………………………………………..2
2. Product Description and Application………………………………………..2
3. Market Study, Plant Capacity and Production Program…………………..3
3.1
Market Study .................................................................................................................... 3
3.1.1
Present Demand and Supply ..................................................................................... 3
3.1.2
Projected Demand ..................................................................................................... 5
3.1.3
Pricing and Distribution ............................................................................................ 7
3.2
Plant Capacity .................................................................................................................. 7
3.3
Production Program.......................................................................................................... 7
4. Raw Materials and Utilities…………………………………………………..8
4.1
Availability and Source of Raw Materials ....................................................................... 8
4.2
Annual Requirement and Cost of Raw Materials and Utilities ........................................ 8
5. Location and Site……………………………………………………………...9
6. Technology and Engineering…………………………………………………9
6.1
Production Process ........................................................................................................... 9
6.2
Machinery and Equipment ............................................................................................. 10
6.3
Size of the Project .......................................................................................................... 11
6.4
Alternative Technology .................................................................................................. 11
7. Human Resource and Training Requirement
………………………………11
7.1
Human Resource ............................................................................................................ 11
1
7.2
Training Requirement .................................................................................................... 13
8. Financial Analysis …………………………………………………………..13
8.1
Underlying Assumption ................................................................................................. 13
8.2
Investment ...................................................................................................................... 14
8.3
Production Costs ............................................................................................................ 16
8.4
Financial Evaluation ....................................................................................................... 17
9. Economic and Social Benefit and Justification……………………………18
ANNEXES………………………………………………………………………..19
1. Executive Summary
The project envisages production of 5000 tons or 50,000 quintals of assorted animal feed per
annum. The total investment requirement of the project is estimated at about Birr 18,403,122; of
which Birr 1.2 million is the cost of working capital. Based on the cash flow statement, the
calculated internal rate of return (IRR) and simple rate of return of the project are 25.9 % and
21.8, respectively. And the net present value (NPV) at 18 % discounting rate is Birr 818 millions.
The plant is expected to create employment opportunities for about 55 persons. The project uses
the local raw materials as the main ingredients of the products. Therefore it creates forward and
backward linkages to the different sectors of the economy.
2. Product Description and Application
Assorted animal feed is used for feeding domestic animals like cattle, sheep and goats, poultry
and hogs.
The feed is prepared by modern industrial production method and the main
ingredients are maize, Milo, wheat, barley, mash, molasses, soybean oil lees, other vegetable oil
lees, crushed bones, oil and fat, and some other additives. Depending on the availability of
2
inputs, some of the above inputs could be substituted to each other without affecting the quality
of the animal feed.
3. Market Study, Plant Capacity and Production Program
3.1 Market Study
3.1.1
Present Demand and Supply
With a livestock and poultry population of 31.9 million, the ANRS has the second largest
livestock resources of the country. But, due decreasing size of grazing land caused by the
expansion of farmlands and lack of modern animal feeding system, the livestock population of
the region is increasing at a very low rate; and in some areas, there is an actual decline of the
livestock population. Besides, because of poor and inadequate feeding, the quality of the meat,
hides and skins of the livestock resources of the region has been declining during the past 25
years.
The estimated and reported animal feed deficit for the ANRS in 1984 is 28-40 percent. The data
is outdated by nearly two decades, but it is doubtful whether development activities implemented
have had a say in changing the figure. The traditional feeding of livestock by letting cattle and
other domestic animals to wander in an ever decreasing grazing land is no longer practical;
simply there is no enough grazing land for the animals.
If the ANRS has to maintain and further develop its livestock resources for domestic use and for
export, the system of feeding the animals should be modernized and at the same time
economical. One option for providing feed for the animals is the establishment of a number of
small to medium scale animal feed making factories in the major urban centers; and if
infrastructures allow, in the major cattle growing areas of the region. The animal feed from the
factories may not be the only source of feed for the animals; it can be used as supplementary but
important feed for livestock productivity.
3
Traditionally, Ethiopian dairy farmers as well as cattle fatteners prepared their own concentrated
feed from different ingredients such as milling and oil factory by-products. In other words, agroindustrial by-products are important rations in ruminant livestock feed. They are generally feeds
of high energy. If such products are mixed with cereals and some sorts of vitamins and minerals,
they are very useful for animal growth and health. However, despite the availability of various
agro-industrial by-products, most of them are under-utilized; mainly because of lack of
appropriate technologies for processing.
In connection to this, however, many inputs used to produce animal feeds have alternative uses,
either for human consumption or for industrial use. These competing demands are determined by
price and availability of the commodity. In country like Ethiopia, where there is shortfall in food
grains production, the availability of raw materials for animal feed plants could be the major
problem. In other words, there is a direct competition between human and livestock for cereal
grains.
To compute the demand for concentrated animal feed in ANRS, it is reasonable to start with the
utilization of agro-industrial by-products as animal feed in the region. Utilization of agroindustrial by products (millers’ by products, oil cakes, brewer’s spent grain, etc…) is a bit higher
in moisture deficit areas (4.1 percent for Dega, 7.0 percent for Woina-Dega and 4.5 percent for
Kola) as compared to sufficient rainfall areas (2.5, 4.3 and 2.3). Transport problem and higher
price prevent by-products from being utilized effectively.
