Investment Office ANRS

Project Profile on the Establishment of 3-

Wheelers Assembly Plant

Development Studies Associates

(DSA)

July 2016 Revised

Bahir Dar
 Table of Contents

1. Executive Summary..................................................................................1
2. Product Description and Application....................................................1
3. Market Study, Plant Capacity and Production Program...................1
3.1 Market Study.......................................................................................................1
3.1.1 Present Demand and Supply........................................................................1
3.1.2 Projected Demand........................................................................................2
3.1.3 Pricing and Distribution...............................................................................3
3.2 Plant Capacity......................................................................................................3
3.3 Production Program.............................................................................................3
4. Raw Materials and Utilities....................................................................3
4.1 Availability and Source of Raw Materials...........................................................3
4.2 Annual Requirement and Cost of Raw Materials and Utilities...........................4
5. Location and Site.....................................................................................4
6. Technology and Engineering.................................................................4
6.1 Production Process...............................................................................................4
6.2 Machinery and Equipment...................................................................................5
6.3 Civil Engineering Cost........................................................................................5
7. Human Resource and Training Requirement......................................6
7.1 Human Resource..................................................................................................6
7.2 Training Requirement..........................................................................................6
8. Financial Analysis...................................................................................7
8.1 Underlying Assumption.......................................................................................7
8.2 Investment............................................................................................................8
8.3 Production Costs..................................................................................................9
8.4 Financial Evaluation............................................................................................9
9. Economic and Social Benefit and Justification..................................10
ANNEXES....................................................................................................12
 1. Executive Summary
This project envisages assembly 1000 3-Wheelers per annum. The total investment
requirement of the project including the working capital is estimated at about Birr 27.2
million; of which around Birr 26.2 million is the cost of the working capital while Birr
2.6 million is for machinery and equipments, and another Birr 2.6 million is for building
and construction. Based on the cash flow statement, the calculated internal rate of return
(IRR) and simple rate of return (SRR) of the project are 32.3 % and 24.6 %, respectively.
The net present value (NPV) at 18 % discounting rate is about Birr 7,700.57 thousand.
The plant is expected to create employment opportunities for about 26 persons.

2. Product Description and Application

A 3-Wheeler is a motorized vehicle used to transport about four people at a time. The
vehicle is popular in India and other Southeast Asian countries and it is used as a “taxi”.
Recently the vehicle has been introduced to the Ethiopian market and it provides
transport services in Dire Daw, Harar, Awassa, Bahir Dar and in other urban centers

3. Market Study, Plant Capacity and Production

Program
3.1 Market Study
3.1.1 Present Demand and Supply
Although it increases instability, having one wheel in front and two in the rear for power
reduces the cost of the steering mechanism and fuel consumption significantly. In urban
transport market segmentation, a 3 – wheeler is equivalent to a taxi. However, it is better
taxi because it is less expensive and less fuel consuming. With the current sky rocketing
price of petroleum substituting taxis with three wheelers (to the possible extent) is not an
option; rather it is a must.

Since they are introduced to the Ethiopian market, a clear demand pattern for the three
wheelers has been emerged. As it is mentioned above, they are providing transport
services in Dire Daw, Harar, Awassa, Bahir Dar and in other urban centers by

1
substituting small taxis and mini buses. In the past four and five years, around ten
thousand three wheelers were imported from India and China to Ethiopia. Most of the
imported brands are tested, and found out that strong enough for the taxi purpose and
highly efficient in terms of fuel consumption. The trend suggests the demand for these
vehicles will certainly increase in the future

3.1.2 Projected Demand

The demand for three wheelers in Ethiopia is mainly derived from the demand for city
transport services. The demand for city transport is mainly a function of the growth rate
of cities’ population. The Ethiopian cites’ population is increasing more than 5 % per
annum. Beside to this, however, three wheelers are notably substituting small taxis and
minibuses in many urban centers of Ethiopia. Leaving aside this substitution effect, the
future demand for three wheelers in Ethiopia is conservatively projected as follows by
taking the past five years average import three wheelers (i.e. 2007 units per annum) and
using the 5 % growth rate.

TABLE 3.1
DEMAND PROJECTION FOR THREE WHEELERS
IN ETHIOPIA

Year E.C. Number of Three Wheelers

2007
2814
2008
2955
2009
3103
2010
2955
2011
3103
2012
3258
2013
3421
2014
3592
2015
3772
2016
3960

2
 3.1.3 Pricing and Distribution

Based on the cost of production, the prices of the three wheelers assembled by the
envisaged project will be Birr 59,018 per unit. Since there will be competition with other
international firms, it is necessary to assemble a good quality product. Moreover, media
advertisement will have a paramount importance to attract users. The products could be
sold both on wholesale and on retail basis.

