Investment Office ANRS

Project Profile on the Establishment
of Wax candle PRODUCING PLANT

Development Studies
Associates (DSA)

October 2008
Addis Ababa

Table of Contents
1.Executive Summary.............................................................................3
2.Product Description and Application.................................................3
3.Market Study, Plant Capacity and Production Program................4
3.1Market Study...........................................................................................................................4
3.1.1Present Demand and Supply............................................................................................4
3.1.2Projected Demand............................................................................................................7
3.1.3Pricing and Distribution...................................................................................................9
3.2Plant Capacity.........................................................................................................................9
3.3Production Program..............................................................................................................10

4.Raw Materials and Utilities...............................................................10
4.1Availability and Source of Raw Materials............................................................................10
4.2Annual Requirement and Cost of Raw Materials and Utilities.............................................10

5.Location and Site................................................................................11
6.Technology and Engineering ...........................................................11
6.1Production Process................................................................................................................11
6.2Machinery and Equipment....................................................................................................12
6.3Civil Engineering Cost..........................................................................................................13

7.Human Resource and Training Requirement.................................13
7.1Human Resource ..................................................................................................................13
7.2Training Requirement...........................................................................................................13

8.Financial Analysis..............................................................................14
8.1Underlying Assumption .......................................................................................................14
8.2Investment.............................................................................................................................15
8.3Production Costs...................................................................................................................15
8.4Financial Evaluation.............................................................................................................16

9.Economic and Social Benefit and Justification...............................17
ANNEXES.............................................................................................19

1. Executive Summary
The project envisages the manufacturing of 308 tons of candles per year in Amhara Regional
State.
The market study shows the existence of sufficient demand for the product.
The initial investment cost is estimated at about Birr 1.8 million.
The project will create employment opportunities for 15 persons.
The internal rate of return (IRR) of the project is 28.7% and the net present value is more than
Birr 456 thousands discounted at 18%.

2. Product Description and Application
From ancient times candles have been important as sources of light, and although they were
replaced first by kerosene lamps and later by incandescent electric lamps, their use has actually
expanded because of their ornamental value. In spite of the technical progress in lighting, the
term “candle power” is used as a unit for measuring the brilliance of any given light.
Candles were manufactured by molding a blend of fats and wax around flax or cotton wick and
so are their modern varieties. Machines have replaced manual labor, new wax formulations have
been introduced for decorative effects. The first waxes used were mutton tallow and beeswax.
Spermaceti obtained from whales was introduced to candle manufacture at the time of the
American Revolution. Since the middle of the nineteenth century paraffin wax was added to the
list of waxes commended for candle manufacture.
The classical household candle is the basis of any candle factory. It ensures steady sales and low
production costs. Sizes of household candles differ slightly in various parts of the world. A
candle size which is very frequently found is a 40-gram candle with a diameter of 19 mm (3/4”)
and a length of 200 mm (8”).
3

3. Market Study, Plant Capacity and Production Program
3.1

Market Study
3.1.1 Present Demand and Supply

Candles are sources of light for homes during evenings and as such they are items of necessity
especially in rural areas. Modern candle processing from paraffin is a young venture, but candle
making from bees wax (Tuaf) is one of the oldest and ancient traditional arts of Ethiopia. The art
is still in existence but due to the expensive nature of the input, the low quality of the product
and the finding of cheap and quality substitute for it, paraffin wax candle-drove it out of the
market.
Candle is demanded by all income groups both in urban and rural areas. However, its importance
becomes more crucial in a country like Ethiopia where modern electricity supplies are minimal
and the numbers of churches using the product are numerous.
In Ethiopia the per-capita consumption of domestic electricity, (as indicated in the report on
Large and Medium Scale Manufacturing and Electricity Industry Survey, Statistical Bulletin –
403) is about 10.5 kwh, which is one of the lowest by world standard. The great majority of the
population, about 85%, is still using other means of lighting. These include imported kerosene
lamps, imported hurricane and pressure lamps, imported and locally produced candles and fire
wood and to a lesser extent electricity.
The general picture of electricity consumption is also true to Amhara region. Currently it is
estimated that about 3-5% of the people in Amhara Region have access to electric light and
energy while the rest of the people, about 17.5 million, use traditional sources of energy for
getting light and heat.
Fuel wood and kerosene are the two main sources of light for homes in places where there is no
electric power supply. Fuel wood made in a form of “kitkit” provides light during the evening, if
woods used for “kitkit’ are available. Kerosene in ‘kuragz’ also provides light for homes. But
due to the widespread deforestation, the type of fuel wood where ‘kitkit’ is made is not available
4

