Investment Office ANRS

Project Profile on the Establishment
of Absorbent cotton Making plant

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................................................................................................3
3.1.3Pricing and Distribution.......................................................................................4
3.2Plant Capacity.............................................................................................................5
3.3Production Program....................................................................................................6

4.Raw Materials and Utilities.......................................................................6
4.1Availability and Source of Raw Materials..................................................................6
4.2Annual Requirement and Cost of Raw Materials and Utilities...................................6

5Location and Site.........................................................................................7
6Technology and Engineering .....................................................................7
6.1Production Process......................................................................................................7
6.2Machinery and Equipment..........................................................................................8
6.3Civil Engineering Cost..............................................................................................10

7Human Resource and Training Requirement........................................10
7.1Human Resource ......................................................................................................10
7.2Training Requirement...............................................................................................11

8Financial Analysis.....................................................................................11
8.1Underlying Assumption ...........................................................................................11
8.2Investment.................................................................................................................13
8.3Production Costs.......................................................................................................14
8.4Financial Evaluation.................................................................................................14

9Economic and Social Benefit and Justification......................................15
ANNEXES....................................................................................................17

1. Executive Summary
This project profile deals with the establishment of absorbent cotton making plant in
Amhara National Regional State. The following presents the main findings of the study.
Demand projection divulges that the domestic demand for absorbent cotton is substantial
and is increasing with time. Accordingly, the planned plant is set to produce 160 ton
annually. The total investment cost of the project including working capital is estimated
at Birr 12.89 million and creates 40 jobs and Birr 554.4 thousands 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 24.6% of capacity utilization
and it will payback fully the initial investment less working capital in 3 years. The result
further shows that the calculated IRR of the project is 28% with NPV of Birr
5,276,413.57
In addition to this, the proposed project possesses wide range of economic and social
benefits such as increasing the level of investment, tax revenue, employment creation and
import substitution.
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
Absorbent cotton is sterilized, deoiled and bleached loose cotton wadding. Originally
absorbent cotton was developed for the purpose of medical use. At present absorbent
cotton is used for sanitary use and in surgical operation as well as for ordinary daily
living. Since absorbent cotton is a material which comes in direct contact with the human
body, it must satisfy the pharmacopeia requirements. In Ethiopia absorbent cotton is
usually needed by women during their menstruation period and hence the viability of
establishing the plant is examined from this point of view.
1

3. Market Study, Plant Capacity and Production
Program
3.1

Market Study
3.1.1 Present Demand and Supply

At present the demand for absorbent cotton is met from domestic production as well as
import. However, there is no exact figure as to the level of domestic production per
annum. Similarly, the information obtained from Customs Authority aggregates the
sanitary pad with other similar materials so that the actual level of import could not be
documented. However, a market research conducted in various supermarkets and shops
in Addis Ababa revealed that most of the sanitary pads on sale are imported ones. This
suggests that domestic production is unable to meet the growing demand for the product.
To arrive at the present effective demand for the product, this profile employed a proxy
approach as follows. As has been stated earlier, women use sanitary pads during their
menstruation period. Therefore, the demand for the product depends on the number of
women in the age group 15-49 years that are believed to make use of the product.
According to CSA, Annual abstract (2006), currently there are 3.5 million women in
urban and 14.9 million women and rural areas of the country as shown in table 1 below.
Table 1: Population of Women Between the Age of 15-49
Age Group
15-19
20-24
25-29
30-34
35-39
40-44
45-49
Total

Urban
702,484
716,469
645,389
517,582
410,129
310,517
237,375
3,539,945

Rural
3,277,916
2,864,646
2,442,170
2,049,586
1,701,719
1,407,770
1,150,000
14,893,807

Total
3,980,400
3,581,115
3,087,559
2,567,168
2,111,848
1,718,287
1,387,375
18,433,752

Source: CSA, Annual Report (2006)

