Pre- feasibility study

4-Stars Hotel Appartments in karak

2017

4-Stars Hotel Appartments in karak

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 Table of Contents
1. EXECUTIVE SUMMARY ....................................................................................................................... 7
2. KEY HIGHLIGHT OF JORDAN .............................................................................................................. 8
3. MARKET ANALYSIS ........................................................................................................................... 14
Project description .................................................................................................................................................... 14
Project objectives ...................................................................................................................................................... 14
Proposed service ....................................................................................................................................................... 14
Target segments ........................................................................................................................................................ 15
Market size analysis ................................................................................................................................................. 15
1.1 COMPETITORS ANALYSIS .......................................................................................................................................... 16
Prices analysis and pricing policy.......................................................................................................................... 16
Expected market share............................................................................................................................................. 17
Expected revenues analysis .................................................................................................................................... 17
4. TECHNICAL ANALYSIS....................................................................................................................... 18
Required human resources .................................................................................................................................... 18
Location analysis ....................................................................................................................................................... 18
Technical requirments analysis ............................................................................................................................. 19
1.1.1 The land and construction works. ......................................................................................................... 19
Machinery and equipment ..................................................................................................................................... 20
Furniture ..................................................................................................................................................................... 20
Legal requirements and procedures ..................................................................................................................... 20
5. FINANCIAL ANALYSIS ....................................................................................................................... 23
Assumptions............................................................................................................................................................... 24
Capital Expenditures ................................................................................................................................................ 26
Operating Expenses.................................................................................................................................................. 30
General and Administrative Expenses ................................................................................................................. 30
Marketing Expenses ................................................................................................................................................. 31
Human Resources..................................................................................................................................................... 32
Depreciations ............................................................................................................................................................. 35
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 Loan.............................................................................................................................................................................. 36
Income Statement ..................................................................................................................................................... 37
Expected Cashflows Statement ............................................................................................................................. 38
Expected Balance Sheet ........................................................................................................................................... 40
Feasibility Indicators ................................................................................................................................................ 41
Sensitivity Analysis ................................................................................................................................................... 43

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 List of Tables
Table1 main results of the study .......................................................................................................................................7
Table2 Population Distribution according to Age Group:...........................................................................................9
Table 4 number of visitors for 3 monthsin 2016 ......................................................................................................... 16
Table 5 number of hotel apartments in Karak ............................................................................................................. 16
Table 6 expected occupancy rate for 10 years ............................................................................................................. 17
Table 7 expected revenues for 10 years (2018-2027) ............................................................................................... 17
Table 8 required human resources ................................................................................................................................. 18
Table 9 prices of some proposed locations in Karak province ................................................................................. 19
Table11 required land....................................................................................................................................................... 19
Table 11 required construction work ............................................................................................................................. 19
Table 12 required machinary and equipment .............................................................................................................. 20
Table 13 required furniture............................................................................................................................................... 20
Table 14 General Assumptions ........................................................................................................................................ 24
Table 15 Currency Exchange Rates................................................................................................................................. 24
Table 16 working time assumption ................................................................................................................................ 24
Table 17 Annual Growth Rates Assumptions ............................................................................................................... 24
Table 18 Expenses Assumptions...................................................................................................................................... 25
Table 19 Income Tax Assumptions ................................................................................................................................. 25
Table 20 Risk Premuim ...................................................................................................................................................... 25
Table 21 Weighted Average Cost of Capital.................................................................................................................. 26
Table 22 Land Capital Expenditure ................................................................................................................................. 26
Table 23 Construction Work Capital Expenditure....................................................................................................... 27
Table 24 Machinery and equipment Capital Expenditure ........................................................................................ 27
Table 25 Furniture Capital Expenditure ......................................................................................................................... 27
Table 26 Pre-Operating Expenses ................................................................................................................................... 28
Table 27 Working Capital .................................................................................................................................................. 28
Table 28 Expenses Summary ............................................................................................................................................ 28
Table 29 Sources of Funding ............................................................................................................................................ 29
Table 30 Operating Expenses ........................................................................................................................................... 30
Table 31 General and Administrative Expenses .......................................................................................................... 31
Table 32 Marketing Expenses .......................................................................................................................................... 31

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 Table 33 expected number of employees ..................................................................................................................... 32
Table 34 Expected monthly Salaries and Wages (2018-2027) ................................................................................ 33
Table 35 Expected Annual Salaries and Wages (2018-2027) .................................................................................. 34
Table 36 Capex and Depreciation Expenses ................................................................................................................. 35
Table 37 Depreciations and Additions on Construction Works............................................................................... 35
Table 38 Loan Details ......................................................................................................................................................... 36
Table 39 Income Statement .............................................................................................................................................. 37
Table 40 Expected Cashflows ........................................................................................................................................... 38
Table 41 Expected balance sheet..................................................................................................................................... 40
Table 42 Free Net Cash Flows Table ............................................................................................................................... 42
Table 43 Payback Period ................................................................................................................................................... 42
Table 44 Financial Analysis Results ................................................................................................................................ 43
Table 45 Sensitivity Analysis ............................................................................................................................................ 43

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 List of Figures
Figure 1 Population of Jordan..............................................................................................................................................8
Figure 2 Sectors Contibution to Jordan’s Economy ..................................................................................................... 10
Figure 3 Number of vistors during (2010-2015) ......................................................................................................... 15

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 1. Executive Summary

The idea of the project to establish 4-star hotel apartments, to target tourists and vistors to suit the cost of
investment and accommodation prices are suitable for the population. The Project implementation will
help in revitalization of tourism sector in karak province. Moreover, it is a very feasible project, in the
project will provid 24 job opportunities for the residents.
The proposed project will provide many services from accommodation to catering and hospitality services
guests. The hotel apartments will be identical in its establishment and services to the requirements
and specifications of the hotel apartments classified by the Ministry of Tourism. Depending on
the expected market share, the expected annual revenue is 601,692 JD in the first year, rising to 1,124,177
JD at the tenth year, and the expected pay pack period is 5 years with an internal rate of return of 26.40%.
The following table shows the most important results of the study:

Table1 main results of the study

Results
Total investment cost (JD) 1,222,878
IRR (%) %26.40
Payback period (years) 5
Net present value (for 10 years) 141,241,1
Provided job opportunities 2,
Expected total cash inflows (for 10 years) 8,979,358
Total operating expenses (for 10 years) 4,841,597
Total net profit (for 10 years) 2,160,533