practically in all parts of Amhara Region. Kerosene, as the only alternative, is only used by “well
to do” farmers because of its price and by low income groups of urban dwellers where there is
electric power and by most urban dwellers, where there is no power supply. For these reasons,
more than 95% of house in the rural areas and a significant number of urban with no electric
power of the Amhara Region do not have lights during the evening, especially after meals are
cooked. Hence, it could be said that Amhara land is as dark as darkness itself after sunset, which
manifests the general backwardness of the Region.
Candle in Ethiopia is not demanded by rural and urban centers with no power but also by urban
centers having power during power interruption, which is a frequent phenomenon of the country
and by a number of churches as a substitute of ‘Tuaf’. More than 3100 churches are estimated to
exist in Amhara Region and 18,000 in the country.
Orthodox Church believers usually vow to light candles in churches during high mass ceremony.
Candle is also demanded during special occasions like birthday, marriage, Christmas, vow day
etc. Hotels, bars and restaurants are also major consumers of candle.
Demand for candle in Ethiopia is satisfied through domestic production and imports.
A) Domestic production:- All commercial candles produced in the country are produced
in and around Addis Ababa. The CSA statistical bulletins reveal that the country has
produced about 593 tons, which is equivalent to 11.86 million of candle on the
average between the last ten years (1990 and 1999 E.C). Local production of candles
has fluctuated over the years.

5

Table -1Domestic Production of candles
Year

Quantity ( In Tons)

90

946

91

719

92

769

93

559

94

677

95

614

96

348

97

256

98

319

99

725

Average

593

Source: CSA, Statistical Bulletins, 1990-1999

B) Import of Candles:- As per the record of Central Statistics and Customs Authority,
the country has imported about 2,856 tons of candles during the last ten years at CIF
value of about Birr 134.32 million on the average. This indicates that more than four
folds of candles come from abroad (table -2- )
The current total effective demand for candles in the country is therefore about 3449 tons, which
is equivalent to about 6.9 million pieces.

6

Table -2Imports of Candles
Year
1990

Quantity (in Tons)
138

Value (in ‘000’ Birr)
817

1991

749

4315

1992

326

2033

1993

1231

7756

1994

12800

77393

1995

1986

11865

1996

670

4186

1997

1967

12280

1998

7181

1073

1999
Average

1510
2856

12605
13432

Source: CSA & Customs Authority Statistical Bulletins, 1990-1999

3.1.2 Projected Demand
As indicated above the major determinants or target markets, for candles are growth in urban
population and income. In addition hotels, bars & restaurants, churches and special accessions as
well as well-to-do rural population demand candles for various reasons.
In this respect national demand for candles is conservatively forecasted based on the following
assumptions:a) Urban Population (of 2007):- 31,151,000 or 6,230,200 families
- 80% of the families (4,984,160) are expected to use 3 packets (24 pieces or 1.2 kgs)
per annum per family for household consumption, which totals to about 14,958,480
packets or about 5,981 tons.
b) Hotels, Bars & Restaurants:- Out of the estimated number of government and private
hotels, bars & restaurants rooms (100,000), 75% are expected to use 50 candles /year
7

(under normal condition a candle burns for about 5 hours). This group will require
about 5,000,000 pieces of candle, which is equivalent to about 250 tons.
c) Churches:- out of the estimated churches of the country (18,000) about 50% (9,000) are
expected to celebrate a minimum of 18 holidays/month and perform high mass where in
three candles are consumed in each church during mass. This will require a total of
5,832,000 pieces for 292 tons. This will include special occasions and vowers’ demand.
d) Well-to-do Rural Facilities – Out of the total 66,780,000 of Rural population of 2007
(13,357,400 families), o.01% of the family is expected to use two packets (16 pcs) per
year, which totals to about 2,137,184 pieces, or about 107 tons of candles per year.
e) The candle consumption will grow by the combined average growth rate of, GDP
growth of 10.7% and urban population growth of 4.5%. which is 7.6% per year.
Based on the above assumptions the forecasted demand for candle for the next ten years is
indicated in table -3- below. Aggregate demand for candles ranges from 6,630 tons in 2001 to
12,818 tons in 2010.
The comparison between effective and projected demand for candles shows that there is excess
demand at national level.