2

The age group listed in the above table represents the age group that demands sanitary
pads. However, for a number of reasons such as ability to pay, awareness, etc, women in
the urban areas use the product more frequently than the rural areas. Therefore, in
estimating the present demand, it is important to make some assumption as to the demand
for the product. In this connection it is assumed that about 30% of the urban women and
1% of the rural women make use of absorbent cotton during their menstruation period.
Given the importance of the product, this assumption can be considered as a conservative
approach. Thus, about 1,061,984 women in the urban area and about 148,938 of the
urban females make use of the sanitary towel every month. This makes the total potential
users to be 1,210,922. On average a woman uses 4 pads in a given month, and, therefore,
the annual demand for the absorbent cotton is estimated to be about 58,124,235 pieces
per year. Roughly speaking this is equivalent to 581.2 tons. Therefore, this figure can be
fairly taken as the current level of demand for the product.

3.1.2 Projected Demand
In forecasting the future demand for absorbent cotton the population growth rate is used.
This is because as the number of women with in the age group of 15 to 49 increases, the
demand for the product also increases. Accordingly, 3% growth rate is considered to
arrive at the following forecast figure.

3

Table 2: Projected Demand for Absorbent Cotton (in tons)
Year

Projected Demand

2007/08
2008/09
2009/10
2010/11
2011/12
2012/13
2013/14
2014/15
2015/16
2016/17
2017/18
2018/19

599
617
635
654
674
694
715
736
758
781
805
829

Thus, as per the above table, demand for the product will increase substantially in the
coming years. This suggests the relevance of establishing a small plant.

3.1.3 Pricing and Distribution
Based on the market research result and the capacity of the envisaged plant, the selling
price of absorbent cotton is set to be Birr 55,000 per ton. In other words it is Birr 5.5 per
4

packet. In distributing the product the envisaged plant shall make use of the available
retail and wholesale network.

3.2

Plant Capacity

Thus, given the expected demand for absorbent cotton as presented earlier, and the
planned technology, the envisaged plant is set to produce 160 tons annually. For a plant
that may start operation in 2009/10 this capacity represents about 19% of the total
demand.

5

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 55 percent
capacity and then it grows to 75 percent in the 2 nd year and 90 percent in the 3rd year. The
capacity will grow to 100 percent starting from the 4 th year. This consideration is
developed based on the assumption that market and logistics barriers would take place for
the first three years of operation.

4. Raw Materials and Utilities
4.1

Availability and Source of Raw Materials

The main raw materials required in the production of absorbent cotton are raw ginned
cotton, soda ash, caustic soda, bleaching agent, other chemicals, wetting agents and
packing materials. The raw cotton shall be secured from the region while the other
materials are imported from abroad.

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 3 below.

6

Table 3: Material and Utility Requirement

Material and Input
Raw Cotton
Soda Ash
Caustic Soda
Bleaching Agent
Other Chemicals
Wetting agent
Packing Material
Total Material Cost

Quantity

L.C.

170 ton
13 ton
18 ton
13
Lump sum
Lump sum
Lump sum

Total Cost
F.C.

1,200,000
65,000
108,000
84,500
16,175
24,263
40,438
1,060,438

297,938

Utility
Electricity
Furnace Oil
Water
Total Utility Cost

120,000 kwh
60,000 lit
10,000m3

66,000
420,000
26,500
512,500

According to the above table the annual cost of material and utility at full capacity of
operation is Birr 1,870,876.

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, Combolcha and Gonder
towns.

6 Technology and Engineering
6.1

Production Process

The production process in producing absorbent cotton involves the following. First of all
the raw cotton is opened and loosened, separated from dust particles and other
contaminants. Then the cotton is boiled using steam for up to four hours with various
chemicals like detergents, caustic soda, soda ash etc. This treatment removes oils, waxes
and other and foreign matters. The Cotton is then washed in large thanks. The washed
7