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 2. Key Highlight of Jordan

Jordan Hashemite Kingdom area is 89342 Kilometers with a population exceed 9.8 Millions distributed
among 12 Governorates.
Jordan is bounded by Saudi Arabia, Iraq, Syria and Palestine from the South, East, North and west
respectively. Jordan climate is mostly arid desert with rainy season between November to April Months.
Jordan is a free market economy, ranked as the fifth freest economy in the MENA region in the Index of
Economic Freedom. Its free market economy enjoys strong partnerships amongst its neighboring country
as well as Europe and the USA. Jordan is a signatory of several bilateral and multilateral trade agreements
such as (Free Trade Agreement with the US and the EU, a Free Trade Agreement with the EFTA states, an
FTA with Singapore, A member of the Greater Arab Free Trade Agreement (GAFTA) and a signatory of the
Aghadir Agreement. Looking at the range of countries these agreements cover and facilitate trade between,
one is confident to say that Jordan has business gateways and partnerships across the globe.
Population Overview
Based on the latest surveys done by Department of Statistics (DOS) in 2017, total number of population
has reached around 9.814.995 with an increase rate of 2.88% from 2016 year, figure below summarizes
the population distribution among the kingdom governorates.
Figure 1 Population of Jordan

Population of Jordan
96,291
144,082 188,160
Amman
316,629
Balqa 176,080
237,059
Zarqa
549,948
Madaba
4,007,526
Irbid 1,770,158
Mafraq
Jerash
Ajloun 1,364,878
189,192
Karak 491,709

Department of Statistics (DOS), 2015

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 Moreover, and based on the latest survey conducted by (DOS) which related to population nationality
distribution over the governorates, it was found that total Non-Jordanian residents constitutes around 30%
of the total population. Half of these are Syrians (1.3 Million) concentrated mainly in Amman Capital (436
Thousand) then Irbid (343 Thousand), Mafraq at 208 Thousand and Zarqa at 175 Thousand.

Jordan prides itself in its youthful population with 35% of ages below 15 years old and only 4% with ages
above 65 years old. Table below summarizes population distribution of Jordanians according to Age
Group:
Table2 Population Distribution according to Age Group:

Age Group Population % Males Females

0-14 Years %35.04 %19.2 %18.2
15-64 Years %61.02 %30.7 %28.6
More than 65 Years %3.94 %1.6 %1.6
Department of Statistics (DOS), 2015.

Overiew of Jordan Economy

Classified as an upper middle economy by the World Bank and as a country of High Human Development
by the UNDP, Jordan is an important financial power in the Middle East. Its small market witnessed growth
in the last two decades since King Abdullah II accessed the throne. Jordan’s GNI per capita has increased in
the last four years due to the basket of economic reforms that were enacted in the recent decade such as
(the new Income Tax Law, Public Private Partnership Law and Investment Law). These laws aim to
encourage the participation of the private sector in the Kingdom’s economic development and provide an
enabling legislative environment for current and new investment opportunities.

The Jordanian economy is overwhelmingly services oriented and its contribution in the GDP is 68.1%. The
contribution of the industrial sector is 22.4%, the construction sector is 4.2% and the agricultural sector is
2.9%. These contributions are aimed to increase to (27.4%), (5.8%) and (3.4%) respectively and that of the
service sector is due to decrease according to Jordan 2025 vision.

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 Figure 2 Sectors Contibution to Jordan’s Economy

4% 3%

23% Service sector

Indusrty sector
construction sector
Agriculture sector
70%

Jordan’s exports include variety of textiles, potassium, phosphates, fertilizers, vegetables and
pharmaceutical products. While it’s main imports are crude and refined petroleum. Distinguished by its
strategic location, on the crossroads between Asia, Africa and Europe with strong connections to the
Levant and the GCC, Jordan has a regional market of interest that represents US$3.8 trillion market and
compromising 380 million consumers.
Jordan infrastructure ranks comparatively well (38th out of 148 comparable economies), with an extensive
8000 KM road network connecting Jordan domestically and externally The new Queen Alia International
Airport and the Port of Aqaba are the major gateways to the international market. In addition to some
mega projects such as the Red- Dead Sea Canal and the national railway network that will be developed to
position Jordan as a hub for regional commerce.

Jordan banking system is quite sophisticated, resilient and in compliance with international standards,
making it very attractive and trustworthy to investors. This is reflected in the fact that 50% of equity in
licensed banks in Jordan is held by non-Jordanians, and non residents’ deposits in Jordanian banks
witnessed a steady growth of 19.2%.
Moreover, realizing the value of MSMEs to drive economic growth, the government has developed the
national Strategy for the encouragement of entrepreneurship and the development of micro small and

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 medium sized enterprises for 2015-2019. This shows the commitment of the Jordan government to
enhance the private sector development and leveraging the country’s strong human capital.
Jordan prides itself in its youthful population. It’s the country most valuable capital. A tech savvy well
educated and trained workforce attracts a lot of investors to Jordan. More than 20.4% of Jordan’s GDP is
dedicated to the education and capacity building for the labor force, this has resulted in securing a 91%
literacy rate and enabled Jordanians to be among most hired and qualified middle-eastern workforce.
Such solid, diverse and resilient characteristics of the Jordanian economy and investment scene position
Jordan as a competitive investment destination.

Major Economic Indicators

 GDP Growth
The Jordanian economy slowed and reached 2.4 percent in 2015 compared to growth rate of 3.1 in 2014
and similar to MENA growth rates.
The growth also slowed for trade, restaurants and hotels; manufacturing; transport; and electricity and
water. Meanwhile, finance, insurance, and business services advanced at a faster pace.
 Inflation rate
Inflation rate decreased to 0.9 in 2015 after 2% decline in the previous year. Inflation Rate
in Jordan averaged 3.1 percent from 2011 until 2015.

 Unemployment
The unemployment rate in Jordan was recorded at 13 percent in 2015, comparing to 11.9
percent a year earlier. This increase due to the current instability in the labor market
structure as well as high competition from low cost foreign labors especially from Syria.

