Business Plan of

Agricultural Mechanization Service

Project
Location: West Shoa Zone,
Ejersa Lefo Woreda Cheleleka
Bobe Kebele.
Name of Farmers Mr. Ayalo

Mobile Number (0941986151)

Dec. 2020
OLonko
mi
Table of Contents

1. INTRODUCTION.......................................................................................................................................... 3
1.1. BACKGROUND....................................................................................................................................................4
1.1 OBJECTIVE OF THE PROJECT..................................................................................................................................5
2. PROJECT DESCRIPTION AND LOCATION...................................................................................................... 5
2.1. LOCATION......................................................................................................................................................... 5
2.2. DESCRIPTION..................................................................................................................................................... 5
2.3. MISSION STATEMENT..........................................................................................................................................6
2.4. COMPANY GOALS AND OBJECTIVES........................................................................................................................7
2.5. AMOUNT AND PURPOSE OF THE LEASE FINANCING....................................................................................................7
2.5.1. Purpose of the lease Financing loan.......................................................................................................7
2.5.2. Amount of the loan.................................................................................................................................8
3. MARKET ANALYSIS OF AGRICULTURAL MACHINERY...................................................................................9
3.1. CURRENT DEMAND AND SUPPLY FOR TRACTOR HIRING SERVICE.....................................................................................9
3.1.1. MARKET SIZE @TARGET CUSTOMERS .....................................................................................................................9
3.2. . MARKETING PROMOTION AND STRATEGY..............................................................................................................9
3.2.1.Machineries and Equipment ................................................................................................................9
3.2.2.Machine Capacity and Service Provision Program ....................................................................................10
3.2.3. Raw materials and inputs, Fuel and lubrication cost......................................................................10
3.2.4. Price of rental Tractor based land tillage per hector.......................................................................12
3.2.5. Sales and Revenue Plan e.................................................................................................................12
3.2.6. Machineries and Equipment -----------------------------------------------------------------------13
4. FINANCIAL REQUIRMENT......................................................................................................................... 13
2.19. BUDGET BREAKDOWNS......................................................................................................................................13
2.2. EXPENSES........................................................................................................................................................13
2.2.1. RAW MATERIALS.............................................................................................................................................. 13
2.2.2. WAGE AND SALARY EXPENSE..............................................................................................................................14
2.2.3. OTHER INITIAL COSTS........................................................................................................................................ 14
2.2.4. SUMMARY OF FINANCIAL REQUIREMENT AND SOURCE OF FUND..........................................................................15-16
2.2.5. FINANCIAL STATEMENT...............................................................................................................................17

2
Summary

Although agricultural productivity in our region Oromia is improving, still major gaps in
productivity in different when compared with the global output level. (FAO, 2014).

This low productivity is because of the agricultural system of Ethiopia is predominantly

subsistence, characterized by the use of traditional farming implements and practices like use
hand-tools for land tillage, crop harvesting, threshing from thousands of year ago which
operated by hand animal power.

Mechanization plays a key role in enabling the growth of commercial agri-food

systems and increasing the efficiency of post-harvest handling, processing and
marketing operations. Consequently, it determines food availability and accessibility, as
well as food prices paid by urban and rural poor, thus contributing to increased
household food security.

Thus, mechanization shall contribute in enabling the small holder farmers to timely prepare
land, sowing and harvest their crops as early as possible to cope up with the erratic rainfall
condition and to save time and labor.

This Ayalew __________ agricultural Mechanization project feasibility study Business plan
pictures the viability of mechanized agricultural production implemented by owner and rental
Combiner harvester service. The rental machineries services proposed to provide hire
machine for smallholder farmers.

