Investment Office ANRS

Project Profile on the Establishment

of high standard office and
household furniture

Development Studies
Associates (DSA)

October 2008
Addis Ababa

Table of Contents
1.Executive Summary...................................................................................1
2.Product Description and Application.......................................................1
3.Market Study, Plant Capacity and Production Program.......................2
3.1Market Study...............................................................................................................2
3.1.1Present Demand and Supply................................................................................2
3.1.2Projected Demand................................................................................................2
3.1.3Pricing and Distribution.......................................................................................3
3.2Plant Capacity.............................................................................................................3
3.3Production Program....................................................................................................3

4.Raw Materials and Utilities.......................................................................4

4.1Availability and Source of Raw Materials..................................................................4
4.2Annual Requirement and Cost of Raw Materials and Utilities...................................4

5Location and Site.........................................................................................5

6Technology and Engineering .....................................................................5
6.1Production Process......................................................................................................5
6.2Machinery and Equipment..........................................................................................6
6.3Civil Engineering Cost................................................................................................7

7Human Resource and Training Requirement..........................................7

7.1Human Resource ........................................................................................................7
7.2Training Requirement.................................................................................................8

8Financial Analysis.......................................................................................8
8.1Underlying Assumption .............................................................................................8
8.2Investment...................................................................................................................9
8.3Production Costs.......................................................................................................10
8.4Financial Evaluation.................................................................................................11

9Economic and Social Benefit and Justification......................................12

ANNEXES....................................................................................................14

1. Executive Summary
This project profile deals with the establishment of modern or high standard office and
household furniture producing plant in Amhara National Regional State. The following presents
the main findings of the study
Demand projection divulges that the domestic demand for high standard office and household
furniture is substantial and is increasing with time. Accordingly, the planned plant is set to
produce various kinds of household and office furniture annually. The total investment cost of
the project including working capital is estimated at Birr 1.47 million and creates 33 job
opportunity and Birr 342.6 thousand of income
The financial result indicates that the project will generate profit beginning from the first year of
operation. Moreover, the project will break even at 27.5% of capacity utilization and it will
payback fully the initial investment less working capital in 2 years. The result further show that
the calculated IRR of the project is 33% with NPV at 18% discount is Birr 808,206.57
In addition to this, the proposed project possesses wide range of economic and social benefits
such as increasing the level of investment, tax revenue, and employment creation.
Generally the project is technically feasible, financially and commercially viable as well as
socially and economically acceptable. Hence the project is worth implementing.

2. Product Description and Application

The proposed project is for setting up a high standard wooden furniture manufacturing unit. The
project will cater to the needs of the domestic market. This project will be capable of integrated
manufacturing of wooden furniture starting from cutting of wood to retailing of product to the
customer. Products to be included in this project are high quality chairs, bead, tables, frames etc.
for office and household uses. They are to be made from processed wood.

3. Market Study, Plant Capacity and Production Program

3.1

Market Study
3.1.1 Present Demand and Supply

The demand for high quality household and office furniture in the Amhara region has increased
substantially. It is true that after the decentralization of the countrys government and
administrative apparatus, many offices, agencies and other institutions are established at the
regional zonal, and woreda. Besides, due to expansion of urban economic activities such as trade
and commerce, woreda and zonal towns and other urban centers have expanded. At the same
time a number of aid and development agencies do have their branch offices in many towns of
the region. In general, there are a number of regional government, business community and non
government offices and employees in the region. Moreover, the Amhara region is expanding the
construction of many residences, hotels, commercial and other buildings in the region. All this
facilities indicate the presence of ample demand for modern furniture for office and household
purposes. Nonetheless, a recent study revealed that there are about 424 micro wood based
enterprises in the Amhara region (DSA/SCI, March 2007) where the majority of the enterprises
are not organized and equipped to produce quality products, though there is a gradual
improvement in the quality of some of their products. Consequently, most high quality furniture
especially office furniture are bought form Addis Ababa or are imported from abroad. In general
the foregoing analysis revealed that there is a need and a captive market in the region for a plant
which will produce high quality office and household furniture

3.1.2 Projected Demand

The estimated population of Amhara region in 2005/06 was 19.1 million of which 2.2 million
lives in the urban area (ANRS, BoFED, 2007). On average this represents more than 400
thousand families in the urban part of the region. If we conservatively assume that only 5
percent of the families can be attracted by high standard furniture facilities, it implies that
about 20 thousand families would form part of the market segment for the envisaged plant.
Moreover, there is a sizeable expansion of governmental, nongovernmental as well as modern

businesses in the region. The growth of urbanization in the region is creating a condition for
rapid increase in the development of new housing schemes. All this suggests the presence of
ample demand for high standard wooden household and office furniture in the region in the
future.