 External Sector
A number of risks manifested in 2015, the closure of land trade routes with Syria and Iraq and the
deepening instability in the region adversely impacted many external sector indicators such as trade,
tourism and direct Investment.
Moreover, loans disbursements increased by JD 545.3 million, due to the use of the International and Arab
Monetary Funds (IMF and AMF) credit facilities. As an outcome of these developments, the overall balance
of the balance of payments registered a surplus of JD 328.7 million in 2015, compared with a surplus of JD
1,550.7 million in 2014.
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 Further, net international investment position (IIP) witnessed an increase in the Kingdom’s net obligations
to abroad; to reach JD 24,357.5 million, compared to a net obligation of JD 22,578.8 million at the end of
2014 as a result of the increase in the stock of external financial assets and liabilities of all resident
economic sectors to reach JD 18,657.9 million and JD 43,015.5 million; respectively.
External Debt in Jordan increased to 9390.50 JOD Million in 2015 from 8030.10 JOD Million in 2014.
External Debt in Jordan averaged 5433.67 JOD Million from 1988 until 2015, reaching an all time high of
9390.50 JOD Million in 2015 and a record low of 3640.20 JOD Million in 2008.
Investment Climate in Jordan
Investment in Jordan is considered as one of the vital sources to boost the economy considering that
Jordan's economy is among the smallest in the Middle East, with insufficient supplies of water, oil, and
other natural resources, underlying the government's heavy reliance on foreign assistance.
The country’s location, supported by myriad free trade agreements (FTAs) offering access to 1.5bn
consumers, enables the kingdom to be a strategic trade route to many of its neighboring countries and
regions.
Jordan aspires to create a competitive investment destination capitalizing on its many advantages
mentioned above. The government focused its efforts to implement significant advances in structural and
legal reform. These efforts are represented in the new Investment Law of 2014, the tax law, in addition to
other endeavors related to providing greater access to credit for MSMEs, and by providing greater
investment incentives to specific priority sectors identified by the new Investment law and the Jordan 2025
vision.
furthermore, in it endeavor to enhance the business environment, several geographically industrial states
were created across the kingdom. These range in type to include (industrial estates, free zones and special
economic zones). Under the new Investment Law, these zones are given a number of incentives that
include a tax rate of 0% on exports, sales tax, import duties, social service tax, dividends tax and a 5%
income tax from all economic and manufacturing activities undertaken in the development zones. As for
the investments in Free Zones, they enjoy Exemptions from customs duties, income tax exemptions and
exemptions from land and building taxes among others. Both development and free zones also enjoy
facilitations regarding visa and residency permits for investors and workers in addition to Repatriation of
capital and profits in a convertible currency. Such estates have succeeded in attracting relatively large
amounts of FDI to Jordan.

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 Key National Invesment Priorities:

Jordan Investment commission worked on taking a leading role in the application of government policies
to promote and attract domestic and foreign investments and create an investment environment that
stimulates economic performance through investment promotion strategy launched in 2016
Jordan investment commission aims to:

 Regulating the special provisions governing Development Zones and Free Zones in the Kingdom
and developing them placing them in service of the national economy as well as monitoring their
functioning.
 Developing plan and programs to stimulate domestic and foreign investments.
 Establishing trade centers and organizing exhibitions as well as opening markets and organizing
trade missions in order to promote national products, in addition to marketing and development
of national exports and encouraging investment.
 Taking appropriate decisions related to private or public institutions to improve Investors’
confidence in Jordan’s investment environment.

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 3. Market Analysis

Project description
The Idea of the proposed project is to build up 4-stars hotel apartments, to target tourists and visitors to
visit the city in addition to the local residents. The suggested prices are suitable and competitor. The
implementation of this project will help revitalize the tourism sector in Karak.

Project objectives
The purpose of this study is to determine the feasibility of establishing four-star hotel apartments in Karak
city. The objectives of this study are as follows:

 Increasing the level of tourism and investment sectors in the province.

 Increase the level of comfort and entertainment for foreign tourists and citizens.
 Encourage the investment in the tourism sector and achieving high profit for the owner.
 Providing job opportunities for the people of the region and to reduce unemployment and improve
the social living standard.

Proposed service
The proposed project will provide hotel services such as accommodation catering and entertainment for
guestd. It is a 4-star hotel apartment, matching the construction and services to the requirements and
specifications of the hotel apartments classified by the Ministry of Tourism

The following points are the project facilities and provided services:

 Restaurant.
 Garden.
 Wake up service.
 Transportation means
 Reception services.
 Clean and room service.
 Parking.

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 Target segments
The Targeted segments are the residents, visitors, and foreign tourists. Since the prices are suitable for
citizens. Karak lacks places for accomadtion and other services, which makes it difficult for tourists to
spend one night in karak.

Market size analysis

The number of population in karak is 316,629, in 2010 the number of forgien tourists were 171,671 and
14,599 of jordanian visitors from the kingdom. While in 2015 the number of forgien tourists were 12,633
tourists, while the number of Jordanian visitors from different provinces were 3,900 visitors. Due to the
recent increase of the population in karak province, the demand on real estate and buildings increased too
which led to the lack of hotel apartments in the city, resulting in a decrease in the number of tourists and
vistors decreased.

The following figure shows the number of visitors during (2010-2015)

Figure 3 Number of vistors during (2010-2015)

200000
180000
160000
140000
120000 ‫عدد الزوار‬
Number
100000 of vistors
80000
60000
40000
20000
0
2015 2014 2013 2012 2011 2010
‫السنة‬
Year
Source: Ministry of Tourism and Antiquities

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 The following table shows the number of vistors to the province of Karak for 3 months in 2016, that
wasissued by Ministry of Tourism and Antiquities Statistics:

Table 3 number of visitors for 3 monthsin 2016

Month Forgien jordanian Total

January 300 450 750
February 750 150 900
March 600 150 750
Total 1650 750 2400

1.1 Competitors analysis

Depending on the data of the Ministry of Tourism for hotels, there are no luxury hotel apartments with
high quality services, and with 4-stars rate.

The following tables shows the details of hotel apartments in karak province.

Table 4 number of hotel apartments in Karak

Karak Hotels suite Rooms Beds

2-Stars 2 0 34 76
1-Stars 1 0 12 24
Unclassified hotels 3 0 27 59
Adjacent apartments 1 1 11 18
Total 7 1 84 177
Source: Ministry of Tourism and Antiquities

Prices analysis and pricing policy

The 4-stars hotel apartments project is a unique project, that will make a great leap in the tourism sectorof
the region. As for the price, the expected price is 55 JD per night.

