Economics Plan 2

ADDIS ABABA INSTITUTE OF TECHNOLOGY
SCHOOL OF CIVIL AND ENVIROMENTAL ENGINEERING
ENGINEERING ECONOMICS
GRADE 7 GENERAL CONTRACTOR
DECEMBER 17, 2017

NAME ID
ELIAS SOLOMON ATR/3740/06
HAILE MARIYAM SEWAGEGN ATR/2455/06
AMANUEL SHIGUTE ATR/4075/06
NEGA FIKRU ATR/2718/06
ECONOMICS BUSSINESS PLAN Page 1

Acknowledgment
In performing our project, we had to take the help and guideline of some respected persons, who
deserves our greatest gratitude. The complete of this project gives us much pleasure. We would like to
show our gratitude to Mr. Getachew PT. AAIT economics course instructor. For giving us a good guideline
for the project throughout numerous consultations. We would also like to expand our deepest gratitude
to all those who are have directly and indirectly guided us in working in this project.

Contents
Table of figures ............................................................................................................................................. 5
Chapter one .................................................................................................................................................. 6
Market analysis and organizational structures ............................................................................................. 6
1.0. Introduction ........................................................................................................................................... 6
1.1. Products and services ....................................................................................................................... 6
1.2. The market ........................................................................................................................................ 6
1.3. Financial Considerations ........................................................................................................................ 8
1.4. Mission ................................................................................................................................................... 8
1.5. Safety ..................................................................................................................................................... 9
1.6. Construction Industry statics ................................................................................................................. 9
1.7. Segmentation of construction industry ............................................................................................... 10
1.8. Strategy and Implementation Summary .............................................................................................. 12
1.9. Promotional campaign ......................................................................................................................... 12
1.10. Marketing Programs .......................................................................................................................... 12
1.11. Management Summary ..................................................................................................................... 13
1.12. Organizational structure of the company .......................................................................................... 14
2.13. Personnel Plan ................................................................................................................................... 14
Chapter two ................................................................................................................................................ 16
Financial plan .............................................................................................................................................. 16
2.0. Loan payment mechanism ................................................................................................................... 16
2.1. Project one time table and financial consideration. ............................................................................ 18
2.2. Graphical analysis of project one ......................................................................................................... 20
2.3. Year 2 financial consideration .............................................................................................................. 21
2.3.1 Project two Culvert construction ....................................................................................................... 21
2.4. Year two project two ........................................................................................................................... 22
2.4.1 Elementary school construction ........................................................................................................ 22
2.5. Year three............................................................................................................................................. 22
2.5.1. Office building construction.............................................................................................................. 22
2.6. Year four............................................................................................................................................... 22
2.6.1. Ornamental Public garden construction. .......................................................................................... 22

2.6.2. Project two ........................................................................................................................................ 23

Waste facility works .................................................................................................................................... 23
2.7. Year five ............................................................................................................................................... 23
Construction of two G+1 residential buildings. .......................................................................................... 23
2.8. Financial statement.............................................................................................................................. 23
2.8.1. Financial statement for Year one ...................................................................................................... 23
2.8.2. Financial statement for Year two for project two and three ............................................................ 24
2.8.3. Year three financial statement ......................................................................................................... 25
2.8.4. Year four financial statement ........................................................................................................... 25
2.8.5. Year five financial statement ............................................................................................................ 26
2.9. Depreciation of a car. ........................................................................................................................... 26
Net present worth analysis (NPV) ............................................................................................................... 28
Appendix ..................................................................................................................................................... 29
Cost break down ......................................................................................................................................... 29
Reference .................................................................................................................................................... 33