cotton is then bleached with chemicals like hydrogen peroxide or sodium hypochlorite.
The bleaching not only whitens the cotton but also improves its moisture absorbing
qualities and further cleans it. The bleached cotton is thoroughly washed again to remove
adhering chemicals. A small quantity of dilute sulpheric acid may be used to neutralize
any excess alkali. The neutralized cotton is then processed in a hydro extractor to remove
absorbed water and dilute sulpheric acid. It is then opened again in a wet cotton opening
machine.
The opened cotton is then dried or subjected to sun drying. Sun drying in the open,
however, is not advisable as it attracts fresh dust and requires a huge amount of open
space. After drying the cotton is sent to the blow room where it is opened more
thoroughly and made into laps. The laps of cotton are then fed into a carding machine
which turns the cotton laps into 6” to 12” wide brands. A special indigo colored paper is
placed under each band and the cotton is rolled, compressed, weighed and cut into
packaging of different sizes. The rolls are then packed in a polyethylene roll after
labelling and stamping with correct weight. The final packing is done in a card board or
corrugated board cartons.
The alternative technology requires a fully automatic production process. In this situation
much of the work will be handled by the machines and minimizes the role of labor in the
process. This approach is very expensive and produces very large amount of finished
absorbent cotton per day when compared with the process discussed earlier. For the
envisaged plant the manual approach is more preferable since its production capacity is
lower, relatively labor intensive and the technology is cheaper than the fully automated
one.

6.2

Machinery and Equipment

The machineries and equipment required for producing absorbent cotton is detailed in
table 4 below.
Table 4: Machinery and Equipment
8

Machinery and Equipment
High Pressure Kier Boiler (cap 500 kg)
Carding Machine
Wet Cotton Opener
Hydro extractor (centrifugal type)
Cotton drier (steam operated continuous type)
Dry Cotton Opener
Porcupine Cleaner
Lap Forming Machine
Rolling Machine
Rolling Cutting Band Saw
Multi-Fuel Boiler (1000kg/hr evaporation
capacity at 150 psig)
Water Reservoir (15,000 litters cap)
Water, Steam, Discharging piping and fittings
Laboratory and testing equipment

Quantity
1
1
1
1
1
1
1
1
1
1
1
1
1
set

The total cost of machinery and equipment including freight insurance and bank cost is
estimated to be about Birr 8,000,000.
The following are some of the machineries suppliers’ address for the envisaged project
9

1. Machinery Manufacturers Corporation
B-61, Circular Garden Road,
Calcutta – 600 043, India
2. Gujarat Machinery Manufacturers Ltd.,
187, Worli, Mumbai – 400018, India

6.3

Civil Engineering Cost

The total site area for the envisaged plant is estimated to be 500m 2 where 350m2 is
allocated for the production place and the remaining space is left for stores (100m2),
office buildings 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 5 below.
Table 5: Human Resource Requirement
Position
Manager
Production Manager
Finance Head/Administrator
Accountant
Secretary
Sales Clerk
Chemist
Store Keeper
Technician
Supervisor
Operators
Daily Labourers
Cleaners
Messengers
Driver

No. Required
1
1
1
1
1
2
1
1
2
2
14
6
2
1
1

Monthly
Salary
4500
4000
3000
1200
1000
800
1200
800
1000
1200
800
400
400
400
800

Total Annual Salary
54000
48000
36000
14400
12000
19200
14400
9600
24000
28800
134400
28800
9600
4800
9600
10

Guards
Benefit (20%)
Total

3

400

40

14400
92400
554400

[[[[[[[[[[[

The envisaged plant creates 40 jobs and about Birr 554.4 thousand of income. The
professionals and support staff 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 focus on the production technology and
machinery maintenance and trouble shooting. Birr 100,000 will be allocated as training
expense.

8 Financial Analysis
8.1

Underlying Assumption

The financial analysis of absorbent cotton making plant is based on the data provided in
the preceding sections 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

1% of fixed investment

B. Depreciation

11

Building

5%

Machinery and equipment

10%

Office furniture

10%

Vehicles

20%

Pre-production (amortization)

20%

12

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
12.89 million as shown in table 6 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 6: Total initial investment
Items
Land
Building and civil works
Office equipment
Vehicles
Plant machinery & equipment
Total fixed investment cost
Pre production capital expenditure*
Total initial investment
Working capital at full capacity
Total

L.C
1,500
1,000,000
100,000
500,000
1,000,000
2,601,500
580,075
3,181,575
586,531
3,768,106

F.C

9,000,000
9,000,000
9,000,000
130,009
9,130,009

Total
1,500
1,000,000
100,000
500,000
10,000,000
11,601,500
580,075
12,181,575
716,540
12,898,115

*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 foreign component of the project accounts for 70.8% of the total investment cost.