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 Expected market share
Due to lack of competitors in the market, the market share is expected to be high. At the beginning the expected market share will be 35% amounting
to 45% within two years. The hotel apartments will contain 32 rooms, in addition to a restaurant with a capacity of 150 people.

Table 5 expected occupancy rate for 10 years

Occupancy rate 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027
Rooms occupancy rate 35% 35% 45% 45% 45% 45% 45% 45% 45% 45%
Restaurant occupancy rate 60% 60% 65% 65% 65% 65% 65% 65% 70% 70%

Expected revenues analysis

The following table shows the expected revenues for 10 years during (2018-2027)

Table 6 expected revenues for 10 years (2018-2027)

Prices assumtions 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027
Room price/night 55 57 58 60 62 64 66 68 70 72
Restaurant/meal 15 15 16 16 17 17 18 18 19 20
Romms revenues 192192 230951 271862 315020 324471 334205 344231 354558 365195 376150
Resturanr revenues 409500 421785 521326 536966 599165 617140 635654 654723 726239 748026

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 4. Technical Analysis

Required human resources

The following table shows the needed human resources:

Table 7 required human resources

Job title Number

Indirect employees
General manager 1
Accountant 1
Marketing officer 1
Guard 2
Restaurant manager 1
Total indirect employees 6
Direct employees
Receptionist 2
Chef 1
Assistant Cook 3
Waiter 8
Cleaner ,
Total direct emplyees 18
Total 24

Location analysis
The project is suggested to be build on a land with beautiful view, close to the city center and
equipped with all services from markets, hospital and other services.

The following table shows the prices of some suggested locarions for the project that can be used
for investments:

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 Table 8 prices of some proposed locations in Karak province

Location Price/m2 classification

Mutah 111-13.5 commercial
Al -Hussayniyah 33-21 commercial
Al – Mazar al janoubi 51-5 commercial
AL yarot 31-11 commercial
Al - rieh 35-1 commercial
AL - qasr 35-31 commercial
Mutah 31-11 residential
Al – Mazar al janoubi 25-3 residential

Technical requirments analysis

1.1.1 The land and construction works.

The project will be established on a land with an area of 2,000 m2. The following table shows the
required land.

Table9 required land

The land Area (m2)

2
Required land ‫م‬
24111

The following table shows required construction works for the project.

Table 10 required construction work

Construction works Area (m2)

Building works 14511
Design 14511
Digging 14511
paving 14111
Soil testing -
Other works -

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 Machinery and equipment
The following table shows the required machinery and equipment:

Table 11 required machinary and equipment

Required machinery and equipment Qty

Fire fighting equipment 1
Elevator 1
Aircondtion 1
TV 1
Washers 1
Steam iron 1

Furniture
The project requires the following furniture:

Table 12 required furniture

Required furniture Qty

Beds 1,
TV 32
Small refrigerator 32
Room furniture 32

Legal requirements and procedures

The first step:

1. Filling out the application form.
2. Filling out the self- assessment form.
3. Attachment of the following documents and requirements.

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  Ownership certificate or a certified lease contract with a new ownership scheme.
 New regulatory site scheme.
 New Land scheme issued by the Department of Land and Survey
 Provide preliminary architectural schemes for the project.
 A recent commercial register showing ID number of the companyt and of its objectives
the establishment of a hotel
 If the project is within the Dead Sea area, the approval of the Jordan Valley Authority is
required to establish the project.
 Note: For the purposes of obtaining customs and tax exemptions for the project,
applications are submitted through the Investment Promotion Corporation
Investment Window
The second step:
Presentation of the request to the competent directorate for the purpose of obtaining the
preliminary approval.
The third step:
Issuing the conditional preliminary approval for the establishment of the project according to
the temporary classification category declared in accordance with the self-assessment
form prepared by the applicant for a maximum period of two years, subject to extension
for a similar period.
The fourth step:
Informing the owners of the establishment of the initial conditional approval granted to them.
The fifth step:
After implementing the project and providing the conditions and requirements below and
furnishing it with fixed assets, the relevant parties shall call the Ministry to complete the
licensing and classification procedures:
1 A copy of the architectural drawings according to the port duly certified.
2 Permission issued by the regulatory body in accordance with the license granted by
the initial approval.
3 The Civil Defense agrees to operate the facility and receive the guests.
4 A commercial register showing the national number of the establishment and its
objectives to establish a hotel / modern hotle.

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 5 A trade name or trademark in accordance with the granted / recent license
The sixth step:
The staff of the competent Directorate will visit the project to ensure the completion
of the furnishing and processing for the purposes of reception of guests and prepare
the necessary technical report.
The seventh step:
The competent directorate shall issue an approval for practicing the profession for the
purpose of receiving the guests valid for a maximum period of six months from the
date of issue.

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 5. Financial Analysis

The Financial Part illustrates all the assumptions which were used when we have developed the
study including project expenses related to capital expenditures, operating expenses (Fixed and
Variable costs) followed by illustrating project revenues.

Assumptions

Calculation Assumptions:

 The weighted average cost of capital used in the study is 12.26% as it was calculated
considering risk free and debt Interest rates as well as Market risk premiums to consider
alternative opportunity costs for investor.
 Icome tax on the net project income is 5 % during the life time of the project.
 Project working capital has been estimated and added to project cash outflows at the
beginning of the project and annual increase in working capital has been also estimated
and added to the operating expenses then net working capital has been added to total
cash inflows at the end of project lifetime.