8

Year
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010

Table -3 –
Forecasted Demand for Candle (tons)
Urban
Hotels
Rural
Population
&Bars
Churches Population Total
5981
250
292
107
6630
6436
269
314
115
7134
6925
289
338
124
7676
7451
311
364
133
8260
8018
335
391
143
8887
8627
361
421
154
9563
9283
388
453
166
10290
9988
417
487
178
11072
10747
449
524
192
11913
11564
483
564
207
12818

In Amhara Region there is no plant that produces candle to date. On the other hand due to its vast
population and increased urbanization the average level of candle consumption of the region
during the last four years was (21996 - 1999) estimated to be about 165 tons which is equivalent
to 3.3 million pieces of candle (Project Idea). Thus, the future candle consumption of the Region
could grow by 7.6 % (average growth rate figure of GDP, 10.7% and urban population, 4.5%).
Consumption of candle per head and per family to the 2007 projected population of the Region
(19,624,000) could be about 0.2 and 0.9 or consumption per head and per family to the urban
population (2,299,000) could be about 1.6 candles and 7.8 candles per year, respectively.
In this respect the establishment of a wax candle manufacturing plant could reduce the lack of
resources of light in the Amhara Region as well as reduce the import volume and save foreign
exchange of the country.

3.1.3 Pricing and Distribution
In view of inflation, the factory gate price of the proposed plant is assumed to be Birr 16,000 per
ton, which is equivalent to total sales of about Birr 5.0 million at full capacity utilization .The
distribution Channels of the product could be through wholesale traders.

3.2

Plant Capacity

9

The output of the proposed plant will be about 28,000 household candles per 8 hour a day, which
is equivalent to 7.7 million Pieces or 308 tons of candles per annum (275 working days).

3.3

Production Program

The plant is assumed to start production at 80% capacity in year one which will increase by 10%
until 100% capacity is reached.

4. Raw Materials and Utilities
4.1

Availability and Source of Raw Materials

The main direct raw material required for the manufacture of household candles are paraffin
wax, a by-product of the oil refining industry, wick and a very small quantity of paraffin oil.
Paraffin wax and oil are imported items while wick is produced locally by the Ethiopian Thread
Factory.
The paraffin wax to be used for the manufacture of household candles on the machinery and
equipment described hereafter should have a maximum oil content of 0.5% and a melting point
of 56 to 62 “C.
Indirect inputs such as packing for candles are packets, cartons and labels. These materials are
produced in local Factories. Utilities such as Electrical power (AC 380 V, 50 c/s, 3-phase 27
kW), water, P.T.T etc could be available at the plant site.

4.2

Annual Requirement and Cost of Raw Materials and Utilities

It is assumed that from 1 ton of paraffin wax 25,000 candles can be produced.
Required direct and indirect materials and utilities for the production of 308 tons of candles are
indicated in the following table:

10

Table -4 Annual Raw Materials and Utilities and Cost (in ’000’ Birr)
Cost
Items

Unit

A) Materials
Paraffin wax
Wick
Paraffin Oil
Carton
Packet
Sub total
B) Utilities
Power
Total

Quantity

L

Total

F

tons
mt
lt.
Pcs
Pcs

3,08
1,771,000
3080
32,080
962,500

18
160
963
1,141

2,464

2,510

2,464
18
46
160
963
3,651

Kwh

216

475
1,616

2,510

475
4,126

46

5. Location and Site
The candle making plant will be located in one of the eleven zonal towns, preferably where
utilities and infrastructure are available for its normal operation. i.e Bahir Dar, Gonder or
Dessie).

6. Technology and Engineering
6.1

Production Process

The production of candle is simple and does not require special knowledge.
The paraffin wax which is normally supplied in solid slabs of 5 kg each, is melted in electrically
heated melting pans pumped by means of a special wax pump into the higher positioned wax
feeding tanks), from where it flows into the moulds of the molding machines, where the candle
wick has already been placed in the right position. As soon as the moulds are filled, cooling
water from the water cooling unit flows through the molding machines to solidify the paraffin
wax in the moulds. After solidification time of approx. 20 minutes the finished candles can be
ejected and packed.

11

Packaging machinery has not been included since in countries with comparatively low labor
costs the packing is better done by hand. In many countries the household candles are simply
packed in blue paper, in cellophane bags or cardboard boxes.
First paraffin wax is manually fed into the boiler. The melted paraffin is then transferred to the
machine, through pipes to fill the moulds; the moulds are cooled by water circulating through the
machine. After the wax in the moulds is solidified to a certain standard, the machine overturns by
a device and the wick is cut automatically. Each candle is collected manually and then packed in
packets for delivery. The technology and capital is simple and affordable.
The producer can use alternative technology that produces less than 40 grams in weight and 19
mm in diameter and 200 mm in length, (like local candle factories) as well as use automatic
packing machine.