13

8.3

Production Costs

The total production cost at full capacity operation is estimated at Birr 4.59 million as
detailed in table 7 below.
Table 7: 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
1,358,376
512,500
554,400
116,015
2,541,291
1,276,015
773,887
4,591,193

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. A modest profit,
however, is obtained starting from the second year of operation. Ratios such as the
percentage of net profit to total sales, return on equity and return on total investment are
0.14%, 0.13% and 16.64% respectively 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 24.6% of capacity utilization.

14

III.

Payback Period

Investment cost and income statement projections are used in estimating the project
payback period. The project will payback fully the initial investment less working capital
in 3 years.
IV.

Simple Rate of Return

For the envisaged plant the simple rate of return equals to 27.9%
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 28% and the net present value at 18 % discount is Birr 5,276,413.57
VI.

Sensitivity Analysis

The envisaged plant incurs loss of Birr 116,424.11 in the first year of operation when cost
of production increases by about 10%. The plant will generate profit starting from the
second year. This result is accompanied by somewhat similar NPV obtained earlier.

9 Economic and Social Benefit and Justification
The envisaged project possesses wide range of benefits that promote the socio-economic
goals and objectives stated in the strategic plan of the Amhara National Regional State. It
boosts the inter sectoral linkage between the agricultural and industrial sectors. At the
same time, therefore, it helps diversify the economic activity. The other major benefits
are listed as follows:
A. Profit Generation
The project is found to be financially viable and earns on average a profit of Birr 2.88
million per year and Birr 28.81 million within the project life. Such result induces the
project promoters to reinvest the profit which, therefore, increases the investment
magnitude in the region.
15

B. Tax Revenue
In the project life under consideration, the region will collect about Birr 11.3 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
Based on the projected figure we learn that in the project life an estimated amount of US
Dollar 8.09 million 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 for several citizens of
the region. That is, it will provide permanent employment to 40 professionals as well as
support staff. Consequently the project creates income of Birr 554.4 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.
F. Diversification and InterSectoral linkage.
The proposed project helps to diversify ANRS’ and Ethiopian economy. It contributes to
industrialization of the region as well as the county’s economy.

16

ANNEXES

17

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

PRODUCTION

Year 1

Year 2

1

2

3

4

0

0

55%

75%

90%

100%

0.00

0.00

465214.65

634383.62

761260.34

845844.82

0.00

0.00

135131.40

184270.09

221124.11

245693.45

Raw Material-Local

0.00

0.00

63626.28

86763.11

104115.73

115684.15

Raw Material-Foreign

0.00

0.00

71505.12

97506.98

117008.38

130009.31

Factory Supplies in Stock

0.00

0.00

2290.38

3123.25

3747.90

4164.33

Spare Parts in Stock and Maintenance

0.00

0.00

20882.70

28476.41

34171.69

37968.55

Work in Progress

0.00

0.00

57259.59

78081.26

93697.51

104108.35

Finished Products

0.00

0.00

114519.18

156162.52

187395.02

208216.69

2. Accounts Receivable

0.00

0.00

528000.00

720000.00

864000.00

960000.00

3. Cash in Hand

0.00

0.00

64014.00

87291.82

104750.18

116389.09

0.00

0.00

922097.25

1257405.35

1508886.41

1676540.46

4. Current Liabilities

0.00

0.00

528000.00

720000.00

864000.00

960000.00

Accounts Payable

0.00

0.00

528000.00

720000.00

864000.00

960000.00

TOTAL NET WORKING CAPITAL REQUIRMENTS

0.00

0.00

394097.25

537405.35

644886.41

716540.46

INCREASE IN NET WORKING CAPITAL

0.00

0.00

394097.25

143308.09

107481.07

71654.05

Capacity Utilization (%)
1. Total Inventory
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%