3.1.3 Pricing and Distribution

Based on the market research result and the capacity of the envisaged plant, the selling price is
set as follows

Birr 2,200 for bed set (150cm x 190cm) which include side table

Birr 2,750 for bed set (120cm x 190 cm) which include side table

Birr 8,000 for sofa set (standard sofa set of three seats, two seats and one seat)

Birr 5,000 for dining set with 6 chairs

Birr 6,500 for office furniture set which includes an office table along with side table for
computer with one executive and two visitors chairs.

3.2

Plant Capacity

Thus, given the expected demand for modern office and household furniture as stated earlier,
and the planned technology, the envisaged plant is set to annually produce the following quantity

250 bed set of 150cm x 190cm size

150 bed set of 120 cm x 190cm size

60 sofa set

80 dining set

80 office furniture set

The production shall use fine quality pure wood and fine quality polishing with elegant design

3.3

Production Program

The program is scheduled based on the consideration that the envisaged plant will work 275 days
in a year in 1 shift, where the remaining days will be holidays and for maintenance. During the
first year of operation the plant will operate at 65 percent capacity and then it grows to 85
3

percent in the 2nd year. The capacity will grow to 100 percent starting from the 3 rd year. This
consideration is developed based on the assumption that there is ample market for the product in
the region and logistics barriers would be eliminated within the first two years of operation.

4. Raw Materials and Utilities

4.1

Availability and Source of Raw Materials

The basic raw material for manufacturing of furniture is wood of prime quality. Therefore, it is
recommended to use dry wood from the forests for manufacturing of quality wooden furniture.
Raw material wood is available from the forest reserves of the region. Other material used in the
furniture manufacturing process are nails, screws, glue/solution, spirit, thinner, lacquer, sealer,
hardener, etc. These raw materials are easily available mainly in the Addis Ababa market

4.2

Annual Requirement and Cost of Raw Materials

and Utilities

The annual raw material and utility requirement and the associated cost for the envisaged plant is
listed in table 1 here under
Table 1: Material and Utility Requirement

Material and Input

Wood
Nails and Screw
Glue/Solution
Sprint
Thinner
Lacquer
Total Material Cost

Quantity
1110 m3
860 kg
920 lit
225 lit
1480 lit
370 lit

Total Cost
L.C.
F.C.
943500
43000
92000
11250
59200
22200
1,171,150

Utility
Electricity
Water
Total Utility Cost

135,000 kwh
5,000 m3

74250
13250
87,500

The total cost of material and utility at full capacity of operation is estimated to be Birr 1,258,
650

5 Location and Site

The appropriate locations for the envisaged project in view of the availability of input,
infrastructure as well as market for the output are Bahir Dar and Combolcha town.

6 Technology and Engineering

6.1

Production Process

The production process of producing high standard furniture is detailed as follows

A. Purchase of Wood
Wood is purchased after quality inspection. In determining quality the following points are
considered: age of wood, dryness of wood and its surface, which should be plane without holes
etc
B. Cutting of Wood
After purchase the wood is cut into different sizes of blocks and slabs.
C. Seasoning/Drying of Wood
Season wood is higher in price than the fresh wood, so if the wood purchased is not properly
dried wood then these blocks/slices are seasoned through putting the wood slices under normal
environmental temperature for considerable duration.
D. Selection of Design
Before start of manufacturing of any furniture product a desired design is selected. Selection of
elegant design is important to ensure attractive finished product.
E. Cutting into Slices
The seasoned wood blocks are cut into desired shape and slices according to the requirement of
design.
F. Molding
The slices of wood are molded into the desired shape according to the design.

G. Carving
Carving means different elegant pattern carved in the wood. Quality of carving depends on the
skills of the labor.
H. Assembly/Fitting
Once the different pieces are carved & molded than these parts/pieces are assembled or fixed
together to give the shape to the final product.
I.