Utilization of concentrated or improved animal feed in the ANRS is only 0.2 %. And, it is from
other regions that the feed is come. Like that of agro-industrial by-products, transport problem
and higher price prevent the use of industrially processed animal feed in the ANRS. Feed
resources for livestock in rural and urban holdings in ANRS are given in Table 3.1.
4
Table 3.1
Feed resources for livestock in rural and urban holdings in ANRS
Number of
%
Rural
Urban
households
Green fodder/.grazing
2,670,653
46,58
51.36
35.08
Crop residues
2,545,602
35.31
32.99
17.05
Improved feed (alfalfa)
22,475
0.18
0.16
0.38
Hay (grass, clover, etc)
1,433,118
13.08
11.43
16.05
By – products/others
277,131
1.31
1.02
8.96
617,411
3.54
3.04.
22.47
By – products: rapeseed cake, Noug
cake, safflower cake, brewing residue
and bran.
Source: CSA, 2010 G.C
3.1.2
Projected Demand
The following assumptions are made to project the future demand for industrially processed
animal feed:
5

In the year 2001 E.C., the cattle population in ANRS is estimated to be 11,026,549 and
estimated to grow at 1.2 % per annum in the coming years.

Of the total cattle population, it is conservative to say at least 0.5 %( which is two times
the current use) can be fed from industrially processed animal feed in the short-run while,
as awareness increases, it can grow at 10 % per annum in the coming years, if the supply
is available at a reasonable price.

The average consumption per head per day is assumed to be 2.7 K.G, which is taken from
the State Dairy Farms past record.
Based on the above facts and assumptions, the ANRS’s demand for industrially processed animal
feed can be projected as given in Table 3.2 below. By the year 2001 E.C, the projected demand
equals 54,333 tons; the figure is projected to reach 62,688 tons and 66,540 tons by the year 2005
E.C. and 2010 E.C.
TABLE 3.2
Processed animal feed demand projections in ANRS
Year (E.C.)
Quantity (in Ton)
2001
54,333
2002
60,484
2003
61,210
2004
61,944
2005
62,688
2006
63,440
2007
64,201
2008
64,971
2009
65,751
2010
66,540
6
3.1.3
Pricing and Distribution
Market prices of industrially processed animal feed depends upon the availability and value of
raw materials, number of processing units, number of processing firms and their production
efficiency, prevailing demand and etc. As discussed earlier, the demand for industrially
processed or concentrated animal feeds for ANRS’s alone surpasses the existing animal feed
supply in the country. The current producer’s prices of the product range between Birr 160 and
Birr 180 per quintal at industry gate. In this project profile, it is proposed to sell the product at
Birr 150 per quintal at the factory gate.
3.2 Plant Capacity
According to market study, the present demand supply gap of animal feed is very large. In this
study, a plant with a capacity of 5000 tons per annum is envisaged; which is a small fraction of
the projected demand of the region. The plant will operate 275 days a year. Sundays and national
holidays, amounting to 65 days a year, are registered holidays for the plant. For maintenance and
repair work as well as for contingence of unexpected work interruption additional 25 days are
assigned.
3.3 Production Program
The plant can start operation at 75 % of its capacity in the first year. It will then build up its
production capacity to 85 % and then 100 % in the second and third year, respectively. As the
plant is new and is equipped with new machinery, production build-up is made to start at reduced
capacity and gradually rise to full capacity. The low production level at the initial stage is also to
develop substantial market outlets for the product. Machinery operators will also get enough time
to develop the required skills and experience.
7
4. Raw Materials and Utilities
4.1 Availability and Source of Raw Materials
The main ingredients for the production of industrially processed animal feed are Milo, maize,
wheat bran, mash, molasses, soybean grounds, fish grounds (meal) and some vitamins.
Depending on the availability of other inputs, the above inputs could be substituted without
affecting the quality of the animal feed. All the raw materials, except molasses, can be obtained
within the region. Molasses can be brought from the existing sugar factories or from the region
if these factories are established.
4.2 Annual Requirement and Cost of Raw Materials and Utilities
The quantities and costs of raw materials required for the production of 5000 tons of
concentrated animal feed are indicated in Table 4.1.Utilities required by the plant consist of
electricity, water and fuel oil. The annual requirement and costs of these utilities is shown in
Table 4.2.