The time span for the financial study is 10 years starting from 2018, where annual increase
rates have been estimated as per the tables below:

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 Assumptions

Table 13 General Assumptions

General Information
All Financial Numbers (Currency) Jordan Dinars
Financial Study Time Span (Years) 11
0 Operating Year
Expected Project First 2118
Last Year in the Financial Study 212,

Table 14 Currency Exchange Rates

Exchange Rates Jordan Dinars
American Dollar 1.,18
Euro 1.,11

Table 15 working time assumption

Working time
Number of weeks in the year 52
Number of working days in the week ,
Number of days in the year 31,
Daily working hours 8

Table 16 Annual Growth Rates Assumptions

Annual Growth Rates Average

Annual Population Growth Rate 2.20%
Annual Sales Price Increase Rate 3.00%
Annual Expenses Increase Rate 3.00%
Annual Increase Rate in Employees Salaries 4.1%
)1( and (2) Source: Inflation Rates, Central Bank of Jordan
(3) Source: Social Security

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 Table 17 Expenses Assumptions

Expenses Assumptions
Raw Materials and Packaging from Total Revenues 20%
Utilities Expenses from Total Revenues 35%
Maintenance Expenses from Total Revenues 5.0%
Depreciation Expenses from Total Revenues 1%
Insurance Expenses from Total Assets Value 0.5%
Marketing Expenses from Total Revenues 0.75%

Table 18 Income Tax Assumptions

Income Tax Assumptions Value

)1( Average Income Tax in Jordan 20%
)2( Income Tax Deduction 80%
Income Tax after Deduction 5%
)3( Compulsary Reserve Percentage 10%
Other Assumptions value
)1( Annual Monthly Salaries have been calculated after multiplying monthly salaries by: 16

Table 19 Risk Premuim

Risk Premuim
)1( Risk Free Rate of Return 6.50%
)2( Return to Debt Maturity 9.48%
)3( Market Risk Premuim 10.12%
Income Tax Rate 5.00%
),( Beta 0.89
Growth Rate 4.00%
)1( Source :Damodaran's Country Default Spreads and Risk Premiums Report
)2( Source :Central Bank of Jordan
)3( Source :Damodaran's Country Default Spreads and Risk Premiums Report
),( Source :Damodoran Beta By Sector, , pages.stern.nyu.edu

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 Table 20 Weighted Average Cost of Capital

Weighted Average Cost of Capital

Average Return on Risk Free Investment %1.51
Return to Debt Maturity %8.,8
Market Risk Premuim %11.12
Income Tax Rate %5
Bets 0.89
Equity ,884151
Loans Value ,884151
Loans
Cost of Borrowing before Tax %8.,8
Cost of Borrowing After Tax %8.11
Loans Value ,884151
Loans Percentage %51
Equity
Cost of Equity %15.5
Equity Value ,884151
Equety Percentage %51
Gross
Project Value 8,84313
Weighted Average Cost of Capital %12.21

Capital Expenditures
The estimated cost of the project is 1,222,878 JD and it covers land costs, construction works,
machinery and equipment, furniture, pre-operating expenses and working capital. The following
tables summarize the details of these expenses:

Table 21 Land Capital Expenditure

Land )Jordan Dinar/Meters Square( Cost Area (M2) Cost(JD)

Required Land 120 2,000 240,000
Total Cost 240,000

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 Table 22 Construction Work Capital Expenditure

Description Cost (JOD per Squared Area / Gross Cost

Meters) (Squared Meters) Jordan Dinar
Construction Works 375 1,500 562,500
Design and blueprints 7 1,500 10,500
Digging 5 1,500 7,500
paving 12 1,000 12,000
Soil test 200 1 200
Other Works 10 7,000 70,000
Total 662,700

Table 23 Machinery and equipment Capital Expenditure

Machinery and equipment Number Unit cost (JD) Total cost

(JD)
Fire fighting equipment 1 500 500
Elevator 1 15,000 15,000
Aircondtion 1 20,000 20,000
TV 1 250 250
Washers 1 3,000 3,000
Steam iron 1 75 75
Total 38,825

Table 24 Furniture Capital Expenditure

Furniture Number Unit cost (JD) Total cost (JD)

Beds 64 350 22,400
TV 32 200 6,400
Small refrigerator 32 100 3,200
Room furniture 32 500 16,000
Total 48,000

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 Table 25 Pre-Operating Expenses

Pre-operating expenses Estimaited cost (JD)

Governmental fees 1,500
Transportation 1,500
Marketing 1,000
Training 2,500
Total cost 6,500

The initial working capital reflects the project's amounts needed to cover all the expenses during
operation until the project starts generating income, the following table shows the components
of the initial working capital:

Table 26 Working Capital

Working Capital No. of % Estimated Cost (JD)

Months
Operating expenses 3 25% 87,379
General and administrative expenses 3 25% 3,166
Marketing expenses 3 25% 6,017
Indirect Salaries 3 25% 19,120
Total 115,112

Table 27 Expenses Summary

Capital expenditure summary Cost (JD) Contingency Cost (JD) %

Land 240,000 10% 264,000 21.59%
Construction works 662,700 10% 728,970 59.61%
Machinery &Equipment 38,825 10% 42,708 3.49%
Furniture 48,000 10% 52,800 4.32%
Pre-Operating Expenses 6,500 10% 7,150 0.58%
Working capital 115,682 10% 127,251 10.41%
Total (JD) 1,111,707 1,222,878 100%

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 Sources of Funding
The financing structure of the project consists of loans and Equity. The investment cost of this
project is estimated at (1,222,878) JD, where 60% of the project will be financed through loans
(733,727) JD, and the remaining (40%) through (Equity) with (489,151) JD. The following table
summarizes the general structure of the required financing:

Table 28 Sources of Funding

Funding Sources Amount Percentage

Equity 489,151 40.00%
)SelfLoans
Financing ( 733,727 60.00%
Total 1,222,878 100%
Use of Fund Amount Percentage
Capital Expenditures 1,088,478 89.01%
Pre-Operating Expenses 7,150 0.58%
Working Capital 127,251 10.41%
Total 1,222,878 100%

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 Operating Expenses
The following table sumarizes the expected operating expenses for the proposed project (2018-2027):

Table 29 Operating Expenses

Description 2111 2119 2121 2121 2122 2122 2124 2125 2121 2127
Room operation expenses from revenues 384,38 ,14181 5,43,2 13411, 1,488, 1148,1 1848,1 ,14812 ,34138 ,54231
Restaurant expenses from revenues 1,34325 1,,4125 1824,1, 18,4838 2184,18 2154888 2224,,8 2284153 25,418, 2114818
Service benefit expenses from revenues 314185 32413, 384158 ,24588 ,14182 ,,451, ,8488, 514,1, 5,45,2 514218
Maintenance from Revenues 1411, 1452, ,4832 84521 84231 84513 84,88 114183 11481, 1142,2
Disposables from Revenues 34118 3421, 34811 ,4211 ,4118 ,4,5, ,4888 541,1 54,5, 54121
Direct Salaries 11,4111 1224,22 12,4,,1 1324111 1384115 1,34,18 1,84112 1554,88 1124181 1184831
Others 1141,, 114812 1,4,21 154311 114,32 1,423, 1,4,51 184283 184818 214511
Total 349,517 370,476 430,254 454,303 489,475 505,679 522,430 539,750 580,260 599,452