Finishing (Paint/Polishing)

Assembled product is grind to make the surface smooth. Once the surface is smooth, finishing
material is applied to make the surface ready for paint or polish. After the base is prepared final
finishing is applied depending on requirement in term of paint/polish.
The alternative technology of production is mainly related to the method of seasoning/drying of
wood. In this regard it is possible to make use of boiler or vacuum system of drying.
Nonetheless, these options are not considered for the envisaged plat as they entail a relatively
higher cost of operation.

6.2

Machinery and Equipment

The machineries and equipment required for producing household and office furniture is detailed
in table 2 below.
Table 2: Machinery and Equipment
Machinery and Equipment
Saw- 18, 27 and 30
Cutter Sliding
Cutter Round
Guage 14 and 18
Planer/Sharper 12
Spindle Molder Machine
Jug Saw
Grinder
Drill Machine
Compressor
Miscellaneous Tools (Hand Tools, Paint Gun etc.)

Quantity
3
1
1
1
2
2
3
2
10
1
As required

The, total cost of machinery and equipment including freight insurance and bank cost is
estimated to be about Birr 500,000.
The following is some of the machineries suppliers address for the envisaged project
Asim Engineering Works
Gondalanwala Road,
Gujranwala, Pakistan
Phone: 0300-6429509
E-mail: asimenggwrk@yahoo.com,

6.3

Civil Engineering Cost

The total site area for the envisaged plant is estimated to be 400m 2 where 175m2 is allocated to
the production place and the remaining space is left for stores (75m 2), show room (100 m2),
office and facilities (50m2).

7 Human Resource and Training Requirement

7.1

Human Resource

The list of required manpower for the envisaged plant is stated in table 3 below
Table 3: Human Resource Requirement
Position
Manager

No.
Required
1

Monthly
Salary
4000

Total Annual
Salary
48000
7

Accountant
Secretary/Cashier
Sales Clerk
Store Keeper
Technician
Supervisor
Operators
Laborers
Cleaners
Guards
Benefit (20%)
Total

1
1
3
1
1
1
12
8
1
3

1200
850
800
800
1000
1500
1000
400
400
400

33

14400
10200
28800
9600
12000
18000
144000
38400
4800
14400
68520
342600

The envisaged plant creates 33 job opportunity and about Birr 342.6 thousand of income. The
professionals and support staffs for the envisaged plant shall be recruited from Amhara region

7.2

Training Requirement

Training of key personnel shall be conducted in collaboration with the suppliers of the plant
machineries. The training should primarily focuses on the production technology and machinery
maintenance and trouble shooting. Birr 20,000 will be allocated as training expense.

8 Financial Analysis
8.1

Underlying Assumption

The financial analysis of high standard furniture producing plant is based on the data provided in
the preceding chapters and the following assumptions.
A. Construction and Finance
Construction period
Source of finance
Tax holidays
Bank interest rate
Discount for cash flow
Value of land
Spare Parts, Repair & Maintenance

2 year
40% equity and 60% loan
2 years
12%
18%
Based on lease rate of ANRS
1% of fixed investment

B. Depreciation
Building

5%
8

Machinery and equipment

Office furniture
Vehicles
Pre-production (amortization)

10%
10%
20%
20%

C. Working Capital (Minimum Days of Coverage)

Raw Material-Local
Raw Material-Foreign
Factory Supplies in Stock
Spare Parts in Stock and Maintenance
Work in Progress
Finished Products
Accounts Receivable
Cash in Hand
Accounts Payable

8.2

30
120
30
30
10
15
30
30
30

Investment

The total investment cost of the project including working capital is estimated at Birr 1.47
million as shown in table 4 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.
Table 4: Total initial investment
Items
Land
Building and civil works
Office equipment

L.C

F.C

Total

1,200

1,200

550,000

550,000

50,000

50,000

Vehicles
Plant machinery & equipment
Total fixed investment cost
Pre production capital
expenditure*
Total initial investment
Working capital at full capacity
Total

100,000

400,000

500,000

701,200

400,000

1,101,200

55,060
756,260
319,710
1,075,970

55,060
400,000

1,156,260

400,000

319,710
1,475,970
9

*Pre-production capital expenditure includes - all expenses for pre-investment studies, consultancy fee during
construction and expenses for companys establishment, project administration expenses, commission expenses,
preproduction marketing and interest expenses during construction.