3.2 Plant Capacity

Based on the minimum economic capacity, a total of 1000 units of three wheelers are
envisaged to be assembled annually. The plant is assumed to operate in a single shift
basis for 275 working days in a year. This schedule is set by deducting 52 Sundays, 13
public holidays, 15 days for annual maintenance purpose and 10 days for unexpected
work interruptions.

3.3 Production Program

The production program follows gradual capacity utilization due to technical and
marketing reasons. Accordingly, 60 %, 75 %and 90 % capacity utilization are assumed
for the first, the second and the third years of the operation, respectively. The fourth year
onwards, 100 % capacity utilization is assumed.

4. Raw Materials and Utilities

4.1 Availability and Source of Raw Materials

Three wheelers are assembled using hundreds of different components. Besides, some
components like cabin can be manufactured by the facilities. Nearly 80 % of the
components and the raw materials needed to assemble the product and to fabricate some
components of it are imported.

3
 4.2 Annual Requirement and Cost of Raw Materials and
Utilities

It should be noted that, in this project profile, it is not possible to list down all the
necessary raw materials and the parts to be imported in order to assemble a three wheeler.
However, the cost of raw materials and components required to assemble 1000 units of
750 CC water cooling diesel three wheelers per annum is estimated to reach Birr 46.2
million while the associated cost of utilities is estimated to reach Birr 500 thousand per
annum.

5. Location and Site

For its convenience to procure raw materials and to distribute the product to different
parts of the country, Dessie is an appropriate choice for the establishment of a three
wheeler assembly plant in the Amhara region.

6. Technology and Engineering

6.1 Production Process

The important parts like the cylinder block, crank shaft, cylinder head, flywheel, cam
shaft, bearing cap and flywheel housing are cleaned. Crank shaft is assembled to cylinder
block. Water chamber cover and push rod chamber cover are assembled. Flywheel
housing and cam shaft are assembled to cylinder block. Flywheel is assembled. Timing
gear case is assembled. Injection pump is assembled. Cam shaft gear and idle gear are
assembled. Timing gear case is assembled. After assembling mounting bracket, the
engine is mounted on a truck. Engine number is engraved on cylinder block. Connecting
rod, piston and piston ring are assembled. The sub-assembled piston is assembled. The
injection time of injection pump is adjusted. Oil suction pipe in oil pan and oil pump are
assembled. Oil pan is assembled. Oil filter and oil cooler are assembled. Valve and valve
spring are assembled to cylinder head. The sub-assembled cylinder head is assembled.
Rocker arm and rocker arm shaft are assembled with valve clearance adjusted. Cylinder
head cover is assembled. Intake and exhaust manifold are assembled. Nozzle and
injection pipe are assembled. Water pump is assembled. Cooling fan is assembled. Fuel

4
filter is assembled. Alternator and starter are assembled. Air compressor is assembled.
Engine test is undertaken. Parts of the external body including the three rubber wheels,
the home made cabin, battery, brakes and others are assembled to with the engine.
Finally, the product is painted.

6.2 Machinery and Equipment

Manufacturing facilities are casting facility, forging facility, cutting facility, press
facility, welding facility, processing facility such as drilling, grinding and cutting, heat
treatment facility, plating facility, painting facility and inspection facility (See Table 6.1).
TABLE 6.1
LIST OF MACHINERY AND EQUIPMENT

Required Facilities
1.Machine Tool
2.Metal Working Machine
3.Inspection & Testing Equipments
4.Painting Line
5.Heat-Treatment Facility

The total cost of machinery/equipment including the utility facility is estimated at Birr
2.6 million; of which Birr 2,309.4 thousand is in foreign currency.
Machinery Supplier’s Address:
Hyloc Hydrotechnic Private Limited
88, Machhe Industrial Estate, Machhe
Belgaum , Karnatakar- 590014,
India

6.3 Civil Engineering Cost

The building area required by the plant is estimated to be 500 m 2, and it costs Birr
2,566,000. This would include cost of land preparation and associated civil works. The
total land area of the plant, including the open space, is 5,000 m 2 , and its lease cost
equals Birr 769,800. The cost of the land lease is as per ANRS land lease rate for Dessie
town which is equal to Birr 153.96 per square meter for industrial purpose. Of the total
cost of the lease, 5 % is paid in the beginning while the rest will be paid in 40years.