3
 1. Introduction

1.1. Company Ownership

 Company Name –Mr. Ayalewu _____________ Mechanized Agricultural
Production and Rental Combiner harvester Service.
 Owner Name :- Ayalewu ____________
 Nationality :- Ethiopian
1.2. Address
 Region :- Oromia
 Zone :- W/Shoa
 Woreda :Ejersa Lefo
 Kebele/Village :- Cheleleka Bobe
 Phone Number:- 0941986151

1.3. Background

Agriculture which our region as well as our country predominantly depend it, is the largest sector
and the back bone of economy. The Oromia region has also great potential to Agriculture
because of its vast area of fertile land, diverse climate, generally adequate rain fall and large
labor pool. Despite Oromia has great potential to agriculture, our agriculture remained
undeveloped. This is due to quite a lot of factors. The largest shares were low level of
mechanization inputs and low level of technologies. Moreover, the greatest source of farm power
was mainly human and animal since dated back 2000 BC (FAO, 2007). Introducing agricultural
mechanization in the region is crucial to transform the existing agriculture which had been driven
by traditional farming systems that characterized by low productivity.

Ayalewu______________:-is an individual entrepreneur engaged on mechanized agricultural

farming system and giving rental services by renting Combiner harvester in his project area.
He is working on agriculture farming production mainly by focusing on Wheat crop. In addition
he provide Combiner harvester services for surround farmers and farmers found in his neigh
boring kebele and woredas to produce additional income by renting Combiner harvester with
competitive price to meet the demand of small holder farmers.

4
Role of Agricultural mechanization:-

Majority of the Ethiopian population is exiting in the Oromia region. In existing situation, the
region is characterized by high growth rate of population, low productivity of food crops due to
low modernization of agriculture. Hence, mechanization is must to produce more and feed
upcoming population.

In this case “Ayalewu ________ Agricultural mechanized project” plays a vital role in
improving the farming system by:-

 Increase labor productivity:

Traditional farming consumes high human and animal power. In case of mechanization small
labors can do much job and decreases cost of production. This means increase in labor
productivity by releasing of labor for other sectors of the economy.

 Increase land productivity:

Mechanization is a complementary input. This is to mean producing more from the existing land.
Mechanization technology increases productivity by enabling farming community to produce a
good quality of work, increase production of crops output by improving soil water infiltration
and air movement in the soil, timeliness of operation, good cropping intensity and faster
turnaround, reduction of crop losses, & increase in the cultivated area.

 Reduces hard work of the rural traditional framing :-

Farming community had been working in hard, and harsh, condition. They produce crop that
produced by such a condition to fed themselves and supply to urban population. Mechanization
modernizes existing farming, makes the life of rural community pleasant and attractive.

1.4. Objective of the Project

The main objective of this project is:-

 To increase his and others farmer agricultural productivity by provide agricultural

Mechanization services (Combiner harvester).

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 2. Increase incomes by providing Combiner harvester on rental basis.

3. Project Description and Location

3.1. Location
Ejersa lafo District is located in, west shewa zone, Oromia regional state. Ejersa Lafo woreda is one
of the twenty two woredas of the west shewa zone. The woreda‟s capital, Olonkomi is located sixty
six kilometers west of Addis Ababa on the Addis Ababa–Naqamite road. It is situated between two
towns: Olankomi and Geba Dilbeta. The woreda has a total area of 28613.6hectars with altitudinal
range from 2000–3288 m.a.s.l and also the population of the woreda is 95,021 (Ejersa Lefo woreda
Report, 2016). Hence, the location of the woreda contributes for the rising of the price of crops for
the farmers who are living in the district. So, this location of woreda is motivating the productivity of
farmers in the area and they have obtained urban processed goods and their agricultural production
sold to urban dwellers. As a result, the relationships between rural and urban areas are intertwined.
As well as, this elevation of the study area is mostly suitable for the production of teff, wheat, barley,
chickpea and grass pea. It implies that, these different sources of crops are the major sources of
income for the households in the woreda.

The woreda is bordered in the south by Ellu and Dawo woreda of south west shewa zone which has a
length of 35kms separated by Dalacho river, in east by Ejere woreda which has a length of 15 kms
separated by Huluko , in the west by Dendi woreda with 15kms, in the north by 35 kms Jeldu
woreda. The woreda has good agro- ecological zones that made unique, among twenty two woreda of
west shewa zone. Among the agro- ecological zones, dega comprises 29 percent and woina-dega 71
percent. It indicates that this favorable climatic condition and land features of the woreda are
comfortable for the diversity of agricultural production and so this woreda is a notable area by its
surplus agricultural production among twenty two woredas. Therefore, these better conditions can be
a reason why the living condition of households are enhanced in the woreda .