Table of figures
Table 1. Startup expense .............................................................................................................................. 8
Table 2. Total startup funding ....................................................................................................................... 8
Table 3. Construction industry statics........................................................................................................... 9
Table 4. Infrastructural comparison between GTP1 and GTP 2 ................................................................. 10
Table 5. Personnel salary for 2 years .......................................................................................................... 14
Table 6. Total payment for personnel......................................................................................................... 15
Table 7. Loan payment at the end of each month for 5 year and every year ............................................ 17
Table 8. Time schedule for project one ...................................................................................................... 19
Table 9.profit and VAT analysis for project one.......................................................................................... 19
Table 10.profit at the end of each month................................................................................................... 20
Table 11. Construction cost per meter length and cross-sectional area. ................................................... 21
Table 12.profit analysis for culvert construction ........................................................................................ 21
Table 13. school construction cost ............................................................................................................. 22
Table 14.office building construction cost. ................................................................................................. 22
Table 15.ornamental public garden construction cost ............................................................................... 22
Table 16.Waste facility works cost.............................................................................................................. 23
Table 17. startup funding ........................................................................................................................... 23
Table 18. Year one project one financial statement ................................................................................... 24
Table 19. Year two financial statment ........................................................................................................ 24
Table 20. Year three financial statement.................................................................................................... 25
Table 21. year four financial statment ........................................................................................................ 25
Table 22.year five financial statement........................................................................................................ 26

Chapter one
Market analysis and organizational structures
1.0. Introduction
To work as contractor and participate Construction in Ethiopia; any one needs to have construction license
form Ethiopian ministry of construction; there is grade in different categories; General Contractors (GC 1-
10) to work any civil construction works except water works; Building Contractor (BC 1-10) to work in
construction of buildings; Road Construction (RC 1-10) to participate in road construction; and Special
contractors (SC 1-4) specialized in single area of construction like foundation drilling. For foreign investor
only GC-1, BC-1, RC-1 or SC-1 registration allowed.
Grade 7 general contractor requirements
PICK UP 5 QUINTALS & ABOVE 1
GRADE BUILDING ROAD GENERAL SPECIALIZED TOTAL

CONTRACTOR CONTRACTOR CONTRACTOR CONTRACTOR CONTRACTOR
No % No % No % No % No %
GRADE 987 19.02 22 23.66 2501 30.72 16 11.85 3526 26.01
7
Table 1. Total number of contractors registered in 2006
Source bureau of Addis Ababa trade and industry development 2006
1.1. Products and services

Our company will involve primarily in building construction sectors like schools, houses, clinks and other
small to medium constructions. And also small scales road projects including gravel roads, cobble roads,
culverts and ditches. The company also takes subcontracts from general contractors. Supplying
construction material also is another sector that we involve
1.2. The market

The construction industry in Ethiopia is booming because of increased public investment on development
projects and private investments. Construction is a huge part of Ethiopia’s economic recovery. The building
sector has seen double digit growth, expanding by 37% annually, and is ushering in a new phase of
development for the country. Infrastructure development and housing projects generously cover the
landscape of modern Ethiopia. The rise of the country’s economic standards has gone beyond the
expectation of analyzed country data, surveys, and opinions of many investors worldwide

Addis Ababa, Ethiopia’s capital city, is expanding at a rate of 3.3% each year, creating a housing void that
needs to be filled. In fact, affordable housing is something of a nationwide priority for the Ethiopian
government, although at present much of the housebuilding activity is centered on the capital.
Condominium construction is the main focus and a collection of ongoing developments are scattered
across the capital – all with different price points but each with affordability in mind. The 40/60 program,
where tenants pay for 40% of an apartment’s cost and the government contributing the remaining 60%,
is making solid progress.
More than 1,290 apartment blocks, standing between 7-9 storeys tall have been completed in various
locations throughout Addis Ababa. 38,790 total condominium units are being built in 13 different sites in
the city. 80,000 further apartment blocks are planned under the 40/60 scheme over the next five years.
Outside the affordable housing sector, more high-end developments are planned. China’s Sinomark Real
Estate is developing a 21-tower residential complex in Addis Ababa. The Chinese developers have stated
this will be “the biggest real estate project in Ethiopia”, and will feature swimming pools, a commercial
zone and sports centers. Costs are expected to reach over $194 million.
Huge sums are being invested in infrastructure. Take the Grand Renaissance Dam (GERD) for example.
Ethiopia’s flagship infrastructure project, the $4.8 billion dam is one of the nation’s most expensive
developments.
Despite delays, thanks to political wrangling due to the GERD’s location spanning the Blue Nile which flows
into Egypt and Sudan, construction is well underway. Overseen by Italian firm Salini Impregilo, building
work on the dam is expected to finish in 2017, although the dam itself was stated to be 70% complete in
May 2016. It is estimated that the GERD will generate 6,000 megawatts of electricity.
Five new road-related projects kicked off in June 2016, three focused on building new links while the
remaining two are centered around repair and maintenance. A total of 347 kilometres of new highway will
be put into action after this project is finished at a cost of some $245 million. Local, state-owned
construction companies will be handling the building work. The longest individual stretch of road, Route
Number One, measures 60 kilometers, connecting Adama and Awash in eastern Addis Ababa.
It is not just the residential or infrastructure sectors that are powering Ethiopia’s construction boom.
Commercial construction activity is playing no small role in changing the face of the Ethiopian building
industry.
The headquarters of the Commercial Bank of Ethiopia (CBE) are being constructed at present by the China
State Construction & Engineering Corporation. Once completed, the CBE’s head office will be East Africa’s
tallest building at an impressive 198 meters tall. Foundations have been laid, so construction on the super
structure is now beginning in earnest.
Africa’s largest terminal for fresh produce is also being built at the rapidly expanding Bole International
Airport. The 17,000 square meter facility will enable Ethiopia to offer Africa’s biggest logistics hub to a
variety of international customers, meaning trade levels could rise substantially. The new facility is
expected to handle 600,000 tons of cargo at full capacity.
Source .A MARKET INSIGHTS REPORT BY ITE BUILD & INTERIORS