5
 7. Human Resource and Training Requirement

7.1 Human Resource

Details of the manpower requirement of the plant is shown in Table 7.1

Table 7.1
MANPOWER REQUIREMENT

Description No Monthly Annual

Salary (Birr) Salary (Birr)
A. Administration
1. General Manager 1 10264 123,168
2. Engineers 1 6415 76,980
3. Personnel Officer 1 3849 46,188
4. Accountant 1 3849 46,188
5. Salesmen 2 3849 92,376
6. Highly Skilled Workers 6 5132 369,504
7. Skilled Workers 6 2566 184,752
8. Semi-Skilled Workers 4 1539.6 73,901
9. Secretaries 2 2052.8 49267
10. Guards 6 769.8 554,253
11. Office Clerks 2 769.8 18,475
Sub-Total 26 1,136,225
Benefits 20 % of Basic Salary 227,245
Total 26 1,363,470

The total annual wages and salary, including 20 % benefits, amount to Birr 1,363,470.

7.2 Training Requirement

Six months on job training is required for the technical personnel. And this can be
managed by hiring experts in the area as required from the technology supplier.

6
 8. Financial Analysis
8.1 Underlying Assumption

The financial analysis of Three Wheelers Assembly plant is based on the data provided in
the preceding chapters and the following assumptions.

A. Construction and Finance

Construction Period 2 Years

Source Of Finance 40% Equity and 60% Loan
Tax Holidays 2 Years
Bank Interest Rate 12%
Discount For Cash Flow 18%
Value Of Land Based on Lease Rate of ANRS
Spare Parts, Repair & Maintenance 3% of the Fixed Investment

B. Depreciation

Building 5%
Machinery And Equipment 10%
Office Furniture 10%
Vehicles 20%
Pre-Production (Amortization) 20%

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 C. Working Capital (Minimum Days of Coverage)

Raw Material-Local 30 Days

Raw Material-Foreign 120 Days
Factory Supplies In Stock 30 Days
Spare Parts In Stock And Maintenance 30 Days
Work In Progress 10 Days
Finished Products 15 Days
Accounts Receivable 30 Days
Cash In Hand 30 Days
Accounts Payable 30 Days

8.2 Investment
The total investment cost of the project including working capital is estimated at Birr
27.2 million as shown in Table 8.1 below. The owner shall contribute 40 % of the finance
in the form of equity while the remaining 60 % is to be financed by bank loan.
TABLE 8.1
TOTAL INITIAL INVESTMENT

Items L.C F.C Total

Land
15,000 15,000
Building and Civil Works
2566000 2566000
Office Equipment
256600 256600
Vehicles
0 0
Plant Machinery & Equipment
256600 2309400 2566000
Total Fixed Investment Cost
3,094,200 2309400 5,403,600
Pre Production Capital
Expenditure* 155884.5 115470 271354.5
Total Initial Investment
3,250,085 2,424,870 5,674,955
Working Capital at Full Capacity
5415063 16123809.98 21538875.7
Total 8,665,148 18,548,680 27,213,830
*Pre-production capital expenditure includes - all expenses for pre-investment studies, consultancy fee
during construction and expenses for company‘s establishment, project administration expenses,
commission expenses, preproduction marketing and interest expenses during construction.
The foreign component of the project accounts for Birr 18.5 million or 68.1% of the total
investment cost.

8
 8.3 Production Costs

The total production cost at full capacity operation is estimated at Birr 50.6 million (See
Table 8.2). Raw materials and utilities account for 92.3 %.

TABLE 8.2
PRODUCTION COST AT FULL CAPACITY

Raw Material Requirement Cost

1. Local Raw Materials 9237600
2. Foreign Raw Materials 36950400
Total Production Cost at full Capacity
Items Cost
1.      Raw materials 46188000
2.      Utilities 500,000
3.      Wages and Salaries 1363469.76
4.      Spares and Maintenance 162812.7
Factory Costs 48214282.46
5.      Depreciation 464830.9
6.      Financial Costs
1961086.028
  Total Production Cost 50,640,199.39

8.4 Financial Evaluation

I. Profitability
According to the projected income statement (See Annex 4) the project will generate
profit beginning from the first year of operation and increases on wards. The income
statement and other profitability indicators also show that the project is viable.
II. Breakeven Analysis
The breakeven point of the projects is given by the formula:

BEP = Fixed Cost

9
 Sale –Variable Cost at full capacity.

The project will break even at 10.6 % of capacity utilization

III. Payback Period

Investment cost and income statement projection are used in estimating the project
payback period. The projects will payback fully the initial investment less working
capital in three years.
IV. Simple Rate of Return
The project’s simple rate of return (SRR) is given by the formula:

SRR= (Net Profit + Interest)/ (Total Investment Outlay) at full capacity utilization.