TABLE 4.1
Raw and auxiliary materials requirement
No
Description
Qty
Cost ('000 Birr)
(tons)
F.C
L.C
Total
1
Oil Cake
1150
-
555
555
2
Frushka (Bran of Cereals)
1235
-
573.6
573.6
3
Molasses
250
-
120.8
120.8
4
Low Quality Maize
2000
-
1200
1200
5
Salt
7
-
5
5
6
Limestone (ground)
8
-
4.3
4.3
8
7
Meal (bone or flesh or blood)
8
Sacks (150 kg capacity)
9
Twine Rope
10
Other
grains
(low
quality
200
-
36
36
100,000 pcs
-
600
600
lump sum
-
8.4
8.4
150
-
216
216
-
-
3,319.1
3,319.1
wheat, barely and etc)
Total Cost
UTILITIES REQUIREMENT AT FULL CAPACITY
No
Item
1
Electricity
2
Water
3
Fuel Oil
Annual Requirement
Cost ('000 Birr)
45,000 KWH
24.5
4800 m3
12.7
374,000 liter
2618
Total
2655.2
5. Location and Site
For its convenience for distribution, Gondar is an appropriate choice for the establishment animal
feed production plant in the region.
6. Technology and Engineering
6.1 Production Process
The major operations involved in the production of animal feed are:- raw materials preparation;
primary crushing; assorting and measuring; mixing; molasses mixing; fine crushing; pellet
making; packaging.
9
Raw and auxiliary materials are first charged into silos and tanks where they are made ready for
further processing. Then, they are processed by primary crusher. Crushed materials are further
separated by means of a sifter, and then stored to assorting tanks according to the kind of raw
materials.
In assorting and measuring operation, small amounts of additives are charged into the bins
containing different assortments of raw materials. The raw materials stored in the assorting tanks
are measured in accordance with their use (cattle feed, hog feed, etc).
The raw materials are then mixed by means of a mixer. In this process, fatty ingredients are
added to the materials in order to raise the nutrient value of the feed. The feed obtained from the
mixer is added with molasses. The product is next accommodated in the product tanks, then
weighed and packaged.
6.2 Machinery and Equipment
Machinery and equipment required by the plant together with auxiliary equipment and their costs
are given in Table 6.1.
TABLE 6.1
MACHINERY AND EQUIPMENT REQUIRED BY CATTLE FEED PRODUCING
PLANT
No
Description
Cost(In Birr)
1
Tanks And Silos for Raw and Auxiliary Materials
0
2
Metal Screen & Shaker
0
3
Mixer
0
4
Hammer Mill (Crusher)
0
5
Blender
0
6
Weighing Scale (5 Tons)
0
10
7
Bagging Equipment
0
8
Dust Collector
0
9
Product Tank
0
10
Tanks for Oil Cakes and Molasses
0
11
Boiler
0
12
Other Accessories
0
Sub-Total
5,680,000
Freight, Insurance, Banks, Charges, Inland Transport, etc.
Total Cost of Machinery and Equipment
550,000
6,230,000
6.3 Size of the Project
The total area required by the plant is estimated to be 5000 m2.
6.4 Alternative Technology
Alternatively, assorted animal feed can be produced using a capital intensive technology that
involves fine crushing and pellet making. In this case, after the feed is mixed with molasses, it is
further crushed by means of the second chamber, and the assorted animal feed that is crushed in
to fine particles is further formed in to pellets. The pellets, which are cylindrical type and come
in sizes measuring 6mm in diameter and 2 cm in length, are then dried.
7. Human Resource and Training Requirement
7.1 Human Resource
11
The manpower requirement of the plant will be 55. In terms of annual expenditure a total of
437,400 Birr will be expended for salary and wages. The following Table 7.1 shows the details
of manpower requirement of the plant.
TABLE 7.1 Manpower requirement of animal feed producing plant
No
Description
Qt
Monthly
Annual
(no)
Salary/Wages
Expenditure
A. Administration
1
Plant Manager
1
2500
30000
2
Secretary
1
500
6000
3
Accountant
1
800
9600
4
Personnel Officer
1
800
9600
5
Salesman
1
800
9600
6
Cashier
1
600
7200
7
Clerks
2
250
6000
8
General Services
5
300
18000
B. Production
1
Production Supervisor
1
1200
14400
2
Electrical/Mechanical Eng.
1
1500
18000
3
Skilled Workers
10
600
72000
4
Unskilled Workers
30
400
144000
-
317400
Sub-total
Training Cost
-
-
120000
Total annual cost
55
-
437,400
12
7.2 Training Requirement
Training is required for key production personnel. For this purpose, one expert from the
technology suppliers can be sent.
8. Financial Analysis
8.1 Underlying Assumption
The financial analysis of milk powder producing plant is based on the data provided in the
preceding chapters and the following assumptions.
A. Construction and Finance
Construction period
2 years
Source of finance
40% equity and 60% loan
Tax holidays
2 years
Bank interest rate
12%
Discount for cash flow
18%
Value of land
Based on lease rate of ANRS
Spare Parts, Repair & Maintenance
3% of fixed investment
13
B.Depreciation
Building
5%
Machinery and equipment
10%
Office furniture
10%
Vehicles
20%
Pre-production (amortization)
20%
B. Working Capital (Minimum Days of Coverage)
Raw Material-Local
30 days
Raw Material-Foreign
120 days
Factory Supplies in Stock
30 days
Spare Parts in Stock and Maintenance
30 days
Work in Progress
10 days
Finished Products
15 days
Accounts Receivable
30 days
Cash in Hand
30 days
Accounts Payable
30 days
8.2 Investment
The total investment cost of the project including working capital is estimated at Birr 18,403,122
as shown in Table 8.1 below. The Owner shall contribute 40 % of the finance in the form of
equity while the remaining 60 % is to be financed by bank loan.