Infrastructural facilities that have been put in place for decades and a half namely, roads, schools,
health centers and residential houses are part of growth. At the same time they enable the tapping of
the nation's human and material resources. The second Growth and Transformation Plan also
emphasizes achieving economic growth bringing structural change as its main objective. That means of
transforming the agricultural-led economy to the industry led one, which needs shifting agricultural labor
to that of manufacturing and service, enables the nation to obtain demographic dividend. This, in turn,
indicates the vitality of the expansion of urbanization which needs more construction work. Currently,
the construction industry has tremendous impact on the Growth Domestic Production by creating value
chains with other sub sectors such as cement industries, small scale enterprises. Such enterprises are
engaged in metal and wood work production utilized as an input for the building construction and stone
crushing companies.
1.3. Financial Considerations

We expect to be profitable during the first year of operations. Though getting or winning a contract is
difficult. Despite initial large outlays in cash to promote the company, the company's cash account is
expected to remain healthy.
1.4. Mission
The mission of Construction Company is to provide quality service at competitive pricing
Startup expense
START UP
REQUIREMENTS
STARTUP EXPENSE Amount of money(birr)
LEGAL 500.00
STATIONERY ETC. 2000.00
BROCHURES 800.00
CONSULTANCY 0.00
PICKUP CAR (USED) 400000.00
INSURANCE 0.00
RENT (OFFICE) 4000.00
EXPENSED OFFICE EQUIPMENT’S 20000.00
OTHER 0.00
TOTAL START UP EXPENSE 427300.00
Table 1. Startup expense
Startup funding
STARTUP FUNDING MONEY (BIRR)
GOVERNMENT LOAN 400,000.00
CONTRIBUTION FROM MEMBERS(50,000 EACH) 250,000.00
TOTAL SUM 650,000.00
Table 2. Total startup funding

1.5. Safety
The company will be committed to conducting business in a manner that protects the health and safety of
all employees, customers, and persons living in the community where it operates. To accomplish this,
Concrete Installation will ensure that it complies with current Health Administration and Occupational
Health and Safety laws and will maintain its operations, procedures, technologies, and policies accordingly.
Each employee will have the responsibility to fully comply with established safety rules and to perform
work in such a manner to prevent injuries to themselves and others. Concrete Installation is very concerned
about job-site safety and plans to set up a comprehensive safety program.
1.6. Construction Industry statics
Table 3. Construction industry statics
Source central statics agency