The SRR would be 24.6 % at full capacity utilization.

V. Internal Rate of Return and Net Present Value

Based on cash flow statement (See Annex 2) the calculated internal rate of return (IRR)
of the project is 32.3 % and the net present value (NPV) at 18 % discount is Birr 7,700.56
thousand.
VI. Sensitivity Analysis
The sensitivity test result which undertaken by increasing the cost of production by 10 %
still indicates that the project would be viable.

9. Economic and Social Benefit and Justification

Based on the foregoing presentation and analysis, we can learn that the proposed project
possesses wide range of benefits that complement the financial feasibility obtained
earlier. In general, the envisaged project promotes the socio-economic goals and
objectives stated in the strategic plan of the Amhara National Regional State. These
benefits are listed as follows:

A. Profit Generation
The project is found to be financially viable and earns on average a profit of Birr 5.38
million per year and Birr 53.63 million within the project life. Such result induces the

10
project promoters to reinvest the profit which, therefore, increases the investment
magnitude in the region.

B. Tax Revenue
In the project life under consideration, the region will collect about Birr 20.27 million
from corporate tax payment alone (i.e. excluding income tax, sales tax and VAT). Such
result create additional fund for the regional government that will be used in expanding
social and other basic services in the region.

C. Import Substitution and Foreign Exchange Saving

As there is no production of three-wheeler in Ethiopia, the commencement of this project

relieves a portion of the import burden. That is, based on the projected figure we learn
that in the project life an estimated amount of US Dollar 21.3 million will be saved as a
result of the proposed project. This will create room for the saved hard currency to be
allocated on other vital and strategic sectors

D. Employment and Income Generation

The proposed project is expected to create employment opportunity to several citizens of

the country. That is, it will provide permanent employment to 26 professionals as well as
support stuffs. Consequently the project creates income of Birr 1362.55 thousand per
year. This would be one of the commendable accomplishments of the project.
E. Pro Environment Project

The proposed production process is environment friendly.

11
ANNEXES

12
 Annex 1: Total Net Working Capital Requirements (in Birr)
CONSTRUCTION PRODUCTION
  Year 1 Year 2 1 2 3 4

Capacity Utilization (%) 0 0 0.6 0.75 0.9 1

1. Total Inventory 0 0 23029031.06 28786288.82 34543546.58 38381718.42

Raw Materials in Stock- Total 0 0 10278929.45 12848661.83 15418394.17 17131549.1

Raw Material-Local 0 0 604642.8998 755803.6247 906964.3753 1007738.175

Raw Material-Foreign 0 0 9674286.55 12092858.17 14511429.83 16123810.9

Factory Supplies in Stock 0 0 32375.19634 40469.00184 48562.80734 53958.66912

Spare Parts in Stock and Maintenance 0 0 10656.82894 13321.02976 15985.25624 17761.39012

Work in Progress 0 0 809380.0368 1011725.046 1214070.055 1348966.728

Finished Products 0 0 1618760.074 2023450.092 2428140.11 2697933.456

2. Accounts Receivable 0 0 3862996.375 4828745.45 5794494.55 6438327.275

3. Cash in Hand 0 0 173223.4752 216529.344 259835.2128 288705.792

CURRENT ASSETS 0 0 16786321.44 20982901.79 25179482.17 27977202.38

4. Current Liabilities 0 0 3862996.375 4828745.45 5794494.55 6438327.275

Accounts Payable 0 0 3862996.375 4828745.45 5794494.55 6438327.275

TOTAL NET WORKING CAPITAL REQUIRMENTS 0 0 12923325.06 16154156.34 19384987.62 21538875.11

INCREASE IN NET WORKING CAPITAL 0 0 12923325.06 3230831.278 3230831.278 2153887.519

1
 Annex 1: Total Net Working Capital Requirements (in Birr) (continued)
PRODUCTION
  5 6 7 8 9 10

Capacity Utilization (%) 100% 100% 100% 100% 100% 100%

1. Total Inventory 38381718.42 38381718.42 38381718.42 38381718.42 38381718.42 38381718.42

Raw Materials in Stock-Total 17131549.1 17131549.1 17131549.1 17131549.1 17131549.1 17131549.1