The woreda has 17 rural and 3 urban kebeles . The Woreda has 11 Private clinics, 13 health posts,
2 Health center and 3 private rural drug venders in the Woreda. There are 16 first cycle primary
schools (1-4), 11 second cycle primary schools (5-8) , 1 high school (9-10) and 3 private school
and 3 kindergarten in the Woreda.

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3.2 Topography
Ejersa Lafo woreda is characterized by nearly flat topography. Among land features: 45%
plateaus, 43% rugged and 12% mountain are located within this woreda. The altitude above
2000m is accounts for 40 percents of the total woreda. It assumed that the present land form or
relief structure of the Ejersa Lafo woreda is mountains, hills, plains and other natural phenomena
are the result of geological and climatic events. On the other hand among the presented land
forms, the district has a plain land which is more suitable for mixed farming activities than high
lands. It indicates that, these favorable land forms and climatic condition are the most important
factors that affect the living condition of households in the project area positively.
3.3 Soil
According to an assessment made on the basic of village records: 28 percent is red soil and 60
percent is black soil. The remaining is covered by yellow soil accounts for 6 percent and brown
soil for 6 percents. It means that the combination of black clay soil and alluvial soil has adequate
nutrients which are the most important factors in agricultural production for better crop
production. Due to its clay characteristics of soil; it is sticky and crack during summer and winter
respectively. So, it is difficult to use for farming purposes. But the portion of the alluvial soil is
very important for agricultural production in the District. Due to the fertility of this soil, the
largest numbers of households are residing on it. As a result, fragmentation of the farm land is
occurred.

3.4 Description

Tractor is a self-propelled power unit that used for pulling or pushing agricultural machiner or
trailers, for plowing, tilling, harrowing, planting and similar tasks. This save manpower and
material resources and greatly reduced the burden on farmers. The main service are produce
agricultural production by using mechanized agricultural and provided land tiller tractor through
rental bases for small holder farmers.

The tractor operates with respective accessories known as disk plough and the disk harrow .The
disk plough performs the soil tillage/ Digging of deep into the top soil while the disk harrow will
cut and digest the soil practices in to smaller units and make ready for sowing. Mission
Statement

Mission
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The project aims to provide advanced farm land preparation services in order to increase the
amount of production surrounding area.

4 Company Goals and Objectives

The ultimate goal is provide quality farm land preparation and land tiller tractor rental service in
district kebeles and surrounding woredas. The project also contribute to the transfer of
knowledge on the importance of mechanization.

4.2 Purpose and Amount of the loan Finance

4.1.2. Purpose of the loan Finance

The project loan has been requested for purchasing of a tractor and its accessories known as
plough and harrow disk.

4.1.3. Amount of the loan

The total cost of the machinery is estimated 1,991,816.51 EB Mr. Tolesa Ayano project will
expect to raise equity of birr, 597,545 that coverd 30%, from its own capital and to borrow
1,394,272 (70%) from Commercial Bank of Ethiopia (CBE) for five years lone for the purchase
of Machinery.
4.1.4. Revenue of the project
4.1.5. . Revenue from Crop production
Mr. Tolesa Ayano has total of 5.5 hectares. From those hectar 5 of the hectares used for
production purpose and in addition to this he cultivates additional 4 to 5 hectares of farm land per
year by conractual agreement with neigh bouring and sourounding farmers in order to get finacial
in come by cultivating different types of crop.

avera
average total ge
total productivi prod price
Year of crop own contract cultivated ty uctio per10
production type land agreement land /hectare n 0kg
Year one
2020/21 Maize 3.5 5 8.5 90 765 800 612,000

Teff 1.5 0 1.5 25 37.5 2800 105,000

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 Total 5 5 10 717,000
Year two
2021/2022 Maize 3.5 5 8.5 90 765 800 612,000