1.7. Segmentation of construction industry

Ethiopia’s construction industry by sector can be divided into four sectors.
 Residential Construction
With a large and growing population, Ethiopia is facing a major housing deficit. As such, residential
construction has been targeted as main area of development by the government. The Ministry of Urban
Development, Housing & Construction says it will build 2.45 million houses over the course of the five year
GTP II.
The housing deficit can perhaps be best exemplified by the capital. A 2011 UN report suggested, at that
time, that Addis Ababa needed at least 300,000 new homes to meet demand. 74 However, with the city
expanding at a rate of 3.8% per year, in terms of both wealth and population 75, more and more housing
units are needed.
While investment figures have yet to be released, costs are expected to reach billions. For example,
700,000 condominiums are planned for construction over the next five years. Total costs for these housing
units is estimated at $312 million.
Projections from Ethiopia’s Central Statistics Agency suggest that 22 million people will make up the
country’s urban population by 2020. 79 At this time, the total population is expected to exceed 100 million.
It is only logical that housing demand will rapidly expand during this period.
 Infrastructure Construction
Infrastructure investment accounts for the majority of the government’s construction spending. The East
African reported that 2014 saw $1.5 billion of Ethiopia’s total $8.5 billion government budget being
invested in infrastructure. 58 A wealth of construction projects began under the auspices of the first
Growth and Transformation Plan. The second GTP will improve on the targets laid down in the initial plan.
The table below revels construction activities planned under GTP II:
Table 4. Infrastructural comparison between GTP1 and GTP 2
Construction Review Online noted that roughly $20billion has been set aside by the government for energy
infrastructure construction. GTP II will be the main beneficent of this huge investment level. Much of the
funds will go towards 10-12 new power generation projects.

Updating transport links is another aspect of infrastructure that the Ethiopian government is keen to
explore. A number of collaborative projects have been completed in recent years. These demonstrate the
vast sums Ethiopia is willing to invest in such developments.
 Industrial Construction
The industrial output of Ethiopia currently stands at 15% of the nation’s total GDP. As with many aspects
of the nation’s economic composition, the government is keen to increase this. A range of new construction
projects are thus underway to boost industrial output.
One such project is the building of four new industrial parks in Adama, Mekelle, Kombolcha and Dire Dawa
and bahir dar Construction of these facilities was expected to commence in late May 2016. The building of
these facilities is expected to cost in the region of $1 billion. Each has a construction time of 9 months so
could be fully operational by February 2017. A total of nine new industrial parks are to be built across
Ethiopia.
 Other Construction Activities

While the infrastructure, industrial and residential sectors are seeing the most construction activity, there
is still much being built in other areas. Civic and hotel construction in particular is flourishing in Ethiopia.
A number of new stadiums are to be built across the country. Addis Ababa will see five alone. Dotted
around the city, they will range in size from 40,000 square meters, 70,000 square meters, and 110,000
square meters. Each will have a maximum capacity of 30,000 occupants.
Developing Addis Ababa’s business district is also a top priority. The headquarters of major pan-African
organizations are situated here. Thus, a big effort is being put into developing the city’s business related
areas. For example, the Commercial Bank of Ethiopia recently hired the Chinese State Construction
Engineering Corporation Ltd (CSCEC) to construct a new 42-storey block to house its offices. The $266.5
million development will become the tallest building in African once completed.
(Source. A MARKET INSIGHTS REPORT BY ITE BUILD & INTERIORS)

1.8. Strategy and Implementation Summary

The company plans to rapidly develop marketing alliances with industry leaders and pursue new sales of
its services to residential and commercial builders.
The company will adopt a corporate strategy that is dedicated to improving the performance of activities
on the critical path of its customers' projects. The company will do this by building on its core strengths:
innovative equipment, design engineering expertise, and project and site management, within an
environment of safety excellence.
In our company, customer service is a pro-active partnership, a relationship that ensures a professional,
efficiently run, safe workplace. The company's customer service philosophy starts at the top, is ingrained
into the fabric of the company,
1.9. Promotional campaign

Our company is committed to an extensive promotional campaign. This will be done aggressively and on
a broad scale. To accomplish initial set goals, the company will require an effective promotional campaign
to accomplish the following objectives:
 Attract customers (organization) who will constantly look to build houses, supplies and
subcontracts.
 Attract quality personnel (engineers, Forman and daily labor)
1.10. Marketing Programs

For the first six months of operation, advertising and promotion is budgeted at approximately 1000 birr. A
fixed amount of revenues will go toward the company advertisement campaign. On an ongoing basis,
Concrete Installation feels that it can budget advertising expenses at less than 10% of revenues. Incentives.
As an extra incentive for customers to remember the company name, the company plans to distribute
coffee mugs, T-shirts, pens, and other advertising specialties with its logo.
Brochures. The objective of brochures is to portray the company goals and products as an attractive
functionality. It is also to show customers how to use the latest in technology as it relates to construction
and building services. Concrete Installation will develop three brochures: one to be used to promote sales,
one to use to announce the product in a new market, and the other to recruit sales associates.