845844.82

845844.82

845844.82

845844.82

845844.82

845844.82

245693.45

245693.45

245693.45

245693.45

245693.45

245693.45

Raw Material-Local

115684.15

115684.15

115684.15

115684.15

115684.15

115684.15

Raw Material-Foreign

130009.31

130009.31

130009.31

130009.31

130009.31

130009.31

Factory Supplies in Stock

4164.33

4164.33

4164.33

4164.33

4164.33

4164.33

Spare Parts in Stock and Maintenance

37968.55

37968.55

37968.55

37968.55

37968.55

37968.55

Work in Progress

104108.35

104108.35

104108.35

104108.35

104108.35

104108.35

Finished Products

208216.69

208216.69

208216.69

208216.69

208216.69

208216.69

2. Accounts Receivable

960000.00

960000.00

960000.00

960000.00

960000.00

960000.00

3. Cash in Hand

116389.09

116389.09

116389.09

116389.09

116389.09

116389.09

1676540.46

1676540.46

1676540.46

1676540.46

1676540.46

1676540.46

4. Current Liabilities

960000.00

960000.00

960000.00

960000.00

960000.00

960000.00

Accounts Payable

960000.00

960000.00

960000.00

960000.00

960000.00

960000.00

TOTAL NET WORKING CAPITAL REQUIRMENTS

716540.46

716540.46

716540.46

716540.46

716540.46

716540.46

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)

3

CONSTRUCTION

PRODUCTION

Year 1

Year 2

1

2

3

4

6090787.50

6807327.96

5368000.00

6792000.00

8064000.00

8896000.00

6090787.50

6807327.96

528000.00

192000.00

144000.00

96000.00

Total Equity

2436315.00

2722931.18

0.00

0.00

0.00

0.00

Total Long Term Loan

3654472.50

4084396.78

0.00

0.00

0.00

0.00

0.00

0.00

528000.00

192000.00

144000.00

96000.00

2. Inflow Operation

0.00

0.00

4840000.00

6600000.00

7920000.00

8800000.00

Sales Revenue

0.00

0.00

4840000.00

6600000.00

7920000.00

8800000.00

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

6090787.50

6090787.50

4479213.47

4518098.25

5709891.12

5954161.36

4. Increase In Fixed Assets

6090787.50

6090787.50

0.00

0.00

0.00

0.00

Fixed Investments

5800750.00

5800750.00

0.00

0.00

0.00

0.00

Pre-production Expenditures

290037.50

290037.50

0.00

0.00

0.00

0.00

5. Increase in Current Assets

0.00

0.00

922097.25

335308.09

251481.07

167654.05

6. Operating Costs

0.00

0.00

1471624.48

1964314.30

2333831.65

2580176.56

7. Corporate Tax Paid

0.00

0.00

0.00

0.00

1060879.93

1297409.67

8. Interest Paid

0.00

0.00

2085491.73

928664.31

773886.93

619109.54

9.Loan Repayments

0.00

0.00

0.00

1289811.55

1289811.55

1289811.55

10.Dividends Paid

0.00

0.00

0.00

0.00

0.00

0.00

Surplus(Deficit)

0.00

716540.46

888786.53

2273901.75

2354108.88

2941838.64

Cumulative Cash Balance

0.00

716540.46

1605327.00

3879228.75

6233337.63

9175176.26

TOTAL CASH INFLOW
1. Inflow Funds

Total Short Term Finances

3. Other Income

Annex 2: Cash Flow Statement (in Birr): Continued
4

PRODUCTION
5
8800000.00

6
8800000.00

7
8800000.00

8
8800000.00

9
8800000.00

10
8800000.00

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

8800000.00

8800000.00

8800000.00

8800000.00

8800000.00

8800000.00

Sales Revenue

8800000.00

8800000.00

8800000.00

8800000.00

8800000.00

8800000.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

5678163.15

5634623.48

5526279.31

4128123.59

4128123.59

4128123.59

4. Increase In Fixed Assets

0.00

0.00

0.00

0.00

0.00

0.00

Fixed Investments
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. Increase in Current Assets