Teff 1.5 0 1.5 25 37.5 2800 105,000

Total 5 5 10 717,000
Year three
2022/23 Maize 3.5 5 8.5 90 765 850 650,250

Teff 1.5 0 1.5 25 37.5 2800 105,000

Total 5 5 10 755,250
Year four
2023/24 Maize 3.5 5 8.5 90 765 900 688,500

Teff 1.5 0 1.5 25 37.5 2800 105,000

Total 5 5 10 793,500
Year five
2024/25 Maize 3.5 5 8.5 90 765 1000 765,000

Teff 1.5 0 1.5 25 37.5 2800 105,000

total 5 5 10 870,000
Total average estimaeted production cost of five years/ 2020-2024
Year two
Input per Year one 2021/202 Year three Year four Year five
S.N Description hectares 2020/21 2 2022/23 2023/24 2024/25
Seed(kuntal)
16,
Maize 2.125 490 16,690 16,890 17,090 17,290

Shumbura 0.975 4,973 5,173 5,373 5,573 5,773

Fertilizer (kuntal)

Maize 34 51,557.43 51,757.43 51,957.43 52,157.43 52,357.43

Shumbura 1.5 2,274.59 2,474.59 2,674.59 2,874.59

Chemicals and
herbisides 9,000 9,000 9,000 9,000
Land preparetion
cost 20,562 24,618.20 28,674.40 32,730.60 36,786.80
Harvesting and
treshing cost 27,600 33,410 39,220 45,030 50,840

Total 110,994 121,260 131,526 141,793 152,059

Total Incame and Expenses of Five year Agricultural Production

S. Year one Year two Year three Year four
N Description 2020/21 2021/2022 2022/23 2023/24 Year five 2024/25
Income
Seles of crop Product 717,000 717,000 755,250 793,500 870,000
Expenses 110,994 121,260 131,526 141,793 152,059
Profit 606,006 595,740 623,724 651,707 717,941

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5 Market Analysis of Agricultural Machinery.

In the Nono woreda there is no enough a farm mechanization business-giving tractor hires for
the farmers in the area. But interested farmers get tractor service from neighboring woredas and
zones. Dou to that the land tiller tractor renting tractor is a profitable way of income generation
beside the income from agricultural production.
5.2 Current demand and supply for Tractor hiring service

Now a days, traditional oxen based cultivation method is giving away to mechanized
farming in some part of rural areas of Oromia where rental tractor service is located. In our
case, farmers in the area cultivate and produce their agricultural production based on
traditional farming system.

Based on this, project owner and number of the smallholder farmers that needs tractor service
for quality land preparation.
5.2.1 M a r k e t s i z e & Ta r g e t C u s t o m e r s

The market size of this rental tractor mechanization is related with the small holders farmers
in Nono Woreda who uses rental tractor services and the adjacent woredas.

5.2.2 Marketing Promotion and Strategy

To reach customers different marketing ways will be used. Among the different marketing
strategies and tools for promotion using the different formal and informal social association and
Participating on farmers field days in order to introduce tractor rental service are important.

5.2.3 Machineries and Equipment

The importance of the tractor machinery is that it saves labor and time, it cultivates the soil better
than the traditional “Maresha”, the machine can operate for more than 16 hours as compared to
oxen which cannot go beyond 6 hours. Thus, by implementation of this project a significant
increase of yield by more than 4 folds could be realized by customers. This will increase
customer satisfaction and have advantage in efficient use of resources and improved food self –
sufficiency goals of farmers.

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 Source of Machinery

The sources of machinery are where from legal farm machinery importer.

Installation cost

It is very easy to install and It will not take much time and labor. It just need connecting of the
tractor to the above discus and adjusts the machine, and then it can start functioning. Thus, no
cost is required as the driver can perform.

5.2.4 Machine Capacity and Service Provision Program

At its full capacity operation, the machine operates 16 working hours per day, in 2 shifts, 6
working days per week, 26 working days per month and 300 working days per year. The
machine shall operate at a capacity of 50%, 66.67%,83.34 %,90% and 100% during the first,
second and third years, respectively. This will be resulted from sufficient promotion works.

Table: 1. Tractors capacity and service provision program .