The foreign component of the project accounts 27.1% of the total investment cost.

8.3

Production Costs

The total production cost at full capacity operation is estimated at Birr 1.79 million as detailed in
table 5 below.

10

Table 5: Production Cost

Items
1.
2.
3.
4.

Raw materials
Utilities
Wages and Salaries
Spares and Maintenance
Factory costs
5. Depreciation
6. Financial costs

Total Production Cost

8.4
I.

Cost
1,171,150
87,500
342,600
11,012
1,612,262
93,512
88,558
1,794,332

Financial Evaluation

Profitability

According to the projected income statement attached in the annex part (see annex 4) the project
will generate profit beginning from the first year of operation. Ratios such as the percentage of
net profit to total sales, return on equity and return on total investment are 10%, 25% and 28% in
the first year and are gradually rising. Furthermore, the income statement and other profitability
indicators show that the project is viable.
II.

Breakeven Analysis

The breakeven point of the project is estimated by using income statement projection.
Accordingly, the project will break even at 27.5% 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 2 years of
operational time.
IV.

Simple Rate of Return

For the envisaged plant the simple rate of return equals to 31.4%

11

V.

Internal Rate of Return and Net Present Value

Based on cash flow statement described in the annex part, the calculated IRR of the project is
33% and the net present value at 18 % discount is Birr 808,206.57
VI.

Sensitivity Analysis

The envisaged plant is profitable even with considerable cost increment. That is the plant
maintains to be profitable starting from the first year when 10 % cost increment takes place in
the sector. This result is accompanied with payback period of 2 years and 7 months of operation.

9 Economic and Social Benefit and Justification

The envisaged project possesses wide range of benefits that promotes the socio-economic goals
and objectives stated in the strategic plan of the Amhara National Regional State. It boosts inter
sectorial linkage between the agricultural (forestry) and industrial sector. At the same time,
therefore, it helps diversify the economic activity of the region. The other major benefits are
listed as follows:
A. Profit Generation
The project is found to be financially viable and earns a profit of Birr 3.99 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 1.47 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

12

C. Employment and Income Generation

The proposed project is expected to create employment opportunity to several citizens of the
region. That is, it will provide permanent employment to 33 professionals as well as support
stuffs. Consequently the project creates income of Birr 342.6 thousands per year. This would be
one of the commendable accomplishments of the project.
D. Pro Environment Project
The proposed production process is environment friendly.

13

ANNEXES

14

Annex 1: Total Net Working Capital Requirements (in Birr)

CONSTRUCTION

PRODUCTION

Year 1

Year 2

Capacity Utilization (%)

0.00

0.00

65%

85%

100%

100%

1. Total Inventory

0.00

0.00

260358.63

340468.97

400551.74

400551.74

0.00

0.00

83045.18

108597.55

127761.82

127761.82

Raw Material-Local

0.00

0.00

83045.18

108597.55

127761.82

127761.82

Raw Material-Foreign

0.00

0.00

0.00

0.00

0.00

0.00

Factory Supplies in Stock

0.00

0.00

1209.55

1581.72

1860.84

1860.84

Spare Parts in Stock and Maintenance

0.00

0.00

2342.55

3063.34

3603.93

3603.93

Work in Progress

0.00

0.00

30238.72

39542.94

46521.11

46521.11

Finished Products

0.00

0.00

60477.44

79085.89

93042.22

93042.22

2. Accounts Receivable

0.00

0.00

167522.73

219068.18

257727.27

257727.27

3. Cash in Hand

0.00

0.00

30498.00

39882.00

46920.00

46920.00

0.00

0.00

375334.17

490821.61

577437.19

577437.19

4. Current Liabilities

0.00

0.00

167522.73

219068.18

257727.27

257727.27

Accounts Payable

0.00

0.00

167522.73

219068.18

257727.27

257727.27

TOTAL NET WORKING CAPITAL REQUIRMENTS

0.00

0.00

207811.45

271753.43

319709.92

319709.92

INCREASE IN NET WORKING CAPITAL

0.00

0.00

207811.45

63941.98

47956.49

0.00

Raw Materials in Stock- Total

CURRENT ASSETS

Annex 1: Total Net Working Capital Requirements (in Birr)