1.11. Management Summary
The company's management philosophy will be based on responsibility and mutual respect. The company
will maintain an environment and structure that will encourage productivity and respect for customers
and fellow employees.
The company will be responsible to its employees, the men and women who work with the company
throughout the state. At the company, everyone will be considered as an individual and the company will
respect their dignity and recognize their merit. Employees will be encouraged to have a sense of security
and pride in their jobs. Additionally, employees will be free to make suggestions and complaints. The
company will afford equal opportunity for employment, payment, development, and advancement for
those qualified.
The company employees will be committed to:
 Providing a safe work environment to protect employees, the employees of customers and
subcontractors, and the public.
 Supplying safe products for customers.
 Continuously improving the company's safety program to reduce the risk of accidents and occupational
illness in a changing work environment.
 Encouraging employees to participate in accident prevention programs and take personal
responsibility for their own and their co-workers' health and safety.
 Monitoring workplaces, enforcing safe work practices, and communicating the company's safety
performance to employees and other stakeholders.
 Making safety a value-added service that the company provides to its customers.

1.12. Organizational structure of the company
CEO
office part-time
engineer accountant
site site
enginner engineer
2.13. Personnel Plan

The company’s management is highly experienced and qualified. Mr. Elias Solomon leads the management
team. The table below outlines the companies’ personnel plan for the consecutive 2 years.
8 NO MONTH1 MONT MONT MONT MONT MONT MONT MONT MONT MONT MONT MONT
H2 H3 H4 H5 H6 H7 H8 H9 H 10 H 11 H 12
ADMINISTRATI 1 3500 3500 3500 3500 3500 3500 3500 3500 3500 3500 3500 3500
ON
PART TIME 1 600 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000
ACCOUNTANT
SITE ENGINEER 1 3000 3000 3000 3000 3000 3000 3000 3000 3000 3000 3000 3000
OFFICE 1 2700 2700 2700 2700 2700 2700 2700 2700 2700 2700 2700 2700
ENGINEER
TOTAL PAYROLL 10200 10200 10200 10200 10200 10200 10200 10200 10200 10200 10200 10200
TOTAL PAYROLL FOR 1 122,400
YEAR
Table 5. Personnel salary for 2 years

PERSONNEL PLAN YEAR ONE YEAR TWO

ADMINISTRATION 1 1
OTHER 3 3
TOTAL PEOPLE 4 4
TOTAL PAYROLL 122,400.00 122,400.00
Table 6. Total payment for personnel.

Chapter two
Financial plan
2.0. Loan payment mechanism

But loan payment is annually (yearly basis) so
Table 7. Loan payment at the end of each month for 5 year and every year

2.1. Project one time table and financial consideration.

We assume that we will build G+1 main building and also G+1 service building (year one)

Table 8. Time schedule for project one
MONTH TOTAL COST PROFIT VAT

1 0 0 0
2 487385.9 87033.2 52219.19
3 315667.54 78916.9 47350
4 550369 82555.35 82555.35
5 384732.5 96183.13 57709.8
6 538610 80791.5 80791.5
7 1193682.3 296329.8 179052
499677.8 499677.8
Table 9.profit and VAT analysis for project one

2.2. Graphical analysis of project one
MONTH PROFIT
1 0
2 52219
3 47350
4 82555.35
5 57709.8
6 80791.5
7 179052
Table 10.profit at the end of each month
PROFIT
200000
180000
160000
140000
120000
100000
80000
60000
40000
20000
0
1 2 3 4 5 6 7
Figure 1. Graphical analysis of profit at the end of each month

2.3. Year 2 financial consideration
2.3.1 Project two Culvert construction

Estimated capital costs for culverts are given in the Environment Agency’s Flood Risk Management
Estimating Guide (Environment Agency 2010a). Indicative costs are available for a range of cross-sectional
areas for rectangular or square culverts. The costs available are based on out-turn costs from 37 projects
to install new culverts and include all associated works such as the provision of headwalls, trash and
security screens, and fencing. (Cost values are in euro (€))
Table 11. Construction cost per meter length and cross-sectional area.
We are awarded to construct a culvert of length 10m and cross-sectional area of 6m2 (3m*2m). From the
above table we estimate the cost of culvert will be €19,700.00. (630,400birr)
CONSTRUCTION COST 630,400BIRR