Raw Material-Local 1007738.175 1007738.175 1007738.175 1007738.175 1007738.175 1007738.175

Raw Material-Foreign 16123810.9 16123810.9 16123810.9 16123810.9 16123810.9 16123810.9

Factory Supplies in Stock 53958.66912 53958.66912 53958.66912 53958.66912 53958.66912 53958.66912

Spare Parts in Stock and Maintenance 17761.39012 17761.39012 17761.39012 17761.39012 17761.39012 17761.39012

Work in Progress 1348966.728 1348966.728 1348966.728 1348966.728 1348966.728 1348966.728

Finished Products 2697933.456 2697933.456 2697933.456 2697933.456 2697933.456 2697933.456

2. Accounts Receivable 6438327.275 6438327.275 6438327.275 6438327.275 6438327.275 6438327.275

3. Cash in Hand 286905.6 286905.6 286905.6 286905.6 286905.6 286905.6

CURRENT ASSETS 27802753.73 27802753.73 27802753.73 27802753.73 27802753.73 27802753.73

4. Current Liabilities 6398181.821 6398181.821 6398181.821 6398181.821 6398181.821 6398181.821

Accounts Payable 6398181.821 6398181.821 6398181.821 6398181.821 6398181.821 6398181.821

TOTAL NET WORKING CAPITAL REQUIRMENTS 21404571.91 21404571.91 21404571.91 21404571.91 21404571.91 21404571.91

INCREASE IN NET WORKING CAPITAL 0 0 0 0 0 0

2
 Annex 2: Cash Flow Statement (in Birr)
CONSTRUCTION PRODUCTION
  Year 1 Year 2 1 2 3 4
TOTAL CASH INFLOW 2849222.25 24388097.36 39273796.38 45229249.1 54081949.1 59661832.72
1. Inflow Funds 2849222.25 24388097.36 3862996.375 965749.1002 965749.1002 643832.7249
Total Equity 1139688.9 9755238.949 0 0 0 0
Total Long Term Loan 1709533.35 14632858.41 0 0 0 0
Total Short Term Finances 0 0 3862996.375 965749.1002 965749.1002 643832.7249
2. Inflow Operation 0 0 35410800 44263500 53116200 59018000
Sales Revenue 0 0 35410800 44263500 53116200 59018000
Interest on Securities 0 0 0 0 0 0
3. Other Income 0 0 0 0 0 0
TOTAL CASH OUTFLOW 2849222.25 2849222.25 50302036.73 45950771.14 54987805.3 58583728.06
4. Increase In Fixed Assets 2849222.25 2849222.25 0 0 0 0
Fixed Investments 2713545 2713545 0 0 0 0
Pre-production Expenditures 135677.25 135677.25 0 0 0 0
5. Increase in Current Assets 0 0 16786321.44 4196580.353 4196580.353 2797720.244
6. Operating Costs 0 0 29670008.19 37069371.82 44468735.45 49401644.54
7. Corporate Tax Paid 0 0 0 0 1964518.335 2353239.956
8. Interest Paid 0 0 3845707.104 1961087.003 1634239.186 1307391.344
9.Loan Repayments 0 0 0 2723731.969 2723731.969 2723731.969
10.Dividends Paid 0 0 0 0 0 0
Surplus(Deficit) 0 21538875.11 -11028240.35 -721522.07 -905856.1969 1078104.669
Cumulative Cash Balance 0 21538875.11 10510634.76 9789112.689 8883256.493 9961361.162
Annex 2: Cash Flow Statement (in Birr): Continued

3
 PRODUCTION
  5 6 7 8 9 10
TOTAL CASH INFLOW 59018000 59018000 59018000 59018000 59018000 59018000
1. Inflow Funds 0 0 0 0 0 0
Total Equity 0 0 0 0 0 0
Total Long Term Loan 0 0 0 0 0 0
Total Short Term Finances 0 0 0 0 0 0
2. Inflow Operation 59018000 59018000 59018000 59018000 59018000 59018000
Sales Revenue 59018000 59018000 59018000 59018000 59018000 59018000
Interest on Securities 0 0 0 0 0 0
3. Other Income 0 0 0 0 0 0
TOTAL CASH OUTFLOW 55557214.32 55344702.1 55115908.64 52163383.18 52163383.18 52163383.18
4. Increase In Fixed Assets 0 0 0 0 0 0
Fixed Investments 0 0 0 0 0 0
Pre-production Expenditures 0 0 0 0 0 0
5. Increase in Current Assets 0 0 0 0 0 0
6. Operating Costs 49401644.54 49401644.54 49401644.54 49401644.54 49401644.54 49401644.54
7. Corporate Tax Paid 2451294.309 2565629.931 2663684.284 2761738.637 2761738.637 2761738.637
8. Interest Paid 980543.5015 653695.6591 326847.8424 0 0 0
9. Loan Repayments 2723731.969 2723731.969 2723731.969 0 0 0
10.Dividends Paid 0 0 0 0 0 0
Surplus(Deficit) 3460785.677 3673297.897 3902091.361 6854616.819 6854616.819 6854616.819
Cumulative Cash Balance 13422146.84 17095444.74 20997536.1 27852152.92 34706769.74 41561386.56