14
Table 8.1 Total initial investment
Items
Total
Land
3750
Building and Civil Works
7,200,000
Office Equipment
500,000
Vehicles
2,500,000
Plant Machinery & Equipment
6,230,000
Total Fixed Investment Cost
16,433,750
Pre production capital expenditure*
Total Initial Investment
750,000
17,183,750
Working Capital at Full Capacity
Total
1,219,372
18,403,122
*Pre-production capital expenditure includes - all expenses for pre-investment studies,
consultancy fee during construction and expenses for company‘s establishment, project
administration expenses, commission expenses, preproduction marketing and interest expenses
during construction.
The major components of the investment are building and civil works, plant and machinery
expenses and working capital which are accounting for 35.2 %, 24.4 % and 35.8 %, respectively.
The foreign component of the project accounts for 24.4 % of the total investment cost.
15
8.3 Production Costs
The total production cost at full capacity operation is estimated at Birr 6.7 million (See Table
8.2). Raw materials and utilities amounts Birr 89.8 % of the total production cost.
Table 8.2 production cost at full capacity
Raw Material Requirement
Cost
1.Local Raw Materials
3,319,100
2.Foreign Raw Materials
0
Total Production Cost at full Capacity
Items
Cost
1. Raw Materials
3,319,100
2.Utilities
2,655,200
3.Wages and Salaries
241,200
4.Spares and Maintenance
62,490
Factory costs
6,277,990
5. Depreciation
168,830
6.Financial Costs
204,391
Total Production Cost
6,651,211
16
8.4 Financial Evaluation
I.
Profitability
According to the projected income statement (See Annex 4) the project will generate profit
beginning from the first year of operation and increases on wards. The income statement and
other profitability indicators also show that the project is viable.
II.
Breakeven Analysis
The breakeven point of the projects is given by the formula:
BEP =
Fixed Cost
Sale –Variable Cost
at full capacity.
The project will break even at 21.8 % of capacity utilization
III.
Payback Period
Investment cost and income statement projection are used in estimating the project payback
period. The projects will payback fully the initial investment less working capital in three years.
IV.
Simple Rate of Return
The project’s simple rate of return is given by the formula:
SRR= (Net Profit + Interest)/ (Total Investment Outlay) at full capacity utilization.
17
The SRR would be 22.2 % at full capacity utilization.
V.
Internal Rate of Return and Net Present Value
Based on cash flow statement (Annex 2) the calculated internal rate of return (IRR) of the project
is 25.9 % and the net present value (NPV) at 18 % discount is Birr 818 thousand.
VI.
Sensitivity Analysis
The sensitivity test result which undertaken by increasing the cost of production by 5 % still
indicates that the project would be viable.
9. Economic and Social Benefit and Justification
Based on the foregoing presentation and analysis, we can learn that the proposed project
possesses wide range of benefits that complement the financial feasibility obtained earlier. In
general, the envisaged project promotes the socio-economic goals and objectives stated in the
strategic plan of the Amhara National Regional State, particularly in Gondar Zuriya woreda
maksegnit Town. These benefits are listed as follows:
A. Profit Generation
The project is found to be financially viable and earns on average a profit of Birr 621 thousands
per year and Birr 6.2 million within the project life. Such result induces the project promoters to
reinvest the profit which, therefore, increases the investment magnitude in the region.
B. Tax Revenue
In the project life under consideration, the region will collect about Birr 2.3 million from
corporate tax payment alone (i.e. excluding income tax, sales tax and VAT). Such result create
additional fund for the regional government that will be used in expanding social and other basic
services in the region
18
C. Employment and Income Generation
The proposed project is expected to create employment opportunity to several citizens of the
country. That is, it will provide employment to 55 staffs. This would be one of the commendable
accomplishments of the project.