Total Capacity operation

Available Estimated Total
Estimated day of land Tota Estimated land
S.N Year Year
Model land working ploughed l ploughed by Year 1 Year 3 Year 4
per year 2 5
capacit ploughed by 1 tractor tract total tractor
y/ per day per year or per year
3 90HP 4 128 512 1 512 512 563.2 619.52 681.472 749.62
Ida'am
1 512 0 51.2 619.52 681.472 749.62
a
5.2.5 Raw materials and inputs, Fuel and lubrication cost

The raw materials for tractor machine and mounted equipment are fuel and lubricants, grease,
change of fuel filter, change of different used oils and replacing by new.

Fuel and lubricants are daily consumed as the tractor does a job or travelled. A tractor utilizes 20
liters of fuel oil to plough 1 hectors. Assuming 20 birr per litter, the fuel cost will be 400 birr per
hector. Oil & lubrication is assumed to be 10% of the fuel cost which is 40 birr per hector. Thus,
the total fuel and lubrication cost per hector will be 440 birr.

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 Change of fuel filter, greasing and overall service is assumed at 25,600 birr per annum per
tractor. Thus, the annual cost of fuel, lubrication, service and other related costs are summarized
in the table blow.

Table:2. Costs of Tractors Raw materials and inputs

S.N Description Year 1 Year 2 Year 3 Year 4 Year 5

Fuel cost per annum (20
340,736 374,810
lit. per Hek) 256,000 281,600 309,760
Oil and lubricants(10% of
34,074 37,481
the fuel cost) 25,600 28,160 30,976
Change of fuel filter,
greasing and overall 39,9 43,9
service 30,000 33,000 36,300 30 23
Total 311,600 342,760 377,036 414,740 456,214
Cost of direct labor is considered under this title of raw materials and inputs. Cost of direct
laborers include the wages and salary .The details of direct labor required for the project and
respective wages/salaries has been indicated in the table below.

Table:3. Cost of direct and indirect labor (wages/salaries).

Unit Total Direc INDIRE

S. Position of Units of Quan cost per cost per Total Cost t CT
N employees measurement tity month month per annum labor LABOR
1 General Manager No 1 5,000 5,000 60,000 60,000
2 Tractor Drivers No 1 3,000 3,000 36,000 48,000 48,000
3 Assistant drivers No 1 2,000 2,000 24,000 24,000 16,000
4 Cashier accountant No 0 0 0 0 0
5 Marketing officer No 0 0 0 0 0

Machine rental and

Customer service
6 department No 0 0 0 0 0

Cost of work
commissioning (10%
7 of base salary) 0 1000 12,000 0
TOTAL 3 10,000 10,000 120,000 72,000 124,000

5.2.6 Price of rental Tractor based land tillage per hector

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 The price of tractor tiller depends whether the tillage is first round, second or third round.
In addition to this the price also varies from soil to soil. To set price of the rental
mechanized tractor tillage, the current prices of tractor tillage in the project area were
considered. The following current prices per hector for first, second and third tillage were
considered. Accordingly, the price for Tractor based land tillage is set 2000 birr per
hector.

6 Revenue from rental tractor

6.2.1 Sales and Revenue plan

Table 4. Sales Revenue of Tractors

Description of Revenue Production Qty (hek ploughed Qty (No of Unit

Year average) tractors) Price Total Price
Ploughing,1st,2nd and 3rd
in average Price 1 512 1 2000 1,024,000
" 2 563 1 2,200 1,239,040
" 3 620 1 2,420 1,499,238

4 681 1 2,662 1,814,078

750 1 2,928 2,194,887

3 FINANCIAL REQUIRMENT

The financial resource is a prime resource for undertaking any activities. The financial analysis
of the lease financing machinery is based on the data provided. Hence, the total budget for
implementing this project is estimated at 2,714,024 Out of the total budget of the project 30% or
597,545 (only cost of tractor) and ather cost 722,207 will be covered by project promoter, while
the rest 70% or EB 1,394,272 will be covered by financial institutions of CBE. The long-term
credit is assumed to be obtained from the Bank with the current interest rate of 11.5%.

6.3 Budget Break downs

There fore the said amount of finance is needed for undertaking the following.

A. MACHINARY AND EQUIPMENT

The total cost of machineries and equipment’s are estimated at EB 1,991,816.51.