0.00

0.00

0.00

0.00

0.00

0.00

6. Operating Costs

2580176.56

2580176.56

2580176.56

2580176.56

2580176.56

2580176.56

7. Corporate Tax Paid

1343842.89

1455080.60

1501513.82

1547947.03

1547947.03

1547947.03

8. Interest Paid

464332.16

309554.77

154777.39

0.00

0.00

0.00

9. Loan Repayments

1289811.55

1289811.55

1289811.55

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

Surplus(Deficit)

3121836.85

3165376.52

3273720.69

4671876.41

4671876.41

4671876.41

Cumulative Cash Balance

12297013.11

15462389.64

18736110.33

23407986.74

28079863.14

32751739.55

TOTAL CASH INFLOW
1. Inflow Funds

Interest on Securities
3. Other Income
TOTAL CASH OUTFLOW

10.Dividends Paid

Annex 3: DISCOUNTED CASH FLOW-TOTAL CAPITAL INVESTED
5

CONSTRUCTION

PRODUCTION

Year 1

Year 2

1

2

3

4

TOTAL CASH INFLOW

0.00

0.00

4840000.00

6600000.00

7920000.00

8800000.00

1. Inflow Operation

0.00

0.00

4840000.00

6600000.00

7920000.00

8800000.00

Sales Revenue

0.00

0.00

4840000.00

6600000.00

7920000.00

8800000.00

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

6090787.50

6090787.50

1865721.74

2107622.39

3502192.65

3949240.28

3. Increase in Fixed Assets

6090787.50

6090787.50

0.00

0.00

0.00

0.00

Fixed Investments

5800750.00

5800750.00

0.00

0.00

0.00

0.00

Pre-production Expenditures

290037.50

290037.50

0.00

0.00

0.00

0.00

4. Increase in Net Working Capital

0.00

0.00

394097.25

143308.09

107481.07

71654.05

5. Operating Costs

0.00

0.00

1471624.48

1964314.30

2333831.65

2580176.56

6. Corporate Tax Paid

0.00

0.00

0.00

0.00

1060879.93

1297409.67

NET CASH FLOW

-6090787.50

-6090787.50

2974278.26

4492377.61

4417807.35

4850759.72

CUMMULATIVE NET CASH FLOW

-6090787.50

-12181575.00

-9207296.74

-4714919.12

-297111.77

4553647.95

Net Present Value (at 18%)

-6090787.50

-5161684.32

2136080.34

2734199.71

2278655.88

2120311.78

Cumulative Net present Value

-6090787.50

-11252471.82

-9116391.48

-6382191.78

-4103535.89

-1983224.11

2. Other Income

Annex 3: DISCOUNTED CASH FLOW-TOTAL CAPITAL INVESTED

(Continued)

6

PRODUCTION
5

6

7

8

9

10

TOTAL CASH INFLOW

8800000.00

8800000.00

8800000.00

8800000.00

8800000.00

8800000.00

1. Inflow Operation

8800000.00

8800000.00

8800000.00

8800000.00

8800000.00

8800000.00

Sales Revenue

8800000.00

8800000.00

8800000.00

8800000.00

8800000.00

8800000.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

3924019.45

4035257.16

4081690.38

4128123.59

4128123.59

4128123.59

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

2580176.56

2580176.56

2580176.56

2580176.56

2580176.56

2580176.56

6. Corporate Tax Paid

1343842.89

1455080.60

1501513.82

1547947.03

1547947.03

1547947.03

NET CASH FLOW

4875980.55

4764742.84

4718309.62

4671876.41

4671876.41

4671876.41

CUMMULATIVE NET CASH FLOW

9429628.51

14194371.35

18912680.97

23584557.38

28256433.79

32928310.19

Net Present Value (at 18%)