(continued)

PRODUCTION
5

10

100%

100%

100%

100%

100%

100%

400551.74

400551.74

400551.74

400551.74

400551.74

400551.74

127761.82

127761.82

127761.82

127761.82

127761.82

127761.82

127761.82

127761.82

127761.82

127761.82

127761.82

127761.82

Raw Material-Foreign

0.00

0.00

0.00

0.00

0.00

0.00

Factory Supplies in Stock

1860.84

1860.84

1860.84

1860.84

1860.84

1860.84

Spare Parts in Stock and Maintenance

3603.93

3603.93

3603.93

3603.93

3603.93

3603.93

Work in Progress

46521.11

46521.11

46521.11

46521.11

46521.11

46521.11

Finished Products

93042.22

93042.22

93042.22

93042.22

93042.22

93042.22

2. Accounts Receivable

257727.27

257727.27

257727.27

257727.27

257727.27

257727.27

3. Cash in Hand

46920.00

46920.00

46920.00

46920.00

46920.00

46920.00

577437.19

577437.19

577437.19

577437.19

577437.19

577437.19

4. Current Liabilities

257727.27

257727.27

257727.27

257727.27

257727.27

257727.27

Accounts Payable

257727.27

257727.27

257727.27

257727.27

257727.27

257727.27

TOTAL NET WORKING CAPITAL REQUIRMENTS

319709.92

319709.92

319709.92

319709.92

319709.92

319709.92

0.00

0.00

0.00

0.00

0.00

0.00

Capacity Utilization (%)

1. Total Inventory
Raw Materials in Stock-Total
Raw Material-Local

CURRENT ASSETS

INCREASE IN NET WORKING CAPITAL

Annex 2: Cash Flow Statement (in Birr)

CONSTRUCTION

PRODUCTION

Year 1

Year 2

578130.00

897839.92

1703147.73

2059670.45

2401159.09

2362500.00

578130.00

897839.92

167522.73

51545.45

38659.09

0.00

Total Equity

231252.00

359135.97

0.00

0.00

0.00

0.00

Total Long Term Loan

346878.00

538703.95

0.00

0.00

0.00

0.00

0.00

0.00

167522.73

51545.45

38659.09

0.00

2. Inflow Operation

0.00

0.00

1535625.00

2008125.00

2362500.00

2362500.00

Sales Revenue

0.00

0.00

1535625.00

2008125.00

2362500.00

2362500.00

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

578130.00

578130.00

1670838.17

1756497.84

2117822.52

2018808.80

4. Increase In Fixed Assets

578130.00

578130.00

0.00

0.00

0.00

0.00

Fixed Investments

550600.00

550600.00

0.00

0.00

0.00

0.00

Pre-production Expenditures

27530.00

27530.00

0.00

0.00

0.00

0.00

5. Increase in Current Assets

0.00

0.00

375334.17

115487.44

86615.58

0.00

6. Operating Costs

0.00

0.00

1063482.03

1387143.58

1629889.74

1629889.74

7. Corporate Tax Paid

0.00

0.00

0.00

0.00

165162.02

170475.51

8. Interest Paid

0.00

0.00

232021.97

106269.83

88558.20

70846.56

9.Loan Repayments

0.00

0.00

0.00

147596.99

147596.99

147596.99

10.Dividends Paid

0.00

0.00

0.00

0.00

0.00

0.00

Surplus(Deficit)

0.00

319709.92

32309.56

303172.61

283336.57

343691.20

Cumulative Cash Balance

0.00

319709.92

352019.47

655192.09

938528.65

1282219.85

TOTAL CASH INFLOW

1. Inflow Funds

Total Short Term Finances

3. Other Income

Annex 2: Cash Flow Statement (in Birr): Continued

3

PRODUCTION
5
2362500.00

6
2362500.00

7
2362500.00

8
2362500.00

9
2362500.00

10
2362500.00

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

2362500.00

2362500.00

2362500.00

2362500.00

2362500.00

2362500.00

Sales Revenue

2362500.00

2362500.00

2362500.00

2362500.00

2362500.00

2362500.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

2006410.65

1997316.10

1984917.96

1824922.82

1824922.82

1824922.82

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

6. Operating Costs

1629889.74

1629889.74

1629889.74

1629889.74

1629889.74

1629889.74

7. Corporate Tax Paid

175789.00

184406.09

189719.59

195033.08

195033.08

195033.08

8. Interest Paid

53134.92

35423.28

17711.64

0.00

0.00

0.00

9. Loan Repayments

147596.99

147596.99

147596.99

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

Surplus(Deficit)