D. Pro Environment Project
The proposed production process is environmentally friendly
ANNEXES
19
Annex 1: Total Net Working Capital Requirements (in Birr)
CONSTRUCTION
PRODUCTION
Year 1
Year 2
1
2
3
4
0
0
75%
85%
100%
100%
0.00
0.00
949113.26
1075661.70
1265484.35
1265484.35
0.00
0.00
271562.73
307771.09
362083.64
362083.64
Raw Material-Local
0.00
0.00
271562.73
307771.09
362083.64
362083.64
Raw Material-Foreign
0.00
0.00
0.00
0.00
0.00
0.00
Factory Supplies in Stock
0.00
0.00
5274.67
5977.96
7032.89
7032.89
Spare Parts in Stock and Maintenance
0.00
0.00
5112.82
5794.53
6817.09
6817.09
Work in Progress
0.00
0.00
131866.77
149449.01
175822.36
175822.36
Finished Products
0.00
0.00
263733.55
298898.02
351644.73
351644.73
2. Accounts Receivable
0.00
0.00
613636.36
695454.55
818181.82
818181.82
3. Cash in Hand
0.00
0.00
236978.18
268575.27
315970.91
315970.91
0.00
0.00
1528165.08
1731920.42
2037553.44
2037553.44
4. Current Liabilities
0.00
0.00
613636.36
695454.55
818181.82
818181.82
Accounts Payable
0.00
0.00
613636.36
695454.55
818181.82
818181.82
TOTAL NET WORKING CAPITAL REQUIRMENTS
0.00
0.00
914528.72
1036465.88
1219371.62
1219371.62
Capacity Utilization (%)
1. Total Inventory
Raw Materials in Stock- Total
CURRENT ASSETS
1
INCREASE IN NET WORKING CAPITAL
0.00
0.00
914528.72
121937.16
182905.74
0.00
2
Annex 1: Total Net Working Capital Requirements (in Birr)
(continued)
PRODUCTION
5
6
7
8
9
10
100%
100%
100%
100%
100%
100%
1265484.35
1265484.35
1265484.35
1265484.35
1265484.35
1265484.35
362083.64
362083.64
362083.64
362083.64
362083.64
362083.64
362083.64
362083.64
362083.64
362083.64
362083.64
362083.64
Raw Material-Foreign
0.00
0.00
0.00
0.00
0.00
0.00
Factory Supplies in Stock
7032.89
7032.89
7032.89
7032.89
7032.89
7032.89
Spare Parts in Stock and Maintenance
6817.09
6817.09
6817.09
6817.09
6817.09
6817.09
Work in Progress
175822.36
175822.36
175822.36
175822.36
175822.36
175822.36
Finished Products
351644.73
351644.73
351644.73
351644.73
351644.73
351644.73
2. Accounts Receivable
818181.82
818181.82
818181.82
818181.82
818181.82
818181.82
3. Cash in Hand
315970.91
315970.91
315970.91
315970.91
315970.91
315970.91
2037553.44
2037553.44
2037553.44
2037553.44
2037553.44
2037553.44
4. Current Liabilities
818181.82
818181.82
818181.82
818181.82
818181.82
818181.82
Accounts Payable
818181.82
818181.82
818181.82
818181.82
818181.82
818181.82
Capacity Utilization (%)
1. Total Inventory
Raw Materials in Stock-Total
Raw Material-Local
CURRENT ASSETS
3
TOTAL NET WORKING CAPITAL REQUIRMENTS
INCREASE IN NET WORKING CAPITAL
1219371.62
1219371.62
1219371.62
1219371.62
1219371.62
1219371.62
0.00
0.00
0.00
0.00
0.00
0.00
4
Annex 2: Cash Flow Statement (in Birr)
CONSTRUCTION
PRODUCTION
Year 1
Year 2
1
2
3
4
1093575.00
2312946.62
6238636.36
6456818.18
7622727.27
7500000.00
1093575.00
2312946.62
613636.36
81818.18
122727.27
0.00
Total Equity
437430.00
925178.65
0.00
0.00
0.00
0.00
Total Long Term Loan
656145.00
1387767.97
0.00
0.00
0.00
0.00
0.00
0.00
613636.36
81818.18
122727.27
0.00
2. Inflow Operation
0.00
0.00
5625000.00
6375000.00
7500000.00
7500000.00
Sales Revenue
0.00
0.00
5625000.00
6375000.00
7500000.00
7500000.00
Interest on Securities
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
TOTAL CASH OUTFLOW
1093575.00
1093575.00
6782477.24
6149905.03
7400266.33
7066018.53
4. Increase In Fixed Assets
1093575.00
1093575.00
0.00
0.00
0.00
0.00
1041500.00
1041500.00
0.00
0.00
0.00
0.00
52075.00
52075.00
0.00
0.00
0.00
0.00
0.00
0.00
1528165.08
203755.34
305633.02
0.00
TOTAL CASH INFLOW
1. Inflow Funds
Total Short Term Finances
3. Other Income
Fixed Investments
Pre-production Expenditures
5. Increase in Current Assets
5
6. Operating Costs
0.00
0.00
4732231.15
5360227.97
6302223.20
6302223.20
7. Corporate Tax Paid
0.00
0.00
0.00
0.00
247366.65
259630.13