4
 Annex 3: DISCOUNTED CASH FLOW-TOTAL CAPITAL INVESTED
CONSTRUCTION PRODUCTION
  Year 1 Year 2 1 2 3 4
TOTAL CASH INFLOW 0 0 35410800 44263500 53116200 59018000

1. Inflow Operation 0 0 35410800 44263500 53116200 59018000

Sales Revenue 0 0 35410800 44263500 53116200 59018000

Interest on Securities 0 0 0 0 0 0

2. Other Income 0 0 0 0 0 0

TOTAL CASH OUTFLOW 2849222.25 2849222.25 42593333.25 40300203.1 47699566.73 53908772.02

3. Increase in Fixed Assets 2849222.25 2849222.25 0 0 0 0

Fixed Investments 2713545 2713545 0 0 0 0

Pre-production Expenditures 135677.25 135677.25 0 0 0 0

4. Increase in Net Working Capital 0 0 12923325.06 3230831.278 3230831.278 2153887.519

5. Operating Costs 0 0 29670008.19 37069371.82 44468735.45 49401644.54

6. Corporate Tax Paid 0 0 0 0 0 2353239.956

NET CASH FLOW -2849222.25 -2849222.25 -7182533.247 3963296.902 5416633.268 5109227.982

CUMMULATIVE NET CASH FLOW -2849222.25 -5698444.5 -12880977.75 -8917680.845 -3501047.577 1608180.404

Net Present Value (at 18%) -2849222.25 -2414595.12 -5158383.561 2412184.851 2793839.194 2233290.644

Cumulative Net present Value -2849222.25 -5263817.37 -10422200.93 -8010016.08 -5216176.886 -2982886.242
Annex 3: DISCOUNTED CASH FLOW-TOTAL CAPITAL INVESTED (Continued)

5
 PRODUCTION
  5 6 7 8 9 10
TOTAL CASH INFLOW 59018000 59018000 59018000 59018000 59018000 59018000

1. Inflow Operation 59018000 59018000 59018000 59018000 59018000 59018000

Sales Revenue 59018000 59018000 59018000 59018000 59018000 59018000

Interest on Securities 0 0 0 0 0 0

2. Other Income 0 0 0 0 0 0

TOTAL CASH OUTFLOW 51852938.85 51967274.48 52065328.83 52163383.18 52163383.18 52163383.18

3. Increase in Fixed Assets 0 0 0 0 0 0

Fixed Investments 0 0 0 0 0 0

Pre-production Expenditures 0 0 0 0 0 0

4. Increase in Net Working Capital 0 0 0 0 0 0

5. Operating Costs 49401644.54 49401644.54 49401644.54 49401644.54 49401644.54 49401644.54

6. Corporate Tax Paid 2451294.309 2565629.931 2663684.284 2761738.637 2761738.637 2761738.637

NET CASH FLOW 7165061.148 7050725.525 6952671.172 6854616.819 6854616.819 6854616.819

CUMMULATIVE NET CASH FLOW 8773241.552 15823967.08 22776638.25 29631255.07 36485871.89 43340488.71

Net Present Value (at 18%) 2654164.629 2213399.243 1849675.876 1545414.967 1309673.698 1109892.97

Cumulative Net present Value -328721.613 1884677.63 3734353.481 5279768.473 6589442.171 7699335.141

Net Present Value (at 18%) 7,699,335.14

Internal Rate of Return 32.3%

Annex 4: NET INCOME STATEMENT ( in Birr)