6.2

Machinery and Equipment

Required machinery and equipments are:
Item
1. Electrically heated wax melting pans
2. Wax pump
3. Electrically heated wax feeding tanks
4. Candle molding machines
5 Water cooling unit

Pieces
2
1
2
2
1

Total Price for machinery and equipment is about Birr 200,000.00, of which 75% is in
foreign currency.
The promoter can reach machinery Supplier by the following address.
Contact InformationCompany Name:
Hot Wax Candle Co., Inc.
Contact Person:
Mr. Steve Gordon
Street Address:
3500 North O'Henry Blvd
City: Greensboro
Province/State:
North Carolina
Country/Region:
United States
Zip: 27405
Telephone:
1-336-3757892
Fax: 1-336-3757895
Alternative technology could be found in India, China or Japan.
12

6.3

Civil Engineering Cost

The plant will require about 1,000 m2 plot of land of which,
Production

area

100 m2,

Storage

area

27 m2 and

Facilities

area

54 m2

Total

built up area

181 m2

The cost of the building which is to be built with hollow blocks is about Birr 362,200 (Birr
2000/m2) and the land lease is Birr 60/m2.

7. Human Resource and Training Requirement
7.1

Human Resource

The plant will require about 15 employees as indicated in table 5 below.
Table -5Manpower Requirements
Post
Plant manager
Mechanic
Ass/Mechanic
Book keeper
Secretary
Laborers
Guards
Cleaners
Total
20% Benefit
Total

7.2

No.
1
1
1
1
1
5
3
2
15

Salary/Month/Person
2,000
1,000
800
750
750
400
400
400
-

Annual/Salary
24,000
12,000
9,600
9,000
9,000
24,000
14,400
9,600
111,600
22,320
133,920

Training Requirement

13

Training of manpower could be carried out in any one of similar plants established in Addis
Ababa at marginal cost.

8. Financial Analysis
8.1

Underlying Assumption

The financial analysis of candle 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

B. Depreciation
Building

5%

Machinery and equipment

10%

Office furniture

10%

Vehicles

20%

Pre-production (amortization)

20%

C. 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
Finished Products
Accounts Receivable

10 days
15 days
30 days
14

Cash in Hand
Accounts Payable

8.2

30 days
30 days

Investment

The total investment cost of the project including working capital (table 6) is estimated to be
about Birr 1.8 million. The owner could contribute about 40% of the total investment while the
rest 60% could be financed by long term bank loan The foreign component of the project
accounts for Birr 0.65 million or 36% of the total investment cost.
Table 6: Total initial investment
LC
Land
Building
Office equipment
Vehicles
machinery & equipment
Total Fixed Investment
Pre production
Total Initial Investment
Working capital

FC

Total

3,000

3,000

362,200

362,200

10,000

10,000

0

0

50,000

150,000

200,000

425,200

150,000

575,200

28,760

28,760

453,960

150,000

603,960

700,465

497,891

1,198,355

Total

1,154,425
647,891
1,802,315
*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.

8.3

Production Costs

The total production cost at full capacity operation is estimated to be about Birr 4.4 million
(Table 7). Raw materials and utilities account for 82.4% of the total factory cost.

15

Table -7-

Total Production Cost at full Capacity
Items
Cost
1. Raw materials
2. Utilities

475,000

3. Wages and Salaries

133,920

4. Spares and Maintenance

17,256

Factory costs
5. Depreciation
6. Financial costs

Total Production Cost
8.4

3,651,000

4,277,176
44,862
108,139
4,430,177

Financial Evaluation
I.

Profitability

According to the projected income statement the project will generate profit beginning from the
first year of operation. The income statement and other profitability indicators show that the
project will get 29.% return on investment and 26% return on equity as well.
II.

Breakeven Analysis

The project will break even at 14.8 % of capacity utilization.
III.

Payback Period

Investment cost and income statement projection are used in estimating the project payback
period. The project wills payback fully the initial investment less working capital in two years
time.

16

IV.

Simple Rate of Return

The project’s simple rate of return is 23.3% at full capacity utilization.
V.

Internal Rate of Return and Net Present Value

Based on cash flow statement the calculated IRR of the project is 28.7% and the net present
value at 18% discount is Birr 456 thousands.
VI.

Sensitivity Analysis

If costs of raw materials are increased by 10 %, the plant will absorb it profitably.