General and Administrative Expenses

The following table sumarizes the expected general and administrative expenses for the proposed project (2018-2027):

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 Table 30 General and Administrative Expenses

Description 2011 2119 2121 2121 2122 2122 2124 2125 2121 2127
Telecom 14211 14231 142,3 14311 14351 14381 14,33 14,,1 14521 14511
Hospitality 111 118 13, 151 1,5 181 ,11 ,38 ,11 ,83
Staionary and Printing ,51 ,1, ,,, ,82 511 522 53, 553 5,1 58,
Transportation 111 118 13, 151 1,5 181 ,11 ,38 ,11 ,83
Training 511 515 531 5,1 513 581 58, 115 133 152
Insurance 8411, 84,18 84111 84821 84188 84,1, 84,,8 1141,1 1143,1 114152
Miscellaneous 14151 14181 14221 14258 14281 14335 143,5 14,11 14,58 14512
Total 12,665 13,045 13,436 13,839 14,255 14,682 15,123 15,576 16,044 16,525

Marketing Expenses

Table 31 Marketing Expenses

Description 2111 2119 2121 2121 2122 2122 2124 2125 2121 2122
Marketing Expenses 6,017 6,527 7,932 8,520 9,236 9,513 9,799 10,093 10,914 11,242

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 Human Resources
The total annual salaries and monthly wages has been estimated on 16 months for the purpose of considering annual increments on salaries as well as payments
related to social security and health insurance, etc.
The following table summerizes the expected annual salaries and wages, considering annual increment on salaries as per the income statement:
Table 32 expected number of employees

Job title 2111 2119 2121 2121 2122 2122 2124 2125 2121 2127
Indirect employees
General manager 1 1 1 1 1 1 1 1 1 1
Accountant 1 1 1 1 1 1 1 1 1 1
Marketing officer 1 1 1 1 1 1 1 1 1 1
Guard 2 2 2 2 2 2 2 2 2 2
Restaurant manager 1 1 1 1 1 1 1 1 1 1
Total number of indirect employees 6 6 6 6 6 6 6 6 6 6
direct employees
Receptionist 2 2 2 2 2 2 2 2 2 2
Chef 1 1 1 1 1 1 1 1 1 1
Assistant Cook 3 3 3 3 3 3 3 3 3 3
Waiter 8 8 8 8 8 8 8 8 8 8
Cleaner , , , , , , , , , ,
Total number of direct employees 18 18 18 18 18 18 18 18 18 18
Grand total 24 24 24 24 24 24 24 24 24 24

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 Table 33 Expected monthly Salaries and Wages (2018-2027)

Job title 2111 2119 2121 2121 2122 2122 2124 2125 2121 2127
Indirect employees
General manager 24111 24182 2411, 24251 243,8 24,,5 245,5 24151 24,58 248,1
Accountant 111 125 151 1,, ,15 ,3, ,1, ,85 82, 811
Marketing officer 111 125 151 1,, ,15 ,3, ,1, ,85 82, 811
Guard 181 188 211 21, 223 232 2,2 252 212 2,3
Restaurant manager 14211 142,8 14311 1435, 14,18 14,1, 1452, 14581 14155 14,23
direct employees
Receptionist 311 312 325 338 352 31, 382 38, ,1, ,31
Chef 14351 14,15 14,13 14523 14585 14151 14,18 14,88 14812 14838
Assistant Cook 111 125 151 1,, ,15 ,3, ,1, ,85 82, 811
Waiter 351 31, 3,8 385 ,11 ,28 ,,5 ,1, ,83 512
Cleaner 211 218 21, 221 235 2,5 255 215 2,1 28,

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 Table 34 Expected Annual Salaries and Wages (2018-2027)

Job title 2111 2119 2121 2121 2122 2122 2124 2125 2121 2127
Indirect employees
General manager 324111 334312 3,41,8 314111 3,4581 384121 ,14,2, ,2438, ,,4132 ,548,2
Accountant 84111 8488, 114,13 114831 1142,, 114,31 12421, 124,18 1342,1 134,82
Marketing officer 84111 8488, 114,13 114831 1142,, 114,31 12421, 124,18 1342,1 134,82
Guard 14181 14328 14588 14858 ,41,1 ,4,33 ,4,38 84155 84385 84,28
Restaurant manager 184211 18488, 21481, 214111 2245,8 234,,2 2,4,35 254,31 214,,8 2,4515
Total indirect salaries 76,480 79,616 82,880 86,278 89,815 93,498 97,331 101,322 105,476 109,801
direct employeess
Receptionist 84111 8488, 114,13 114831 1142,, 114,31 12421, 124,18 1342,1 134,82
Chef 214111 224,81 234,18 2,431, 254311 214,11 2,4,88 284111 284,88 314111
Assistant Cook 284811 284881 314211 324,81 334822 354218 314152 384155 384,18 ,143,,
Waiter ,,4811 ,1413, ,845,8 514538 524112 5,4,18 5,411, 584352 114,85 1,4318
Cleaner 124811 134325 1348,1 1,4,,1 154132 1541,8 114281 114858 1,4153 1843,,
Total direct salaries 117,600 122,422 127,441 132,666 138,105 143,768 149,662 155,798 162,186 168,836
Grand total 194,111 212,122 211,221 211,944 222,921 222,215 241,992 252,121 212,112 221,121

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 Depreciations
The following tables illustrate cost of Capex and Depreciaition rates:

Table 35 Capex and Depreciation Expenses

Capex Cost and Annual Depreciation Rates Cost (JOD) Depreciation Rate Annual Additions Percentage
Land 21,4111 %1.1 %1.1
Construction Works ,2848,1 %5.1 %1.1
Machinaries ,24,18 %11.1 %2.1
Furniture 524811 %11.1 %5.1
1,111,421

Table 36 Depreciations and Additions on Construction Works

Capex, Annual Additions and 2111 2119 2121 2121 2122 2122 2124 2125 2121 2122
Depreciaitions
Total Fixed Assets 141884,,8 1418148,2 141854115 141884,1, 1411343,, 1411,4511 141114823 141114322 141214118 141254821
Total Depreciation Expenses ,54888 ,143,8 ,14,13 ,,4183 ,,4,88 ,,4813 ,8433, ,84,8, ,84253 ,84,,3
Total Accumulated Depreciation ,54888 8243,8 1384111 181415, 23341,3 28145,1 32848,8 3,84113 ,2,4811 ,,,4111
Total Additions 1 34,8, 341,3 34,88 34813 ,4133 ,4312 ,4511 ,4181 ,4811
Total Net Book Values 141,24,,8 888412, 851455, 8134211 8184,3, 8254815 ,8148,3 ,3,4158 1834112 1,84211

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 Loan

The table below summarizes all details related to the loan such as annual installments and payment methods for the remaining amount of the loan for each year of
the project.