356089.35

365183.90

377582.04

537577.18

537577.18

537577.18

Cumulative Cash Balance

1638309.20

2003493.10

2381075.14

2918652.32

3456229.50

3993806.69

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

10.Dividends Paid

Annex 3: DISCOUNTED CASH FLOW-TOTAL CAPITAL INVESTED

CONSTRUCTION

PRODUCTION

Year 1

Year 2

TOTAL CASH INFLOW

0.00

0.00

1535625.00

2008125.00

2362500.00

2362500.00

1. Inflow Operation

0.00

0.00

1535625.00

2008125.00

2362500.00

2362500.00

Sales Revenue

0.00

0.00

1535625.00

2008125.00

2362500.00

2362500.00

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

578130.00

578130.00

1271293.48

1451085.56

1843008.25

1800365.25

3. Increase in Fixed Assets

578130.00

578130.00

0.00

0.00

0.00

0.00

Fixed Investments

550600.00

550600.00

0.00

0.00

0.00

0.00

Pre-production Expenditures

27530.00

27530.00

0.00

0.00

0.00

0.00

4. Increase in Net Working Capital

0.00

0.00

207811.45

63941.98

47956.49

0.00

5. Operating Costs

0.00

0.00

1063482.03

1387143.58

1629889.74

1629889.74

6. Corporate Tax Paid

0.00

0.00

0.00

0.00

165162.02

170475.51

NET CASH FLOW

-578130.00

-578130.00

264331.52

557039.44

519491.75

562134.75

CUMMULATIVE NET CASH FLOW

-578130.00

-1156260.00

-891928.48

-334889.04

184602.71

746737.46

Net Present Value (at 18%)

-578130.00

-489940.68

189838.78

339031.40

267948.07

245714.28

Cumulative Net present Value

-578130.00

-1068070.68

-878231.89

-539200.49

-271252.43

-25538.15

2. Other Income

Annex 3: DISCOUNTED CASH FLOW-TOTAL CAPITAL INVESTED

(Continued)

PRODUCTION
5

10

TOTAL CASH INFLOW

2362500.00

2362500.00

2362500.00

2362500.00

2362500.00

2362500.00

1. Inflow Operation

2362500.00

2362500.00

2362500.00

2362500.00

2362500.00

2362500.00

Sales Revenue

2362500.00

2362500.00

2362500.00

2362500.00

2362500.00

2362500.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

1805678.74

1814295.83

1819609.33

1824922.82

1824922.82

1824922.82

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

1629889.74

1629889.74

1629889.74

1629889.74

1629889.74

1629889.74

6. Corporate Tax Paid

175789.00

184406.09

189719.59

195033.08

195033.08

195033.08

NET CASH FLOW

556821.26

548204.17

542890.67

537577.18

537577.18

537577.18

CUMMULATIVE NET CASH FLOW

1303558.72

1851762.88

2394653.56

2932230.74

3469807.92

4007385.10

Net Present Value (at 18%)

206264.16

172095.01

144429.64

121200.04

102711.90

87043.98

Cumulative Net present Value

180726.01

352821.02

497250.66

618450.69

721162.59

808206.57

Interest on Securities
2. Other Income
TOTAL CASH OUTFLOW

4. Increase in Net Working Capital

Net Present Value (at 18%)

Internal Rate of Return

808,206.57

33.0%

Annex 4: NET INCOME STATEMENT ( in Birr)