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 will improve the health condition of the population, reduce
deforestation and promote the socio-economic goals and objectives stated in the strategic plan of
the Amhara National Regional State. 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 0.36 million per
year and birr 3.6 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 1.3 million from
corporate tax payment alone (i.e. excluding income tax, sales tax and VAT). Such result creates
additional fund for the regional government that will be used in expanding social and other basic
services in the region.
C. Import Substitution and Foreign Exchange Saving
The commencement of this project relieves a portion of the import burden. That is, based on the
projected figure we learn that in the project life an estimated amount of US Dollar 5.3 million

17

will be saved as a result of the proposed project. This will create room for the saved hard
currency to be allocated to other vital and strategic sectors.
D. Employment and Income Generation
The proposed project is expected to create employment opportunity to 15 professionals as well as
support staff. Consequently the project creates income for birr 134 thousand per year. This would
be one of the commendable accomplishments of the project.
E. Pro Environment Project
The proposed production process is environment friendly.

18

ANNEXES

19

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

PRODUCTION

Year 1

Year 2

1

2

3

4

Capacity Utilization (%)

0.00

0.00

80%

90%

100%

100%

1. Total Inventory

0.00

0.00

1522909.52

1713273.21

1903636.90

1903636.90

0.00

0.00

617367.27

694538.18

771709.09

771709.09

Raw Material-Local

0.00

0.00

219054.55

246436.36

273818.18

273818.18

Raw Material-Foreign

0.00

0.00

398312.73

448101.82

497890.91

497890.91

Factory Supplies in Stock

0.00

0.00

3771.96

4243.46

4714.95

4714.95

Spare Parts in Stock and Maintenance

0.00

0.00

1505.98

1694.23

1882.47

1882.47

Work in Progress

0.00

0.00

94299.01

106086.39

117873.76

117873.76

Finished Products

0.00

0.00

188598.02

212172.77

235747.53

235747.53

2. Accounts Receivable

0.00

0.00

430080.00

483840.00

537600.00

537600.00

3. Cash in Hand

0.00

0.00

53142.11

59784.87

66427.64

66427.64

0.00

0.00

1388764.35

1562359.90

1735955.44

1735955.44

4. Current Liabilities

0.00

0.00

430080.00

483840.00

537600.00

537600.00

Accounts Payable

0.00

0.00

430080.00

483840.00

537600.00

537600.00

TOTAL NET WORKING CAPITAL REQUIRMENTS

0.00

0.00

958684.35

1078519.90

1198355.44

1198355.44

INCREASE IN NET WORKING CAPITAL

0.00

0.00

958684.35

119835.54

119835.54

0.00

Raw Materials in Stock- Total

CURRENT ASSETS

1

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

(continued)