8. Interest Paid
0.00
0.00
522081.01
245269.56
204391.30
163513.04
9.Loan Repayments
0.00
0.00
0.00
340652.16
340652.16
340652.16
10.Dividends Paid
0.00
0.00
0.00
0.00
0.00
0.00
Surplus(Deficit)
0.00
1219371.62
-543840.88
306913.15
222460.95
433981.47
Cumulative Cash Balance
0.00
1219371.62
675530.75
982443.90
1204904.84
1638886.31
6
Annex 2: Cash Flow Statement (in Birr): Continued
PRODUCTION
5
6
7
8
9
10
7500000.00
7500000.00
7500000.00
7500000.00
7500000.00
7500000.00
0.00
0.00
0.00
0.00
0.00
0.00
Total Equity
0.00
0.00
0.00
0.00
0.00
0.00
Total Long Term Loan
0.00
0.00
0.00
0.00
0.00
0.00
Total Short Term Finances
0.00
0.00
0.00
0.00
0.00
0.00
2. Inflow Operation
7500000.00
7500000.00
7500000.00
7500000.00
7500000.00
7500000.00
Sales Revenue
7500000.00
7500000.00
7500000.00
7500000.00
7500000.00
7500000.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
7037403.75
7015037.97
6986423.18
6617156.24
6617156.24
6617156.24
0.00
0.00
0.00
0.00
0.00
0.00
Fixed Investments
0.00
0.00
0.00
0.00
0.00
0.00
Pre-production Expenditures
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
TOTAL CASH INFLOW
1. Inflow Funds
Interest on Securities
3. Other Income
TOTAL CASH OUTFLOW
4. Increase In Fixed Assets
5. Increase in Current Assets
7
6. Operating Costs
6302223.20
6302223.20
6302223.20
6302223.20
6302223.20
6302223.20
7. Corporate Tax Paid
271893.61
290406.08
302669.56
314933.04
314933.04
314933.04
8. Interest Paid
122634.78
81756.52
40878.26
0.00
0.00
0.00
9. Loan Repayments
340652.16
340652.16
340652.16
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
Surplus(Deficit)
462596.25
484962.03
513576.82
882843.76
882843.76
882843.76
Cumulative Cash Balance
2101482.57
2586444.60
3100021.42
3982865.18
4865708.94
5748552.70
10.Dividends Paid
Annex 3: DISCOUNTED CASH FLOW-TOTAL CAPITAL INVESTED
CONSTRUCTION
PRODUCTION
Year 1
Year 2
1
2
3
4
TOTAL CASH INFLOW
0.00
0.00
5625000.00
6375000.00
7500000.00
7500000.00
1. Inflow Operation
0.00
0.00
5625000.00
6375000.00
7500000.00
7500000.00
Sales Revenue
0.00
0.00
5625000.00
6375000.00
7500000.00
7500000.00
Interest on Securities
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
2. Other Income
8
TOTAL CASH OUTFLOW
1093575.00
1093575.00
5646759.87
5482165.13
6485128.94
6561853.33
3. Increase in Fixed Assets
1093575.00
1093575.00
0.00
0.00
0.00
0.00
Fixed Investments
1041500.00
1041500.00
0.00
0.00
0.00
0.00
52075.00
52075.00
0.00
0.00
0.00
0.00
4. Increase in Net Working Capital
0.00
0.00
914528.72
121937.16
182905.74
0.00
5. Operating Costs
0.00
0.00
4732231.15
5360227.97
6302223.20
6302223.20
6. Corporate Tax Paid
0.00
0.00
0.00
0.00
0.00
259630.13
-
-
1093575.00
1093575.00
-21759.87
892834.87
1014871.06
938146.67
-
-
-
-
1093575.00
2187150.00
2208909.87
1316075.00
-301203.94
636942.73
1093575.00
-926758.47
-15627.60
543406.86
523459.20
410072.56
-
-
-
-
1093575.00
2020333.47
2035961.07
1492554.21
-969095.01
-559022.45
Pre-production Expenditures
NET CASH FLOW
CUMMULATIVE NET CASH FLOW
Net Present Value (at 18%)
Cumulative Net present Value
Annex 3: DISCOUNTED CASH FLOW-TOTAL CAPITAL INVESTED (Continued)
PRODUCTION
9
5
6
7
8
9
10
TOTAL CASH INFLOW
7500000.00
7500000.00
7500000.00
7500000.00
7500000.00
7500000.00
1. Inflow Operation
7500000.00
7500000.00
7500000.00
7500000.00
7500000.00
7500000.00
Sales Revenue
7500000.00
7500000.00
7500000.00
7500000.00
7500000.00
7500000.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
6574116.81
6592629.28
6604892.76
6617156.24
6617156.24
6617156.24
3. Increase in Fixed Assets
0.00
0.00
0.00
0.00
0.00
0.00
Fixed Investments
0.00
0.00
0.00
0.00
0.00
0.00
Pre-production Expenditures
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
5. Operating Costs
6302223.20
6302223.20
6302223.20
6302223.20
6302223.20
6302223.20
6. Corporate Tax Paid
271893.61
290406.08