6

PRODUCTION
1

65%

85%

100%

100%

100%

1535625.00

2008125.00

2362500.00

2362500.00

2362500.00

1535625.00

2008125.00

2362500.00

2362500.00

2362500.00

Other Income

0.00

0.00

0.00

0.00

0.00

2. Less Variable Cost

962824.03

1259077.58

1481267.74

1481267.74

1481267.74

572800.97

749047.42

881232.26

881232.26

881232.26

37.30

37.30

37.30

37.30

37.30

194170.00

221578.00

242134.00

242134.00

242134.00

378630.97

527469.42

639098.26

639098.26

639098.26

25

26

27

27

27

4. Less Cost of Finance

232021.97

106269.83

88558.20

70846.56

53134.92

5. GROSS PROFIT

146609.00

421199.59

550540.06

568251.70

585963.34

0.00

0.00

165162.02

170475.51

175789.00

146609.00

421199.59

385378.05

397776.19

410174.34

Gross Profit/Sales

10%

21%

23%

24%

25%

Net Profit After Tax/Sales

10%

21%

16%

17%

17%

Return on Investment

28%

37%

32%

32%

31%

Return on Equity

25%

71%

65%

67%

69%

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 (%)

Annex 4: NET INCOME STATEMENT (in Birr): Continued

PRODUCTION

10

100%

100%

100%

100%

100%

2362500.00

2362500.00

2362500.00

2362500.00

2362500.00

2362500.00

2362500.00

2362500.00

2362500.00

2362500.00

Other Income

0.00

0.00

0.00

0.00

0.00

2. Less Variable Cost

1481267.74

1481267.74

1481267.74

1481267.74

1481267.74

881232.26

881232.26

881232.26

881232.26

881232.26

37

37

37

37

37

231122.00

231122.00

231122.00

231122.00

231122.00

650110.26

650110.26

650110.26

650110.26

650110.26

28

28

28

28

28

4. Less Cost of Finance

35423.28

17711.64

0.00

0.00

0.00

5. GROSS PROFIT

614686.98

632398.62

650110.26

650110.26

650110.26

6. Income (Corporate) Tax

184406.09

189719.59

195033.08

195033.08

195033.08

7. NET PROFIT

430280.89

442679.03

455077.18

455077.18

455077.18

Gross Profit/Sales

26%

27%

28%

28%

28%

Net Profit After Tax/Sales

18%

19%

19%

19%

19%

Return on Investment

32%

31%

31%

31%

31%

Return on Equity

73%

75%

77%

77%

77%

Capacity Utilization (%)

1. Total Income
Sales Revenue

VARIABLE MARGIN
(In % of Total Income)
3. Less Fixed Costs
OPERATIONAL MARGIN
(In % of Total Income)

RATIOS (%)

Annex 5: Projected Balance Sheet (in Birr)

CONSTRUCTION
Year 1

Year 2

PRODUCTION
1

TOTAL ASSETS
1. Total Current Assets
Inventory on Materials and Supplies
Work in Progress
Finished Products in Stock
Accounts Receivable
Cash in Hand
Cash Surplus, Finance Available
Securities
2. Total Fixed Assets, Net of Depreciation
Fixed Investment
Construction in Progress
Pre-Production Expenditure
Less Accumulated Depreciation
3. Accumulated Losses Brought Forward
4. Loss in Current Year
TOTAL LIABILITIES
5. Total Current Liabilities
Accounts Payable
Bank Overdraft
6. Total Long-term Debt
Loan A
Loan B
7. Total Equity Capital
Ordinary Capital
Preference Capital
Subsidies
8. Reserves, Retained Profits Brought Forward
9.Net Profit After Tax
Dividends Payable
Retained Profits

578130.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
578130.00
0.00
550600.00
27530.00
0.00
0.00
0.00
578130.00
0.00
0.00
0.00
346878.00
346878.00
0.00
231252.00
231252.00
0.00
0.00
0.00
0.00
0.00
0.00

1475969.92
319709.92
0.00
0.00
0.00
0.00
0.00
319709.92
0.00
1156260.00
550600.00
550600.00
55060.00
0.00
0.00
0.00
1475969.92
0.00
0.00
0.00
885581.95
885581.95
0.00
590387.97
590387.97
0.00
0.00
0.00
0.00
0.00
0.00

1790101.65
727353.65
86597.28
30238.72
60477.44
167522.73
30498.00
352019.47
0.00
1062748.00
1101200.00
0.00
55060.00
93512.00
0.00
0.00
1790101.65
167522.73
167522.73
0.00
885581.95
885581.95
0.00
590387.97
590387.97
0.00
0.00
0.00
146609.00
0.00
146609.00

Annex 5: Projected Balance Sheet (in Birr):