6
 PRODUCTION
  1 2 3 4 5
Capacity Utilization (%) 60% 75% 90% 100% 100%

1. Total Income 35410800 44263500 53116200 59018000 59018000

Sales Revenue 17000000 25500000 34000000 34000000 34000000
Other Income 0 0 0 0 0
2. Less Variable Cost 9991229.35 14986844.03 19982458.7 19982458.7 19982458.7
VARIABLE MARGIN 7008770.65 10513155.98 14017541.3 14017541.3 14017541.3
(In % of Total Income) 41.23 41.23 41.23 41.23 41.23
3. Less Fixed Costs 2974327 3038263 3102199 3102199 3102199
OPERATIONAL MARGIN 4034443.65 7474892.98 10915342.3 10915342.3 10915342.3
(In % of Total Income) 23.73 29.31 32.1 32.1 32.1
4. Less Cost of Finance 5320383.31 2454604.76 2045503.96 1636403.17 1227302.38
5. GROSS PROFIT -1285939.66 5020288.22 8869838.34 9278939.13 9688039.92
6. Income (Corporate) Tax 0 0 2660951.5 2783681.74 2906411.98
7. NET PROFIT -1285939.66 5020288.22 6208886.83 6495257.39 6781627.94
RATIOS (%)  
Gross Profit/Sales 4.04% 10.77% 12.33% 13.29% 13.84%
Net Profit After Tax/Sales 4.04% 10.77% 8.63% 9.30% 9.69%
Return on Investment 28.33% 30.79% 24.79% 24.96% 24.60%
Return on Equity 13.13% 43.77% 42.07% 50.40% 52.50%
Annex 4: NET INCOME STATEMENT (in Birr): Continued

7
 PRODUCTION
  6 7 8 9 10
Capacity Utilization (%) 100% 100% 100% 100% 100%

1. Total Income 59018000 59018000 59018000 59018000 59018000

Sales Revenue 34000000 34000000 34000000 34000000 34000000
Other Income 0 0 0 0 0
2. Less Variable Cost 19982458.7 19982458.7 19982458.7 19982458.7 19982458.7
VARIABLE MARGIN 14017541.3 14017541.3 14017541.3 14017541.3 14017541.3
(In % of Total Income) 41.23 41.23 41.23 41.23 41.23
3. Less Fixed Costs 2661109 2661109 2661109 2661109 2661109
OPERATIONAL MARGIN 11356432.3 11356432.3 11356432.3 11356432.3 11356432.3
(In % of Total Income) 33.4 33.4 33.4 33.4 33.4
4. Less Cost of Finance 818201.59 409100.79 0 0 0
5. GROSS PROFIT 10538230.71 10947331.51 11356432.3 11356432.3 11356432.3
6. Income (Corporate) Tax 3161469.21 3284199.45 3406929.69 3406929.69 3406929.69
7. NET PROFIT 7376761.5 7663132.05 7949502.61 7949502.61 7949502.61
RATIOS (%)  
Gross Profit/Sales 14.49% 15.04% 15.60% 15.60% 15.60%
Net Profit After Tax/Sales 10.14% 10.53% 10.92% 10.92% 10.92%
Return on Investment 24.38% 24.02% 23.66% 23.66% 23.66%
Return on Equity 54.95% 57.05% 59.15% 59.15% 59.15%
Annex 5: Projected Balance Sheet (in Birr)