PROFIT 25% 157,600.00birr
INCOME TAX 47,280.00birr
TOTAL COST 888,864.00birr
Table 12.profit analysis for culvert construction

2.4. Year two project two
2.4.1 Elementary school construction

We assumed to build elementary school. The cost of building elementary school per m2 is € 450 around
14,400.00 Ethiopian birr. We build 120m2 of school making the total cost 1.72 million birr
CONSTRUCTION COST 1,720,000BIRR

GROTH PROFIT 25% 430,000.00birr
TOTAL COST 2,408,000birr
Table 13. School construction cost
2.5. Year three
2.5.1. Office building construction

Constructing 2 story Office building of total area of 150 m2 for expansion of the existing office to the
company. The cost for m2 is around 20,000 birr.

TOTAL COST 4,200,000.00birr
Table 14.office building construction cost.
2.6. Year four
2.6.1. Ornamental Public garden construction.

Includes land forming, tree planting and construction of gardens, parks, water pool fountain and green
areas by placement land scape stones.

Table 15.ornamental public garden construction cost

2.6.2. Project two
Waste facility works

Includes installation of public swage and basin sewage handling facilities.

GROSS PROFIT 25% 350,000.00birr
Table 16.Waste facility works cost
2.7. Year five
Construction of two G+1 residential buildings.

GROSS PROFIT 20% 1,046,000.00birr
2.8. Financial statement
2.8.1. Financial statement for Year one

STARTUP FUNDING
BANK LOAN 400,000.00
CONTRIBUTION FROM EACH MEMBER 250,000.00
TOTAL 650,000.00birr
STARTUP EXPENSE 427,300.00
OPERATING COST 172,700.00birr
Table 17. Startup funding

GROSS PROFIT 499,677.00

OPERATING COST 172,700.00
INCOME TAX -140,666.00
OFFICE RENT -48,000.00
STATIONARY 0.00
LOAN PAYMENT -119,329.23
SALARY PAYMENT -122,000.00
OPERATING AND MAINTENANCE COST FOR CAR 22,200.00
DEPRECIATION -16,666.7
FURNITURE AND EQUIPMENT 0.00
RESEARCH AND DEVELOPMENT 0.00
INSURANCE 0.00
ADVERTISING 5000.00
TRAVEL 0.00
UTILITIES 0.00
WEB HOSTING AND DOMAINS 0.00
OTHER 0.00
TOTAL 219,681.77
OPRATING COST 172,700.00
NET BALANCE 47681.77birr
Table 18. Year one project one financial statement
2.8.2. Financial statement for Year two for project two and three
GROSS PROFIT 587,600.00BIRR
STATIONARY 2000.00
INSURANCE 0.00
ADVERTISING 5000.00
TRAVEL 0.00
UTILITIES 0.00
OTHER 0.00
TOTAL(YEAR ONE AND TWO) 336,172.77
OPRATING COST 219681.24
NET BALANCE(YEAR TWO) 116,489.53birr
Table 19. Year two financial statement

2.8.3. Year three financial statement

STATIONARY -5000.00
INSURANCE 0.00
ADVERTISING 5000.00
TRAVEL 0.00
UTILITIES 0.00
OTHER 0.00
TOTAL(YEAR ONE ,THREE AND TWO) 500,843.77
NET BALANCE(YEAR THREE) 164,671.00birr
Table 20. Year three financial statement
2.8.4. Year four financial statement

Table 21. Year four financial statement

STATIONARY -5000.00
INSURANCE 0.00
ADVERTISING 5000.00
TRAVEL 0.00
UTILITIES 0.00
OTHER 0.00
TOTAL(YEAR ONE ,THREE AND TWO) 434343.77

2.8.5. Year five financial statement

GROSS PROFIT 1,046,000.00BIRR
OPERATING COST 434343.77
STATIONARY -5000.00
INSURANCE 0.00
ADVERTISING -5000.00
TRAVEL 0.00
UTILITIES 0.00
OTHER 0.00
TOTAL(YEAR ONE ,THREE AND TWO) 827,214.77
OPRATING COST 434343.77
Table 22.year five financial statement
2.9. Depreciation of a car.