302669.56
314933.04
314933.04
314933.04
NET CASH FLOW
925883.19
907370.72
895107.24
882843.76
882843.76
882843.76
CUMMULATIVE NET CASH FLOW
1562825.92
2470196.64
3365303.88
4248147.64
5130991.40
6013835.16
Net Present Value (at 18%)
342976.34
284846.38
238132.69
199042.49
168680.07
142949.21
Cumulative Net present Value
-216046.11
68800.27
306932.95
505975.44
674655.51
817604.73
Interest on Securities
2. Other Income
TOTAL CASH OUTFLOW
4. Increase in Net Working Capital
Net Present Value (at 18%)
Internal Rate of Return
817,604.73
25.9%
10
Annex 4: NET INCOME STATEMENT ( in Birr)
PRODUCTION
1
2
3
4
5
75%
85%
100%
100%
100%
5625000.00
6375000.00
7500000.00
7500000.00
7500000.00
5625000.00
6375000.00
7500000.00
7500000.00
7500000.00
Other Income
0.00
0.00
0.00
0.00
0.00
2. Less Variable Cost
4637616.15
5255964.97
6183488.20
6183488.20
6183488.20
987383.85
1119035.03
1316511.80
1316511.80
1316511.80
17.55
17.55
17.55
17.55
17.55
263445.00
273093.00
287565.00
287565.00
287565.00
723938.85
845942.03
1028946.80
1028946.80
1028946.80
12.87
13.27
13.72
13.72
13.72
4. Less Cost of Finance
522081.01
245269.56
204391.30
163513.04
122634.78
5. GROSS PROFIT
201857.84
600672.47
824555.50
865433.76
906312.02
0.00
0.00
247366.65
259630.13
271893.61
201857.84
600672.47
577188.85
605803.63
634418.42
Capacity Utilization (%)
1. Total Income
Sales Revenue
VARIABLE MARGIN
(In % of Total Income)
3. Less Fixed Costs
OPERATIONAL MARGIN
(In % of Total Income)
6. Income (Corporate) Tax
7. NET PROFIT
RATIOS (%)
11
Gross Profit/Sales
3.59%
9.42%
10.99%
11.54%
12.08%
Net Profit After Tax/Sales
3.59%
9.42%
7.70%
8.08%
8.46%
Return on Investment
23.34%
26.24%
22.94%
22.58%
22.22%
Return on Equity
14.81%
44.08%
42.36%
44.46%
46.56%
12
Annex 4: NET INCOME STATEMENT (in Birr):Continued
PRODUCTION
6
7
8
9
10
100%
100%
100%
100%
100%
1. Total Income
7500000.00
7500000.00
7500000.00
7500000.00
7500000.00
Sales Revenue
7500000.00
7500000.00
7500000.00
7500000.00
7500000.00
0.00
0.00
0.00
0.00
0.00
2. Less Variable Cost
6183488.20
6183488.20
6183488.20
6183488.20
6183488.20
VARIABLE MARGIN
1316511.80
1316511.80
1316511.80
1316511.80
1316511.80
17.55
17.55
17.55
17.55
17.55
3. Less Fixed Costs
266735.00
266735.00
266735.00
266735.00
266735.00
OPERATIONAL MARGIN
1049776.80
1049776.80
1049776.80
1049776.80
1049776.80
14.00
14.00
14.00
14.00
14.00
4. Less Cost of Finance
81756.52
40878.26
0.00
0.00
0.00
5. GROSS PROFIT
968020.28
1008898.54
1049776.80
1049776.80
1049776.80
6. Income (Corporate) Tax
290406.08
302669.56
314933.04
314933.04
314933.04
7. NET PROFIT
677614.20
706228.98
734843.76
734843.76
734843.76
Capacity Utilization (%)
Other Income
(In % of Total Income)
(In % of Total Income)
13
RATIOS (%)
Gross Profit/Sales
12.91%
13.45%
14.00%
14.00%
14.00%
Net Profit After Tax/Sales
9.03%
9.42%
9.80%
9.80%
9.80%
Return on Investment
22.29%
21.93%
21.57%
21.57%
21.57%
Return on Equity
49.73%
51.83%
53.93%
53.93%
53.93%
14
Annex 5: Projected Balance Sheet (in Birr)
CONSTRUCTION
PRODUCTION
Year 1
Year 2
1
2
3
4
1093575.00
3406521.62
4222015.83
4563854.32
4923118.28
5188269.75
1. Total Current Assets
0.00
1219371.62
2203695.83
2714364.32
3242458.28
3676439.75
Inventory on Materials and Supplies
0.00
0.00
281950.22
319543.58
375933.62
375933.62
Work in Progress
0.00
0.00
131866.77
149449.01
175822.36
175822.36
Finished Products in Stock
0.00
0.00
263733.55
298898.02
351644.73
351644.73
Accounts Receivable
0.00
0.00
613636.36
695454.55
818181.82
818181.82
Cash in Hand
0.00
0.00
236978.18
268575.27
315970.91
315970.91
Cash Surplus, Finance Available
0.00
1219371.62
675530.75
982443.90
1204904.84
1638886.31
Securities
0.00
0.00
0.00
0.00
0.00
0.00
1093575.00
2187150.00
2018320.00
1849490.00
1680660.00
1511830.00
0.00
1041500.00
2083000.00
2083000.00
2083000.00
2083000.00
1041500.00