8
 CONSTRUCTION PRODUCTION
  Year 1 Year 2 1 2 3 4
TOTAL ASSETS 23705798.55 124803554.4 147542200.3 156801248 164234827.8 175644227.9
1. Total Current Assets 0 77391957.32 104794102.9 118716650.4 130813729.9 146886629.7
Inventory on Materials and Supplies 0 0 43573055.99 49797778.26 56022500.56 62247222.83
Work in Progress 0 0 3484750.783 3982572.335 4480393.886 4978215.412
Finished Products in Stock 0 0 6969501.592 7965144.669 8960787.746 9956430.849
Accounts Receivable 0 0 16812432 19214208 21615984 24017760
Cash in Hand 0 0 147061.7452 168070.5623 189079.405 210088.2221
Cash Surplus, Finance Available 0 77391957.32 33807300.8 37588876.51 39544984.29 45476912.34
Securities 0 0 0 0 0 0
2. Total Fixed Assets, Net of Depreciation 23705798.55 47411597.1 42748097.38 38084597.66 33421097.94 28757598.22
Fixed Investment 0 22576951 45153902 45153902 45153902 45153902
Construction in Progress 22576951 22576951 0 0 0 0
Pre-Production Expenditure 1128847.55 2257695.1 2257695.1 2257695.1 2257695.1 2257695.1
Less Accumulated Depreciation 0 0 4663499.72 9326999.44 13990499.16 18653998.88
3. Accumulated Losses Brought Forward 0 0 0 0 0 0
4. Loss in Current Year 0 0 0 0 0 0
TOTAL LIABILITIES 23705798.55 124803554.4 147542200.3 156801248 164234827.8 175644227.9
5. Total Current Liabilities 0 0 16812432 19214208 21615984 24017760
Accounts Payable 0 0 16812432 19214208 21615984 24017760
Bank Overdraft 0 0 0 0 0 0
6. Total Long-term Debt 14223479.13 74882132.65 74882132.65 62401777.22 49921421.77 37441066.34
Loan A 14223479.13 74882132.65 74882132.65 62401777.22 49921421.77 37441066.34
Loan B 0 0 0 0 0 0
7. Total Equity Capital 9482319.42 49921421.77 49921421.77 49921421.77 49921421.77 49921421.77
Ordinary Capital 9482319.42 49921421.77 49921421.77 49921421.77 49921421.77 49921421.77
Preference Capital 0 0 0 0 0 0
Subsidies 0 0 0 0 0 0
8. Reserves, Retained Profits Brought Forward 0 0 0 5926213.899 25263841.03 42776000.29
9.Net Profit After Tax 0 0 5926213.899 19337627.13 17512159.26 21487979.5
Dividends Payable 0 0 0 0 0 0
Retained Profits 0 0 5926213.899 19337627.13 17512159.26 21487979.5

9
Annex 5: Projected Balance Sheet (in Birr): Continued

10
 PRODUCTION
  5 6 7 8 9 10
TOTAL ASSETS 44773639.25 48036377.12 51527908.51 57971965.33 64416022.15 70860078.97
1. Total Current Assets 41399349.25 45072647.12 48974738.51 55829355.33 62683972.15 69538588.97
Inventory on Materials and Supplies 17203269.13 17203269.13 17203269.13 17203269.13 17203269.13 17203269.13
Work in Progress 1348966.728 1348966.728 1348966.728 1348966.728 1348966.728 1348966.728
Finished Products in Stock 2697933.456 2697933.456 2697933.456 2697933.456 2697933.456 2697933.456
Accounts Receivable 6438327.275 6438327.275 6438327.275 6438327.275 6438327.275 6438327.275
Cash in Hand 288705.792 288705.792 288705.792 288705.792 288705.792 288705.792
Cash Surplus, Finance Available 13422146.84 17095444.74 20997536.1 27852152.92 34706769.74 41561386.56
Securities 0 0 0 0 0 0
2. Total Fixed Assets, Net of Depreciation 3374290 2963730 2553170 2142610 1732050 1321490
Fixed Investment 5427090 5427090 5427090 5427090 5427090 5427090
Construction in Progress 0 0 0 0 0 0
Pre-Production Expenditure 271354.5 271354.5 271354.5 271354.5 271354.5 271354.5
Less Accumulated Depreciation 2324154.5 2734714.5 3145274.5 3555834.5 3966394.5 4376954.5
3. Accumulated Losses Brought Forward 0 0 0 0 0 0
4. Loss in Current Year 0 0 0 0 0 0
TOTAL LIABILITIES 44773639.25 48036377.12 51527908.51 57971965.33 64416022.15 70860078.97
5. Total Current Liabilities 6438327.275 6438327.275 6438327.275 6438327.275 6438327.275 6438327.275
Accounts Payable 6438327.275 6438327.275 6438327.275 6438327.275 6438327.275 6438327.275
Bank Overdraft 0 0 0 0 0 0
6. Total Long-term Debt 5447463.912 2723731.969 0 0 0 0
Loan A 5447463.912 2723731.969 0 0 0 0
Loan B 0 0 0 0 0 0
7. Total Equity Capital 10894927.85 10894927.85 10894927.85 10894927.85 10894927.85 10894927.85
Ordinary Capital 10894927.85 10894927.85 10894927.85 10894927.85 10894927.85 10894927.85
Preference Capital 0 0 0 0 0 0
Subsidies 0 0 0 0 0 0
8. Reserves, Retained Profits Brought
Forward 16273233.47 21992920.19 27979390.05 34194653.38 40638710.2 47082767.02
9. Net Profit After Tax 5719686.746 5986469.84 6215263.33 6444056.819 6444056.819 6444056.819
Dividends Payable 0 0 0 0 0 0
Retained Profits 5719686.746 5986469.84 6215263.33 6444056.819 6444056.819 6444056.819

11