Table 37 Loan Details

Loan Value 733,727

Annual Interst Rate 9.48%
Loans Period 5
Grace Period 0
Loan Starts at year: 2018
Annual Payment 190,991
Number of Payments 5
Year Annual Payment Interest Capital Loan Remaining Value
2118 733,727
2118 190,991 69,557 121,434 612,293
2121 190,991 58,045 132,945 479,348
2121 190,991 45,442 145,549 333,799
2122 190,991 31,644 159,347 174,453
2123 190,991 16,538 174,453 0

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 Income Statement

Table 38 Income Statement

Description 2111 2119 2121 2121 2122 2122 2124 2125 2121 2122
Revenues
Sales Revenues 1114182 1524,31 ,834188 8514881 8234135 85143,, 8,84885 141184281 141814,3, 1412,41,,
Gross Operating Revenues 1114182 1524,31 ,834188 8514881 8234135 85143,, 8,84885 141184281 141814,3, 1412,41,,
Operating Expenses )3,8451,( )3,14,,1( ),31425,( ),5,4313( ),884,,5( )51541,8( )5224,31( )5384,51( )5814211( )5884,52(
Gross Operating Profit 25241,5 2824258 312483, 38,4183 ,3,4111 ,,54111 ,5,4,5, ,184532 51141,, 52,4,25
Gross Profit Percentage %,2 %,3 %,1 %,, %,, %,, %,, %,, %,, %,,
Salaries and Benefits (Indirect ),14,81( ),84111( )824881( )8142,8( )884815( )834,88( )8,4331( )1114322( )1154,,1( )1184811(
General
Staff) and Administraive )124115( )1341,5( )134,31( )134838( )1,4255( )1,4182( )154123( )1545,1( )1141,,( )114525(
Markeing
Expenses Expenses )1411,( )1452,( ),4832( )84521( )84231( )84513( )84,88( )114183( )11481,( )1142,2(
Pre-Operating Expenses ),4151(
Gross Indirect Expenses )1124312( )884188( )11,42,8( )118413,( )1134311( )11,4183( )1224253( )1214881( )1324,3,( )13,451,(
Income before Interest, 1,84813 18341,1 2584181 28841,1 321485, 32,48,2 3354212 3,245,1 3,84,,1 38,4158
Fixed Assets Depreciations
Depreciation and Tax ),54888( ),143,8( ),14,13( ),,4183( ),,4,88( ),,4813( ),8433,( ),84,8,( ),84253( ),84,,3(
Income before Tax and Interests 113481, 1314,23 21148,3 2,14853 2,34315 28141,1 2814818 2834,5, 3284,8, 33,4,1,
Bank Interests )18455,( )5841,5( ),54,,2( )3141,,( )114538( )1( )1( )1( )1( )1(
Income Before Tax 3,431, ,841,, 1114531 2114318 251482, 28141,1 2814818 2834,5, 3284,8, 33,4,1,
Income Tax )14,15( )3483,( )8432,( )114515( )1248,1( )1,4113( )1,43,3( )1,4188( )114,,,( )1148,1(

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 Description 2111 2119 2121 2121 2122 2122 2124 2125 2121 2122
Net Profit 324581 ,,4,,3 158421, 1884,83 2,34885 2114111 2,2452, 2,84118 3134112 32145,,
Net Profit Percentage %5 %11 %21 %23 %21 %28 %28 %28 %28 %28
Compulsory Reserves )34258( ),4,,,( )154821( )1848,8( )2,4388( )21411,( )2,4252( )2,481,( )314311( )32415,(
Retained Earnings 284332 814111 2384885 ,184,88 1384385 8,,48,5 14123411, 143,,42,8 141554881 148,,4,81

Expected Cashflows Statement

The table belwo summarizes project cashflows statement, where net cash flows are positive during all years as below:
Table 39 Expected Cashflows

2111 2119 2121 2121 2122 2122 2124 2125 2121 2122
Cash Inflows from Operating Activities
Net Profit 324581 ,,4,,3 158421, 1884,83 2,34885 2114111 2,2452, 2,84118 3134112 32145,,
Bank Interests 18455, 5841,5 ,54,,2 3141,, 114538 1 1 1 1 1
Depreciation ,54888 ,143,8 ,14,13 ,,4183 ,,4,88 ,,4813 ,8433, ,84,8, ,84253 ,84,,3
Total Operating Cashflows before
1,841,8 1,8413, 2514358 2,84531 3184113 3134818 3214858 32,4853 3124211 3,1428,
Additions to Working Capital
Inventory (Increase/Decrease) )34213( )1,1( )182( ),18( )158( )112( )11,( )1,2( )1,,( )183(
Accounts Receviables
1 1 1 1 1 1 1 1 1 1
(Increase/Decrease)

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 2111 2119 2121 2121 2122 2122 2124 2125 2121 2122
Accounts Paybales (Increase/Decrease) 5148,1 24211 84588 245,1 545,, 243,1 24,58 245,2 1438, 24833
Working Capital (Increase/Decrease) ,841,3 14555 ,481, 14851 54388 2421, 24281 243,1 14221 24151
Net Cashflows from Operating
1814,81 1814183 25842,, 2814381 3134,12 3114183 32341,8 3314223 3184,85 3,24838
Activities
Cashflows from Investments Activities
Fixed Assets (Procurement) )141884,,8( )34,8,( )341,3( )34,88( )34813( ),4133( ),4312( ),4511( ),4181( ),4811(
Net Cashflows from Investments
)141884,,8( )34,8,( )341,3( )34,88( )34813( ),4133( ),4312( ),4511( ),4181( ),4811(
Activities
Cashflows from Financing Activities
Capital ,884151
Loan Amortization )1214,3,( )13248,5( )1,545,8( )15843,,( )1,,4,53( 1 1 1 1 1
Bank Interest Rate )18455,( )5841,5( ),54,,2( )3141,,( )114538( )1( )1( )1( )1( )1(
Loans ,334,2, 1 1 1 1 1 1 1 1 1
Net Cashflows from Financing Activities 14131488, )1814881( )1814881( )1814881( )1814881( 1 1 1 1 1
Net (Increase/Decrease) in Cash 1,14211 )134,82( 1341,3 854581 1184,,8 31241,8 3184831 3254,23 3134,81 318413,
Cashflows at the Beginning of Period 1 1,14211 1214,18 1814151 2,541,2 38,4181 ,1141,1 1412,48,1 143514188 14,1,4,88
Cashflows at the End of Period 1,14211 1214,18 1814151 2,541,2 38,4181 ,1141,1 1412,48,1 143514188 14,1,4,88 241824525