PRODUCTION
5

6

7

8

9

10

100%

100%

100%

100%

100%

100%

1903636.90

1903636.90

1903636.90

1903636.90

1903636.90

1903636.90

771709.09

771709.09

771709.09

771709.09

771709.09

771709.09

Raw Material-Local

273818.18

273818.18

273818.18

273818.18

273818.18

273818.18

Raw Material-Foreign

497890.91

497890.91

497890.91

497890.91

497890.91

497890.91

Factory Supplies in Stock

4714.95

4714.95

4714.95

4714.95

4714.95

4714.95

Spare Parts in Stock and Maintenance

1882.47

1882.47

1882.47

1882.47

1882.47

1882.47

Work in Progress

117873.76

117873.76

117873.76

117873.76

117873.76

117873.76

Finished Products

235747.53

235747.53

235747.53

235747.53

235747.53

235747.53

2. Accounts Receivable

537600.00

537600.00

537600.00

537600.00

537600.00

537600.00

3. Cash in Hand

66427.64

66427.64

66427.64

66427.64

66427.64

66427.64

1735955.44

1735955.44

1735955.44

1735955.44

1735955.44

1735955.44

4. Current Liabilities

537600.00

537600.00

537600.00

537600.00

537600.00

537600.00

Accounts Payable

537600.00

537600.00

537600.00

537600.00

537600.00

537600.00

TOTAL NET WORKING CAPITAL REQUIRMENTS

1198355.44

1198355.44

1198355.44

1198355.44

1198355.44

1198355.44

0.00

0.00

0.00

0.00

0.00

0.00

Capacity Utilization (%)
1. Total Inventory
Raw Materials in Stock-Total

CURRENT ASSETS

INCREASE IN NET WORKING CAPITAL

2

Annex 2: Cash Flow Statement (in Birr)
CONSTRUCTION

PRODUCTION

Year 1

Year 2

1

2

3

4

301980.00

1500335.44

4372480.00

4488960.00

4981760.00

4928000.00

301980.00

1500335.44

430080.00

53760.00

53760.00

0.00

Total Equity

120792.00

600134.18

0.00

0.00

0.00

0.00

Total Long Term Loan

181188.00

900201.26

0.00

0.00

0.00

0.00

0.00

0.00

430080.00

53760.00

53760.00

0.00

2. Inflow Operation

0.00

0.00

3942400.00

4435200.00

4928000.00

4928000.00

Sales Revenue

0.00

0.00

3942400.00

4435200.00

4928000.00

4928000.00

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

301980.00

301980.00

5099252.51

4363597.14

4911687.90

4722952.91

4. Increase In Fixed Assets

301980.00

301980.00

0.00

0.00

0.00

0.00

Fixed Investments

287600.00

287600.00

0.00

0.00

0.00

0.00

Pre-production Expenditures

14380.00

14380.00

0.00

0.00

0.00

0.00

5. Increase in Current Assets

0.00

0.00

1388764.35

173595.54

173595.54

0.00

6. Operating Costs

0.00

0.00

3449689.30

3880003.34

4310317.38

4310317.38

7. Corporate Tax Paid

0.00

0.00

0.00

0.00

139404.51

145892.84

8. Interest Paid

0.00

0.00

260798.86

129766.71

108138.93

86511.14

9.Loan Repayments

0.00

0.00

0.00

180231.54

180231.54

180231.54

10.Dividends Paid

0.00

0.00

0.00

0.00

0.00

0.00

Surplus(Deficit)

0.00

1198355.44

-726772.51

125362.86

70072.10

205047.09

Cumulative Cash Balance

0.00

1198355.44

471582.93

596945.79

667017.88

872064.97

TOTAL CASH INFLOW
1. Inflow Funds

Total Short Term Finances

3. Other Income

3

Annex 2: Cash Flow Statement (in Birr): Continued
PRODUCTION
5
4928000.00

6
4928000.00

7
4928000.00

8
4928000.00

9
4928000.00

10
4928000.00

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

4928000.00

4928000.00

4928000.00

4928000.00

4928000.00

4928000.00

Sales Revenue

4928000.00

4928000.00

4928000.00

4928000.00

4928000.00

4928000.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

4707813.46

4694399.61

4679260.16

4483889.17

4483889.17

4483889.17

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

4310317.38

4310317.38

4310317.38

4310317.38

4310317.38

4310317.38

7. Corporate Tax Paid

152381.18

160595.11

167083.45

173571.79

173571.79

173571.79

8. Interest Paid

64883.36

43255.57

21627.79

0.00

0.00

0.00

9. Loan Repayments

180231.54

180231.54

180231.54

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

Surplus(Deficit)

220186.54

233600.39

248739.84

444110.83

444110.83

444110.83

Cumulative Cash Balance

1092251.51

1325851.90

1574591.75

2018702.58

2462813.41

2906924.25

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

4

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

3942400.00

4435200.00

4928000.00

4928000.00

1. Inflow Operation

0.00

0.00

3942400.00

4435200.00

4928000.00

4928000.00

Sales Revenue

0.00

0.00

3942400.00

4435200.00

4928000.00

4928000.00

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

301980.00

301980.00

4408373.66

3999838.89

4569557.43

4456210.22

3. Increase in Fixed Assets

301980.00

301980.00

0.00

0.00

0.00

0.00

Fixed Investments

287600.00

287600.00

0.00

0.00

0.00

0.00

Pre-production Expenditures

14380.00

14380.00

0.00

0.00

0.00

0.00

4. Increase in Net Working Capital

0.00

0.00

958684.35

119835.54

119835.54

0.00

5. Operating Costs

0.00

0.00

3449689.30

3880003.34

4310317.38

4310317.38

6. Corporate Tax Paid

0.00

0.00

0.00

0.00

139404.51

145892.84

NET CASH FLOW

-301980.00

-301980.00

-465973.66

435361.11

358442.57

471789.78

CUMMULATIVE NET CASH FLOW

-301980.00

-603960.00

-1069933.66

-634572.54

-276129.98

195659.80

Net Present Value (at 18%)

-301980.00

-255915.25

-334655.03

264974.21

184880.69

206223.66

Cumulative Net present Value

-301980.00

-557895.25

-892550.28

-627576.06

-442695.38

-236471.72

2. Other Income

5

Annex 3: DISCOUNTED CASH FLOW-TOTAL CAPITAL INVESTED

(Continued)