1041500.00
0.00
0.00
0.00
0.00
52075.00
104150.00
104150.00
104150.00
104150.00
104150.00
0.00
0.00
168830.00
337660.00
506490.00
675320.00
TOTAL ASSETS
2. Total Fixed Assets, Net of Depreciation
Fixed Investment
Construction in Progress
Pre-Production Expenditure
Less Accumulated Depreciation
15
3. Accumulated Losses Brought Forward
0.00
0.00
0.00
0.00
0.00
0.00
4. Loss in Current Year
0.00
0.00
0.00
0.00
0.00
0.00
1093575.00
3406521.62
4222015.83
4563854.32
4923118.28
5188269.75
5. Total Current Liabilities
0.00
0.00
613636.36
695454.55
818181.82
818181.82
Accounts Payable
0.00
0.00
613636.36
695454.55
818181.82
818181.82
Bank Overdraft
0.00
0.00
0.00
0.00
0.00
0.00
6. Total Long-term Debt
656145.00
2043912.97
2043912.97
1703260.81
1362608.65
1021956.49
Loan A
656145.00
2043912.97
2043912.97
1703260.81
1362608.65
1021956.49
Loan B
0.00
0.00
0.00
0.00
0.00
0.00
7. Total Equity Capital
437430.00
1362608.65
1362608.65
1362608.65
1362608.65
1362608.65
Ordinary Capital
437430.00
1362608.65
1362608.65
1362608.65
1362608.65
1362608.65
Preference Capital
0.00
0.00
0.00
0.00
0.00
0.00
Subsidies
0.00
0.00
0.00
0.00
0.00
0.00
Forward
0.00
0.00
0.00
201857.84
802530.31
1379719.17
9.Net Profit After Tax
0.00
0.00
201857.84
600672.47
577188.85
605803.63
Dividends Payable
0.00
0.00
0.00
0.00
0.00
0.00
Retained Profits
0.00
0.00
201857.84
600672.47
577188.85
605803.63
TOTAL LIABILITIES
8. Reserves, Retained Profits Brought
16
Annex 5: Projected Balance Sheet (in Birr): Continued
PRODUCTION
5
6
7
8
9
10
5482036.01
5818998.04
6184574.86
6919418.62
7654262.38
8389106.14
4139036.01
4623998.04
5137574.86
6020418.62
6903262.38
7786106.14
Inventory on Materials and Supplies
375933.62
375933.62
375933.62
375933.62
375933.62
375933.62
Work in Progress
175822.36
175822.36
175822.36
175822.36
175822.36
175822.36
Finished Products in Stock
351644.73
351644.73
351644.73
351644.73
351644.73
351644.73
Accounts Receivable
818181.82
818181.82
818181.82
818181.82
818181.82
818181.82
Cash in Hand
315970.91
315970.91
315970.91
315970.91
315970.91
315970.91
Cash Surplus, Finance Available
2101482.57
2586444.60
3100021.42
3982865.18
4865708.94
5748552.70
0.00
0.00
0.00
0.00
0.00
0.00
1343000.00
1195000.00
1047000.00
899000.00
751000.00
603000.00
2083000.00
2083000.00
2083000.00
2083000.00
2083000.00
2083000.00
0.00
0.00
0.00
0.00
0.00
0.00
104150.00
104150.00
104150.00
104150.00
104150.00
104150.00
TOTAL ASSETS
1. Total Current Assets
Securities
2. Total Fixed Assets, Net of Depreciation
Fixed Investment
Construction in Progress
Pre-Production Expenditure
17
Less Accumulated Depreciation
844150.00
992150.00
1140150.00
1288150.00
1436150.00
1584150.00
3. Accumulated Losses Brought Forward
0.00
0.00
0.00
0.00
0.00
0.00
4. Loss in Current Year
0.00
0.00
0.00
0.00
0.00
0.00
5482036.01
5818998.04
6184574.86
6919418.62
7654262.38
8389106.14
818181.82
818181.82
818181.82
818181.82
818181.82
818181.82
818181.82
818181.82
818181.82
818181.82
818181.82
818181.82
0.00
0.00
0.00
0.00
0.00
0.00
681304.32
340652.16
0.00
0.00
0.00
0.00
Loan A
681304.32
340652.16
0.00
0.00
0.00
0.00
Loan B
0.00
0.00
0.00
0.00
0.00
0.00
7. Total Equity Capital
1362608.65
1362608.65
1362608.65
1362608.65
1362608.65
1362608.65
Ordinary Capital
1362608.65
1362608.65
1362608.65
1362608.65
1362608.65
1362608.65
Preference Capital
0.00
0.00
0.00
0.00
0.00
0.00
Subsidies
0.00
0.00
0.00
0.00
0.00
0.00
Forward
1985522.80
2619941.21
3297555.41
4003784.39
4738628.15
5473471.91
9. Net Profit After Tax
634418.42
677614.20
706228.98
734843.76
734843.76
734843.76
0.00
0.00
0.00
0.00
0.00
0.00
634418.42
677614.20
706228.98
734843.76
734843.76
734843.76
TOTAL LIABILITIES
5. Total Current Liabilities
Accounts Payable
Bank Overdraft
6. Total Long-term Debt
8. Reserves, Retained Profits Brought
Dividends Payable
Retained Profits
18
19