1806216.98

1495772.05

1255250.43

1053302.90

892629.58

756465.74

Cumulative Net present Value

-177007.13

1318764.93

2574015.35

3627318.25

4519947.83

5276413.57

Interest on Securities
2. Other Income
TOTAL CASH OUTFLOW

4. Increase in Net Working Capital

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

5,276,413.57

28.0%

7

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

2

3

4

5

55%

75%

90%

100%

100%

4840000.00

6600000.00

7920000.00

8800000.00

8800000.00

4840000.00

6600000.00

7920000.00

8800000.00

8800000.00

Other Income

0.00

0.00

0.00

0.00

0.00

2. Less Variable Cost

1232928.98

1681266.80

2017520.15

2241689.06

2241689.06

3607071.02

4918733.21

5902479.85

6558310.94

6558310.94

74.53

74.53

74.53

74.53

74.53

1514710.50

1559062.50

1592326.50

1614502.50

1614502.50

2092360.52

3359670.71

4310153.35

4943808.44

4943808.44

43.23

50.90

54.42

56.18

56.18

2085491.73

928664.31

773886.93

619109.54

464332.16

6868.79

2431006.39

3536266.42

4324698.90

4479476.28

0.00

0.00

1060879.93

1297409.67

1343842.89

6868.79

2431006.39

2475386.49

3027289.23

3135633.40

Gross Profit/Sales

0.14%

36.83%

44.65%

49.14%

50.90%

Net Profit After Tax/Sales

0.14%

36.83%

31.25%

34.40%

35.63%

Return on Investment

16.64%

26.41%

25.33%

28.27%

27.91%

Return on Equity

0.13%

47.12%

47.98%

58.68%

60.78%

Capacity Utilization (%)
1. Total Income
Sales Revenue

VARIABLE MARGIN
(In % of Total Income)
3. Less Fixed Costs
OPERATIONAL MARGIN
(In % of Total Income)
4. Less Cost of Finance
5. GROSS PROFIT
6. Income (Corporate) Tax
7. NET PROFIT
RATIOS (%)

8

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

7

8

9

10

100%

100%

100%

100%

100%

8800000.00

8800000.00

8800000.00

8800000.00

8800000.00

8800000.00

8800000.00

8800000.00

8800000.00

8800000.00

Other Income

0.00

0.00

0.00

0.00

0.00

2. Less Variable Cost

2241689.06

2241689.06

2241689.06

2241689.06

2241689.06

6558310.94

6558310.94

6558310.94

6558310.94

6558310.94

74.53

74.53

74.53

74.53

74.53

1398487.50

1398487.50

1398487.50

1398487.50

1398487.50

5159823.44

5159823.44

5159823.44

5159823.44

5159823.44

58.63

58.63

58.63

58.63

58.63

4. Less Cost of Finance

309554.77

154777.39

0.00

0.00

0.00

5. GROSS PROFIT

4850268.67

5005046.05

5159823.44

5159823.44

5159823.44

6. Income (Corporate) Tax

1455080.60

1501513.82

1547947.03

1547947.03

1547947.03

7. NET PROFIT

3395188.07

3503532.24

3611876.41

3611876.41

3611876.41

Gross Profit/Sales

55.12%

56.88%

58.63%

58.63%

58.63%

Net Profit After Tax/Sales

38.58%

39.81%

41.04%

41.04%

41.04%

Return on Investment

28.72%

28.36%

28.00%

28.00%

28.00%

Return on Equity

65.81%

67.91%

70.01%

70.01%

70.01%

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)
9

CONSTRUCTION
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

Year 1
6090787.50
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
6090787.50
0.00
5800750.00
290037.50
0.00
0.00
0.00
6090787.50
0.00
0.00
0.00
3654472.50
3654472.50
0.00
2436315.00
2436315.00
0.00
0.00
0.00
0.00
0.00
0.00

Year 2
12898115.46
716540.46
0.00
0.00
0.00
0.00
0.00
716540.46
0.00
12181575.00
5800750.00
5800750.00
580075.00
0.00
0.00
0.00
12898115.46
0.00
0.00
0.00
7738869.28
7738869.28
0.00
5159246.18
5159246.18
0.00
0.00
0.00
0.00
0.00
0.00