PRODUCTION
5

6

7

8

9

10

TOTAL CASH INFLOW

4928000.00

4928000.00

4928000.00

4928000.00

4928000.00

4928000.00

1. Inflow Operation

4928000.00

4928000.00

4928000.00

4928000.00

4928000.00

4928000.00

Sales Revenue

4928000.00

4928000.00

4928000.00

4928000.00

4928000.00

4928000.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

4462698.56

4470912.49

4477400.83

4483889.17

4483889.17

4483889.17

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

4310317.38

4310317.38

4310317.38

4310317.38

4310317.38

4310317.38

6. Corporate Tax Paid

152381.18

160595.11

167083.45

173571.79

173571.79

173571.79

NET CASH FLOW

465301.44

457087.51

450599.17

444110.83

444110.83

444110.83

CUMMULATIVE NET CASH FLOW

660961.24

1118048.75

1568647.92

2012758.75

2456869.58

2900980.42

Net Present Value (at 18%)

172362.33

143491.21

119876.58

100127.48

84853.80

71910.00

Cumulative Net present Value

-64109.39

79381.82

199258.40

299385.88

384239.68

456149.68

Interest on Securities
2. Other Income
TOTAL CASH OUTFLOW

4. Increase in Net Working Capital

Net Present Value (at 18%)
Internal Rate of Return

456,149.68

28.7%

6

Annex 4: NET INCOME STATEMENT ( in Birr)
PRODUCTION
1

2

3

4

5

80%

90%

100%

100%

100%

3942400.00

4435200.00

4928000.00

4928000.00

4928000.00

3942400.00

4435200.00

4928000.00

4928000.00

4928000.00

Other Income

0.00

0.00

0.00

0.00

0.00

2. Less Variable Cost

3399657.90

3824615.14

4249572.38

4249572.38

4249572.38

542742.10

610584.86

678427.62

678427.62

678427.62

13.77

13.77

13.77

13.77

13.77

94893.40

100250.20

105607.00

105607.00

105607.00

447848.70

510334.66

572820.62

572820.62

572820.62

11

12

12

12

12

4. Less Cost of Finance

260798.86

129766.71

108138.93

86511.14

64883.36

5. GROSS PROFIT

187049.84

380567.95

464681.69

486309.48

507937.26

0.00

0.00

139404.51

145892.84

152381.18

187049.84

380567.95

325277.19

340416.64

355556.08

Gross Profit/Sales

5%

9%

9%

10%

10%

Net Profit After Tax/Sales

5%

9%

7%

7%

7%

Return on Investment

29%

30%

24%

24%

23%

Return on Equity

26%

53%

45%

47%

49%

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 (%)

7

Annex 4: NET INCOME STATEMENT (in Birr): Continued
PRODUCTION
6

7

8

9

10

100%

100%

100%

100%

100%

4928000.00

4928000.00

4928000.00

4928000.00

4928000.00

4928000.00

4928000.00

4928000.00

4928000.00

4928000.00

Other Income

0.00

0.00

0.00

0.00

0.00

2. Less Variable Cost

4249572.38

4249572.38

4249572.38

4249572.38

4249572.38

678427.62

678427.62

678427.62

678427.62

678427.62

14

14

14

14

14

99855.00

99855.00

99855.00

99855.00

99855.00

578572.62

578572.62

578572.62

578572.62

578572.62

12

12

12

12

12

4. Less Cost of Finance

43255.57

21627.79

0.00

0.00

0.00

5. GROSS PROFIT

535317.05

556944.83

578572.62

578572.62

578572.62

6. Income (Corporate) Tax

160595.11

167083.45

173571.79

173571.79

173571.79

7. NET PROFIT

374721.93

389861.38

405000.83

405000.83

405000.83

Gross Profit/Sales

11%

11%

12%

12%

12%

Net Profit After Tax/Sales

8%

8%

8%

8%

8%

Return on Investment

23%

23%

22%

22%

22%

Return on Equity

52%

54%

56%

56%

56%

Capacity Utilization (%)
1. Total Income
Sales Revenue

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

RATIOS (%)

8

Annex 5: Projected Balance Sheet (in Birr)
CONSTRUCTION
Year 1

Year 2

PRODUCTION
1

2

3

4

9

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

301980.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
301980.00
0.00
287600.00
14380.00
0.00
0.00
0.00
301980.00
0.00
0.00
0.00
181188.00
181188.00
0.00
120792.00
120792.00
0.00
0.00
0.00
0.00
0.00
0.00