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 Estimated Unit Total Estimated
Type Of Machinary Quantity price (birr) Unit price (birr 30% Cost
John Deer size 1 1,544,729.94 1,544,729.94 463,418.98
1 5090E(90HP)
2 Disc plough 1 201,535.62 201,535.62 60,460.686
3 Disc Harrow 1 245,550.95 245,550.95 73,665.285
Total 1991816.51 1991816.51 597544.95

6.4 Expenses

In estimating costs of operations, expenses have been categorized into direct costs of operations
and indirect expenses. Direct operating expenses include cost of raw materials such as fuel oil
and lubricants, and direct labor.

6.5 Raw materials

Table: 5. Raw & auxiliary materials requirement

S.N Description Year 1 Year 2 Year 3 Year 4 Year 5

Fuel cost per annum (20
340,736 374,810
lit. per Hek) 256,000 281,600 309,760
Oil and lubricants(10% of
34,074 37,481
the fuel cost) 25,600 28,160 30,976
Change of fuel filter,
greasing and overall 39,9 43,9
service 30,000 33,000 36,300 30 23
Total 311,600 342,760 377,036 414,740 456,214

Wage and Salary Expense

Table: 6. Human power Requirement, Monthly and Annual Salary

Units
of Unit
Position of measur Quant cost per Total cost Total Cost Direct INDIREC
S.N employees ement ity month per month per annum labor T LABOR
1 General Manager No 1 5,000 5,000 60,000 60,000
2 Tractor Drivers No 1 3,000 3,000 36,000 48,000 48,000
3 Assistant drivers No 1 2,000 2,000 24,000 24,000 16,000
4 Cashier accountant No 0 0 0 0 0
5 Marketing officer No 0 0 0 0 0
Machine rental and
Customer service
6 department No 0 0 0 0 0
7 Cost of work 0 1000 0
commissioning (10% 12,000

14
 Units
of Unit
Position of measur Quant cost per Total cost Total Cost Direct INDIREC
S.N employees ement ity month per month per annum labor T LABOR
of base salary)
TOTAL 3 10,000 10,000 120,000 72,000 124,000

Table 7. Other Initial Costs

Property Insurance (1% of fixed
19,918 1% of fixed Investment Cost
1 Investment Cost)
2 Uniforms 2,000 2*1000 br
3 Telephone, fax and postal 800 100 per month per tractors

4 Repair and maintenance 600 2 % of the Fixed Cost

5 Advertisement 1,000 1000 per tractors
6 Stationery and other office supplies 0 200 per month per tractors
7 Electricity 0 0 per tractors
8 Water 1,000 1000 per tractors
11 Transportation cost 4,000 4000 per tractor
12 Gas Oil and lubricant 2,560 10% of fuel cost
13 For training 10,000 5000 per person

14 Miscellaneous Expense 2,000 2000 birr per month per tractors

Total 43,878

6.6 Summary of Financial Requirement and Source of fund

Table:- 8. Financial Requirement

SN Description Cost in birr

1 Fixe Investment
1.1 Machinery & equipment 1,991,817
1.2 other (building, office equipment, etc) 0
Total Fixed Investment Cost 1,991,817
2 Operatin Expense
2.1 Raw Materials 311,600
2.2 Salary Expense 120,000
2.3 Other Operating Expense 43,878
Total Operating Expense 475,478
Sub total 2,467,295
Contingency (10% of sub total) 246,729
Total Cost (sub total + Contingency) 2,714,024
Table :9. Source of fund

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S.N Description % share Amount in birr
1 Promoters' contributionfor tractor cost 30% 597,545
2 Bank finance for tractor cost 70% 1,394,272
3 Other promoter contribution - 722,207
4 other borrowing
Total 100% 2,714,024
Table: 10. Loan Repayment Schedule

Intrest rate Total Annual Remaining

Year Principal Payment (11.5 %) Payment Balance
0 0 0 0 1,394,272
1 278,854 160,341 439,196 1,115,417
2 278,854 128,273 407,127 836,563
3 278,854 96,205 375,059 557,709
4 278,854 64,136 342,991 278,854
5 278,854 32,068 310,923 0
Table: 11. Depreciation Schedule

Original
Value In Depreciation Depreciation Depreciation Depreciation Depreciation Depreciation
SN Description Birr rate in % Per year 1 Per year 2 Per year 3 Per year 4 Per year 5
Machines
&
1 Equipments 1,991,817 10% 199,182 199,182 199,182 199,182 199,182
Sales Revenue

Based on the production capacity of the envisioned machinery indicated in previous the total
revenue of the project is projected as indicated in the table below.