PRODUCTION
1
13432984.25
2527424.25
158304.48
57259.59
114519.18
528000.00
64014.00
1605327.00
0.00
10905560.00
11601500.00
0.00
580075.00
1276015.00
0.00
0.00
13432984.25
528000.00
528000.00
0.00
7738869.28
7738869.28
0.00
5159246.18
5159246.18
0.00
0.00
0.00
6868.79
0.00
6868.79

Annex 5: Projected Balance Sheet (in Birr):

2
14766179.09
5136634.09
215869.75
78081.26
156162.52
720000.00
87291.82
3879228.75
0.00
9629545.00
11601500.00
0.00
580075.00
2552030.00
0.00
0.00
14766179.09
720000.00
720000.00
0.00
6449057.73
6449057.73
0.00
5159246.18
5159246.18
0.00
0.00
6868.79
2431006.39
0.00
2431006.39

3
16095754.04
7742224.04
259043.70
93697.51
187395.02
864000.00
104750.18
6233337.63
0.00
8353530.00
11601500.00
0.00
580075.00
3828045.00
0.00
0.00
16095754.04
864000.00
864000.00
0.00
5159246.18
5159246.18
0.00
5159246.18
5159246.18
0.00
0.00
2437875.18
2475386.49
0.00
2475386.49

4
17929231.72
10851716.72
287826.33
104108.35
208216.69
960000.00
116389.09
9175176.26
0.00
7077515.00
11601500.00
0.00
580075.00
5104060.00
0.00
0.00
17929231.72
960000.00
960000.00
0.00
3869434.64
3869434.64
0.00
5159246.18
5159246.18
0.00
0.00
4913261.67
3027289.23
0.00
3027289.23

Continued

PRODUCTION

10

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

5
19775053.58
13973553.58
287826.33
104108.35
208216.69
960000.00
116389.09
12297013.11
0.00
5801500.00
11601500.00
0.00
580075.00
6380075.00
0.00
0.00
19775053.58
960000.00
960000.00
0.00
2579623.09
2579623.09
0.00
5159246.18
5159246.18
0.00
0.00

6
21880430.10
17138930.10
287826.33
104108.35
208216.69
960000.00
116389.09
15462389.64
0.00
4741500.00
11601500.00
0.00
580075.00
7440075.00
0.00
0.00
21880430.10
960000.00
960000.00
0.00
1289811.55
1289811.55
0.00
5159246.18
5159246.18
0.00
0.00

7
24094150.79
20412650.79
287826.33
104108.35
208216.69
960000.00
116389.09
18736110.33
0.00
3681500.00
11601500.00
0.00
580075.00
8500075.00
0.00
0.00
24094150.79
960000.00
960000.00
0.00
0.00
0.00
0.00
5159246.18
5159246.18
0.00
0.00

8
27706027.20
25084527.20
287826.33
104108.35
208216.69
960000.00
116389.09
23407986.74
0.00
2621500.00
11601500.00
0.00
580075.00
9560075.00
0.00
0.00
27706027.20
960000.00
960000.00
0.00
0.00
0.00
0.00
5159246.18
5159246.18
0.00
0.00

9
31317903.61
29756403.61
287826.33
104108.35
208216.69
960000.00
116389.09
28079863.14
0.00
1561500.00
11601500.00
0.00
580075.00
10620075.00
0.00
0.00
31317903.61
960000.00
960000.00
0.00
0.00
0.00
0.00
5159246.18
5159246.18
0.00
0.00

10
34929780.01
34428280.01
287826.33
104108.35
208216.69
960000.00
116389.09
32751739.55
0.00
501500.00
11601500.00
0.00
580075.00
11680075.00
0.00
0.00
34929780.01
960000.00
960000.00
0.00
0.00
0.00
0.00
5159246.18
5159246.18
0.00
0.00

7940550.90
3135633.40
0.00
3135633.40

11076184.30
3395188.07
0.00
3395188.07

14471372.37
3503532.24
0.00
3503532.24

17974904.61
3611876.41
0.00
3611876.41

21586781.01
3611876.41
0.00
3611876.41

25198657.42
3611876.41
0.00
3611876.41

11

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