1802315.44
1198355.44
0.00
0.00
0.00
0.00
0.00
1198355.44
0.00
603960.00
287600.00
287600.00
28760.00
0.00
0.00
0.00
1802315.44
0.00
0.00
0.00
1081389.26
1081389.26
0.00
720926.18
720926.18
0.00
0.00
0.00
0.00
0.00
0.00

2419445.28
1860347.28
622645.21
94299.01
188598.02
430080.00
53142.11
471582.93
0.00
559098.00
575200.00
0.00
28760.00
44862.00
0.00
0.00
2419445.28
430080.00
430080.00
0.00
1081389.26
1081389.26
0.00
720926.18
720926.18
0.00
0.00
0.00
187049.84
0.00
187049.84

Annex 5: Projected Balance Sheet (in Birr):

2673541.68
2159305.68
700475.86
106086.39
212172.77
483840.00
59784.87
596945.79
0.00
514236.00
575200.00
0.00
28760.00
89724.00
0.00
0.00
2673541.68
483840.00
483840.00
0.00
901157.72
901157.72
0.00
720926.18
720926.18
0.00
0.00
187049.84
380567.95
0.00
380567.95

2872347.32
2402973.32
778306.51
117873.76
235747.53
537600.00
66427.64
667017.88
0.00
469374.00
575200.00
0.00
28760.00
134586.00
0.00
0.00
2872347.32
537600.00
537600.00
0.00
720926.18
720926.18
0.00
720926.18
720926.18
0.00
0.00
567617.79
325277.19
0.00
325277.19

3032532.42
2608020.42
778306.51
117873.76
235747.53
537600.00
66427.64
872064.97
0.00
424512.00
575200.00
0.00
28760.00
179448.00
0.00
0.00
3032532.42
537600.00
537600.00
0.00
540694.63
540694.63
0.00
720926.18
720926.18
0.00
0.00
892894.97
340416.64
0.00
340416.64

9
4421978.85
4198768.85
778306.51

10
4826979.69
4642879.69
778306.51

Continued

PRODUCTION
TOTAL ASSETS
1. Total Current Assets
Inventory on Materials and Supplies

5
3207856.96
2828206.96
778306.51

6
3402347.35
3061807.35
778306.51

7
3611977.19
3310547.19
778306.51

8
4016978.02
3754658.02
778306.51

10

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

117873.76
235747.53
537600.00
66427.64
1092251.51
0.00
379650.00
575200.00
0.00
28760.00
224310.00
0.00
0.00
3207856.96
537600.00
537600.00
0.00
360463.09
360463.09
0.00
720926.18
720926.18
0.00
0.00
1233311.61
355556.08
0.00
355556.08

117873.76
235747.53
537600.00
66427.64
1325851.90
0.00
340540.00
575200.00
0.00
28760.00
263420.00
0.00
0.00
3402347.35
537600.00
537600.00
0.00
180231.54
180231.54
0.00
720926.18
720926.18
0.00
0.00
1588867.69
374721.93
0.00
374721.93

117873.76
235747.53
537600.00
66427.64
1574591.75
0.00
301430.00
575200.00
0.00
28760.00
302530.00
0.00
0.00
3611977.19
537600.00
537600.00
0.00
0.00
0.00
0.00
720926.18
720926.18
0.00
0.00
1963589.63
389861.38
0.00
389861.38

117873.76
235747.53
537600.00
66427.64
2018702.58
0.00
262320.00
575200.00
0.00
28760.00
341640.00
0.00
0.00
4016978.02
537600.00
537600.00
0.00
0.00
0.00
0.00
720926.18
720926.18
0.00
0.00
2353451.01
405000.83
0.00
405000.83

117873.76
235747.53
537600.00
66427.64
2462813.41
0.00
223210.00
575200.00
0.00
28760.00
380750.00
0.00
0.00
4421978.85
537600.00
537600.00
0.00
0.00
0.00
0.00
720926.18
720926.18
0.00
0.00
2758451.84
405000.83
0.00
405000.83

117873.76
235747.53
537600.00
66427.64
2906924.25
0.00
184100.00
575200.00
0.00
28760.00
419860.00
0.00
0.00
4826979.69
537600.00
537600.00
0.00
0.00
0.00
0.00
720926.18
720926.18
0.00
0.00
3163452.68
405000.83
0.00
405000.83

11

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