Table:-12. Sales Revenue

Total Price
Type Of In come Year 1 Year 2 Year 3 Year 4 Year 5
Sales from Tractors 1,814,07
survices 1,024,000 1,239,040 1,499,238 8 2,194,887
Sales from crop 651,70 717,9
production survices 606,006 595,740 623,724 7 41

Total
1,630,006 1,834,780 2,122,962 2,465,786 2,912,829

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7 FINANCIAL STATEMENT

Table: 13. Balance Sheet

Asset

Current Asset
Cash 597,545
Inventory of Raw Material -
Total Current Asset 597,545
Fixe Asset
Machinary 1,991,817
other (building, office equipment, etc) -
Total Fixed Asset 1,991,817
Total Asset 2,589,361
Liability
Account Payable 1,394,272
Owners Equity
Capital 597,545
Total Liability & Owners' Equity
1,991,817
A. Income Loss Statement

The project revenue and production costs are listed and compared to evaluate whether the project
generate profit or loss. Accordingly, the forecasted income statement has shown that the project
is profitable throughout its life.

Table :-14. Income –loss statement of the project

Description Year 1 Year 2 Year 3 Year 4 Year 5

Sales 1,630,006 1,834,780 2,122,962 2,465,786 2,912,829

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 Cost of materials 422,594 464,020 508,562 556,532 608,273
Cost of direct labor 72,000 82,800 95,220 109,503 125,928
Sub total of direct materials and direct labor
cost 494,594 546,820 603,782 666,035 734,201
Gross profit 1,135,412 1,287,960 1,519,180 1,799,751 2,178,627
Expenses
Salary 124,000 142,600 163,990 188,589 216,877
other operating expenses 43,878 50,460 58,029 66,733 76,743
Annual depreciation 199,182 199,182 199,182 199,182 199,182
Principal repayment 278,854 278,854 278,854 278,854 278,854
Interest payment 160,341 128,273 96,205 64,136 32,068
Total indirect expenses 806,255 799,369 796,260 797,494 803,724
Profit before tax 329,157 488,591 722,920 1,002,256 1,374,903
Tax(30%) 98,747 146,577 216,876 300,677 412,471
Net Income/loss 230,410 342,014 506,044 701,580 962,432
B. Cash Flow Analysis

The cash flow analysis provides a look at the movement of cash in and out of the project. It is
important to determine whether or not the project has enough cash to pay its bills, handle
expenses and acquire asset.

Table :- 15. Projected Cash Flow Statement

Description Year 0 Year 1 Year 2 Year 3 Year 4 Year 5

Owners equity 597,544.95
Loan principal 1,394,271.56
Sales 1,630,006 1,834,780 2,122,962 2,465,786 2,912,829
Total Cash In flow 1,991,816.51 1,630,006 1,834,780 2,122,962 2,465,786 2,912,829
Cash Payment
Raw Materials 422,594 464,020 508,562 556,532 608,273
Salary Expense 196,000 225,400 259,210 298,092 342,805
Other Operating Expense 43,878 50,460 58,029 66,733 76,743
Loan Repayment 278,854 278,854 278,854 278,854 278,854
Intrest payment 160,341 128,273 96,205 64,136 32,068
Tax(30%) 98,747 146,577 216,876 300,677 412,471
TOTAL PAYMENT 1,991,817 1,200,415 1,293,585 1,417,736 1,565,025 1,751,215
NET CASH FLOWS 429,591 541,195.15 705,225.64 900,761.17 1,161,613.82
CUMMULATIVE CASH
FLOWS 429,591 541,195.15 705,225.64 900,761.17 1,161,613.82

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