Three methods to compute depreciation
 Straight line method

 Declining balance method
 Sum of years method
Straight line method

𝐶−𝑆
D=
𝑁
400000−200000
D=
12
16,666.7birr

2.10. Net profit computation of five year

year Net profit
1 47,681.77
2 116,489.00
3 164,671.00
4 98,171.00
5 392,871.00
Net profit
6%
14% 1
2
48% 3
20% 4
5
12%
Figure 2.chart representing profit

Net present worth analysis (NPV)

Minimum rate of return (MARR): In business and engineering, the minimum rate of return on a project a
manger or company is willing to accept before starting a project, give its risk and the opportunity cost of
forgoing other projects. We decide to take 10% MARR.
Figure 3. cash flow diagram
NPV = 𝑃𝑐𝑎𝑝𝑖𝑡𝑎𝑙 + 𝑃𝑁. 𝑝𝑟𝑜𝑓𝑖𝑡1 + 𝑃𝑁. 𝑝𝑟𝑜𝑓𝑖𝑡1 + 𝑃𝑁. 𝑝𝑟𝑜𝑓𝑖𝑡2 + 𝑃𝑁. 𝑝𝑟𝑜𝑓𝑖𝑡3 + 𝑃𝑁. 𝑝𝑟𝑜𝑓𝑖𝑡4 +
𝑃𝑁. 𝑝𝑟𝑜𝑓𝑖𝑡5 − 𝑃𝑠𝑡𝑎𝑟𝑡𝑢𝑝 𝑒𝑥𝑝𝑒𝑛𝑠𝑒
NPV = 836,009.14birr

Appendix
Cost break down




Reference
A MARKET INSIGHTS REPORT BY ITE BUILD & INTERIORS
Environment Agency’s Flood Risk Management Estimating Guide (Environment Agency 2010a)
Engineering economics by Leland blank, Anthony tarquin
Minster of urban development and construction (www.mudco.gov.et)

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ADDIS ABABA INSTITUTE OF TECHNOLOGY

SCHOOL OF CIVIL AND ENVIROMENTAL ENGINEERING

GRADE 7 GENERAL CONTRACTOR

DECEMBER 17, 2017

ECONOMICS BUSSINESS PLAN Page 1

ECONOMICS BUSSINESS PLAN Page 2

ECONOMICS BUSSINESS PLAN Page 3

2.6.2. Project two ........................................................................................................................................ 23

ECONOMICS BUSSINESS PLAN Page 4

ECONOMICS BUSSINESS PLAN Page 5

Market analysis and organizational structures

Grade 7 general contractor requirements

PICK UP 5 QUINTALS & ABOVE 1

GRADE BUILDING ROAD GENERAL SPECIALIZED TOTAL

Source bureau of Addis Ababa trade and industry development 2006

1.1. Products and services

1.2. The market

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Source .A MARKET INSIGHTS REPORT BY ITE BUILD & INTERIORS

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1.3. Financial Considerations

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1.6. Construction Industry statics

Table 3. Construction industry statics

Source central statics agency

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1.7. Segmentation of construction industry

Table 4. Infrastructural comparison between GTP1 and GTP 2

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 Other Construction Activities

(Source. A MARKET INSIGHTS REPORT BY ITE BUILD & INTERIORS)

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1.8. Strategy and Implementation Summary

1.9. Promotional campaign

1.10. Marketing Programs

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1.11. Management Summary

The company employees will be committed to:

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1.12. Organizational structure of the company

2.13. Personnel Plan

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PERSONNEL PLAN YEAR ONE YEAR TWO

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2.0. Loan payment mechanism

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But loan payment is annually (yearly basis) so

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2.1. Project one time table and financial consideration.

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Table 8. Time schedule for project one

MONTH TOTAL COST PROFIT VAT

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2.2. Graphical analysis of project one

Table 10.profit at the end of each month

Figure 1. Graphical analysis of profit at the end of each month

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2.3. Year 2 financial consideration

2.3.1 Project two Culvert construction

CONSTRUCTION COST 630,400BIRR

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2.4. Year two project two

2.4.1 Elementary school construction

CONSTRUCTION COST 1,720,000BIRR