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 Expected Balance Sheet
The balance sheet is one of the main statements which the project depends on, as it reflects the financial position of the entity and is usually estimated on the last
day of the financial year.
All financial information and analysis of the project shall be the estimated for the years (2018-2027) as shown in the table below:

Table 40 Expected balance sheet

Description 2111 2119 2121 2121 2122 2122 2124 2125 2121 2122
Assets
Current Assets
Cash 140,201 126,409 190,051 275,642 394,090 706,140 1,024,976 1,350,699 1,714,489 2,082,525
Inventory 3,203 3,849 4,531 5,250 5,408 5,570 5,737 5,909 6,087 6,269
Total current Assets 143,404 130,258 194,582 280,892 399,498 711,710 1,030,713 1,356,608 1,720,575 2,088,795
Non Current Assets
Fixed Assets (net) 1,042,478 999,624 956,554 913,260 869,734 825,965 781,943 737,659 693,102 648,260
Total Non Current Assets 1,042,478 999,624 956,554 913,260 869,734 825,965 781,943 737,659 693,102 648,260
Total Assets 1,185,882 1,129,882 1,151,136 1,194,152 1,269,232 1,537,674 1,812,656 2,094,268 2,413,677 2,737,054
Liabilities
Current Liabilities
Paybles 51,846 54,048 62,647 65,217 70,764 73,140 75,597 78,140 84,537 87,370
Remaining amount of Loan 132,945 145,549 159,347 174,453 (0) (0) (0) (0) (0) 0

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 Description 2111 2119 2121 2121 2122 2122 2124 2125 2121 2122
Total current Liabilities 184,792 199,596 221,994 239,669 70,764 73,140 75,597 78,140 84,537 87,370
Non Current Liabilities
Long Terms Loans 479,348 333,799 174,453 0 0 0 0 0 0 0
Total Long Term Liabilities 479,348 333,799 174,453 0 0 0 0 0 0 0
Total Liabilities 664,140 533,396 396,446 239,669 70,764 73,140 75,597 78,140 84,537 87,370
Owners Equity
Shareholders Contributions 489,151 489,151 489,151 489,151 489,151 489,151 489,151 489,151 489,151 489,151
Statutory Reseve 3,259 10,733 26,554 46,533 70,932 97,538 124,791 152,698 183,999 216,053
Retained Profits 29,332 96,601 238,985 418,799 638,385 877,845 1,123,117 1,374,279 1,655,990 1,944,480
Total Equity 521,742 596,486 754,690 954,483 1,198,468 1,464,535 1,737,059 2,016,128 2,329,140 2,649,684
Total Liabilities and Equity 1,185,882 1,129,882 1,151,136 1,194,152 1,269,232 1,537,674 1,812,656 2,094,268 2,413,677 2,737,054

Feasibility Indicators
There are more than one method to calculate the discounted cash flow statement. However, in this study, WACC was used to calculate the discounted cash flows
and net investment value. The Company's financing structure is based on equity and loans; therefore, the discounted rate should be adjusted according to WACC
based on the following assumptions, the following table illustrates the net expected free cash flow of the project:

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 Table 41 Free Net Cash Flows Table

Before 2111 2119 2121 2121 2122 2122 2124 2125 2121 2122 Final
Net Cashflows
Operating value
Net Free Cashflows )1422248,8( 21348,1 1,,4188 25,4133 2,14581 3184,38 31241,8 3184831 3254,23 3134,81 318413, ,41354881
Discount Factor 1.11 1.,1 1.13 1.51 1.51 1.,5 1.,1 1.35 1.31 1.28 1.25 1.25
Net Present Value
)1,222,121( 144,119 111,511 142,142 121,215 122,252 122,242 112,124 112,512 111,912 91,919 1,152,212
for Cash Flows

The table below illustrates payback period for the project, as it is one of the indicators which investors care about before taking the investment decision as they
need to know when the project will return the invested amount of money. Payback period definition is the total required period so that the project generates a total
money equal to the total invested capital expenditure, as investor is always looking to return the full invested amount of money at the earliest possible.

Table 42 Payback Period

Payback Period Before 2111 2119 2121 2121 2122 2122 2124 2125 2121 2122
Operating
Net Free Cashflows )1422248,8( 21348,1 1,,4188 25,4133 2,14581 3184,38 31241,8 3184831 3254,23 3134,81 318413,
Project Value Returned 1422248,8 14118483, 8,14,38 58,4115 311452, 1418, )3114815( )1284811( )855452,( )14318431,( )1418,4351(
Payback Period (Year) 5 1 1 1 1 1 1 1 1 1 1

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 Table 43 Financial Analysis Results

Weighted Average Cost of Capital (WACC) %12.21

Net Present Value for Cashflows 1,142,176
Payback Period 5
Internal Rate of Return %26.40

Sensitivity Analysis
Sensitivity analysis is conducted to investigate the effects of changes in significant inputs of the financial analysis. This includes changes in revenues, total
investment costs, and operating costs.
Table 44 Sensitivity Analysis

Sensitivity Analysis Internal Rate of Return Payback Period WACC

Original Scenario %21.,1 5 12.26%
Revenues declined by 10% %21.,1 1 11.82%
Operating Expenses Increased by 10% %23.11 5 11.82%

Conclusions and Recommendations

Based on the profitability analysis and considering that project inrernal rate of return is higher than WACC, it is concluded that the project is feasible as the net
present value for the project is positive 1,142,176 Jordan Dinars considering that the project provides 24 Job Opportunitites for the governorate residents.

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