2115249.70
1146013.70
113242.60
39542.94
79085.89
219068.18
39882.00
655192.09
0.00
969236.00
1101200.00
0.00
55060.00
187024.00
0.00
0.00
2115249.70
219068.18
219068.18
0.00
737984.96
737984.96
0.00
590387.97
590387.97
0.00
0.00
146609.00
421199.59
0.00
421199.59

2391689.84
1515965.84
133226.59
46521.11
93042.22
257727.27
46920.00
938528.65
0.00
875724.00
1101200.00
0.00
55060.00
280536.00
0.00
0.00
2391689.84
257727.27
257727.27
0.00
590387.97
590387.97
0.00
590387.97
590387.97
0.00
0.00
567808.59
385378.05
0.00
385378.05

2641869.04
1859657.04
133226.59
46521.11
93042.22
257727.27
46920.00
1282219.85
0.00
782212.00
1101200.00
0.00
55060.00
374048.00
0.00
0.00
2641869.04
257727.27
257727.27
0.00
442790.98
442790.98
0.00
590387.97
590387.97
0.00
0.00
953186.63
397776.19
0.00
397776.19

10

Continued

PRODUCTION
5

TOTAL ASSETS
1. Total Current Assets
Inventory on Materials and Supplies
Work in Progress
Finished Products in Stock
Accounts Receivable
Cash in Hand
Cash Surplus, Finance Available
Securities
2. Total Fixed Assets, Net of Depreciation
Fixed Investment
Construction in Progress
Pre-Production Expenditure
Less Accumulated Depreciation
3. Accumulated Losses Brought Forward
4. Loss in Current Year
TOTAL LIABILITIES
5. Total Current Liabilities
Accounts Payable
Bank Overdraft
6. Total Long-term Debt
Loan A
Loan B
7. Total Equity Capital
Ordinary Capital
Preference Capital
Subsidies
8. Reserves, Retained Profits Brought Forward
9. Net Profit After Tax
Dividends Payable
Retained Profits

2904446.39
2215746.39
133226.59
46521.11
93042.22
257727.27
46920.00
1638309.20
0.00
688700.00
1101200.00
0.00
55060.00
467560.00
0.00
0.00
2904446.39
257727.27
257727.27
0.00
295193.98
295193.98
0.00
590387.97
590387.97
0.00
0.00
1350962.83
410174.34
0.00
410174.34

3187130.29
2580930.29
133226.59
46521.11
93042.22
257727.27
46920.00
2003493.10
0.00
606200.00
1101200.00
0.00
55060.00
550060.00
0.00
0.00
3187130.29
257727.27
257727.27
0.00
147596.99
147596.99
0.00
590387.97
590387.97
0.00
0.00
1761137.17
430280.89
0.00
430280.89

3482212.33
2958512.33
133226.59
46521.11
93042.22
257727.27
46920.00
2381075.14
0.00
523700.00
1101200.00
0.00
55060.00
632560.00
0.00
0.00
3482212.33
257727.27
257727.27
0.00
0.00
0.00
0.00
590387.97
590387.97
0.00
0.00
2191418.05
442679.03
0.00
442679.03

3937289.51
3496089.51
133226.59
46521.11
93042.22
257727.27
46920.00
2918652.32
0.00
441200.00
1101200.00
0.00
55060.00
715060.00
0.00
0.00
3937289.51
257727.27
257727.27
0.00
0.00
0.00
0.00
590387.97
590387.97
0.00
0.00
2634097.09
455077.18
0.00
455077.18

4392366.69
4033666.69
133226.59
46521.11
93042.22
257727.27
46920.00
3456229.50
0.00
358700.00
1101200.00
0.00
55060.00
797560.00
0.00
0.00
4392366.69
257727.27
257727.27
0.00
0.00
0.00
0.00
590387.97
590387.97
0.00
0.00
3089174.27
455077.18
0.00
455077.18

4847443.88
4571243.88
133226.59
46521.11
93042.22
257727.27
46920.00
3993806.69
0.00
276200.00
1101200.00
0.00
55060.00
880060.00
0.00
0.00
4847443.88
257727.27
257727.27
0.00
0.00
0.00
0.00
590387.97
590387.97
0.00
0.00
3544251.45
455077.18
0.00
455077.18

10