Investment Office ANRS

Project Profile on the

DEHYDRATED Vegetables processing plant

Development Studies Associates

(DSA)

October 2008
Addis Ababa
 Table of Contents

1. Executive Summary..........................................................................................1
2. Product Description and Application..............................................................1
3. Market Study, Plant Capacity and Production Program..............................2
3.1 Market Study...................................................................................................................2
3.1.1 Present Demand and Supply....................................................................................2
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.......................................3
5. Location and Site...............................................................................................4
6. Technology and Engineering............................................................................5
6.1 Production Process...........................................................................................................5
6.2 Machinery and Equipment...............................................................................................5
6.3 Civil Engineering Cost....................................................................................................7
7. Human Resource and Training Requirement................................................7
7.1 Human Resource..............................................................................................................7
7.2 Training Requirement......................................................................................................8
8. Financial Analysis.............................................................................................8
8.1 Underlying Assumption...................................................................................................8
8.2 Investment........................................................................................................................9
8.3 Production Costs............................................................................................................10
8.4 Financial Evaluation......................................................................................................10
9. Economic and Social Benefit and Justification.............................................11
ANNEXES...............................................................................................................13
 1. Executive Summary

This profile provides basic information on the production of 270 tons of Dehydrated Vegetables
per annum. The total investment requirement of the project is estimated at about Birr 4.4 million;
of which Birr 2.5 million is for machinery and equipment while Birr 352 thousands is the cost of
working capital. Based on the cash flow statement, the calculated internal rate of return (IRR)
and simple rate of return of the project are 23.7 % and 20.7 %, respectively. And the net present
value (NPV) at 18 % discounting rate is Birr 933 thousand. The plant is expected to create
employment opportunities for about 30 persons.

2. Product Description and Application

Vegetables are generally perishable food items. Without proper preservation, they are often
spoiled due to microbial degradation or enzymatic reaction. Preservation techniques aim at
complete or partial destruction or elimination of microbial agents (mold, yeast, bacteria) by
inhibiting their growth and activity. Through preservation, it is possible to store, transport and
distribute vegetables without changing their basic natural content. There are several methods of
preserving vegetables from spoilage. These include heat treatment, dehydration, salting,
pickling, preserving with sugar and chemical freezing and sterilization by electric or ultraviolet.
This project deals with the drying (dehydration) forms of preservation. Drying/dehydrating is a
preserving method in which food products are preserved by taking out the moisture from them.

Dehydrated vegetables are basically used as culinary vegetables and as processed raw materials.
They are used as culinary raw vegetables by housewives, caterers and institutions and also in
more specialized applications such as armed forces rations and others. Most widely used
products are potato as granules and flakes, followed by onions, peas, green beans, vegetable
mince and carrot. Dehydrated vegetables have better flavour, colour, aroma, ease of re-hydration
and acceptability in comparison to sun dried products.

1
 3. Market Study, Plant Capacity and Production Program
3.1 Market Study
3.1.1 Present Demand and Supply

In recent years, a culture of growing and producing vegetables for commercial purpose has been
developing in the ANRS, especially in communities close to urban centres. Unfortunately, in
some season of the year, large amount of vegetables is harvested which the market can not
absorb. As a result, farmers are forced to sell their produce at very low prices, and this
discourages farmers from producing these crops. In other seasons, the very crops which were in
large supply one or two months before are not available in the market.

One main cause of this fluctuation in the supply of vegetable is the lack of preservation system
for these products. Through the problem of perishability of vegetable can not be eliminated
completely, using different methods of preservation will help both the producers (farmers) and
the consumers. Dehydrated vegetables are used as processed raw materials in wide range of food
processing industries. The principal users are frozen food industry, canned food industry, extrude
snack food industry, bakery industry, baby food industry and processed meat industry.

Except some traditional and crude methods of preservation, there is no single plant which is
engaged in the preservation of vegetables through drying and other techniques of preservation in
the ANRS. However, the volume of vegetables that are sold at “throw- away prices” and are left
to rot in some localities in the region could justify the establishment of a plant which will be
engaged in the preservation of vegetables.

3.1.2 Projected Demand

Sharing some little fraction of the current supply of the products (which is estimated to be in
more than ten thousand tons and mainly supplied from imports), is enough as a market for the
envisaged plant. There is also the possibility of exporting the product. With the growth in
population and urbanization, the future demand for dried vegetables will certainly increases in
the future. Hence, a small manufacturing plant producing some hundred tons of different dried
and canned vegetables and fruits (having competitive qualities and prices) certainly faces
unlimited market demand for its product.

2
 3.1.3 Pricing and Distribution

Dehydrated vegetables are sold at different prices in the groceries or food stores. The prices
range from Birr 14 to Birr 20 per Kg. Allowing margin for wholesale and retailers the envisaged
plant is expected to sell at Birr 12,000 per ton. The product distribution is handled through
supermarkets and retail shops.

3.2 Plant Capacity

The minimum economic capacity of a unit manufacturing dehydrated vegetables is 270 tons per
annum based on two shift operation of 275 days working schedule in a year. The working days
are set by deducting all Sundays and public holidays in a given year, and by assuming that
annual maintenance works and unexpected work interruptions take 25 days.

3.3 Production Program

As the plant is new and is equipped with new machinery, and to penetrate the market which is
largely occupied by imports, slow production build up or gradually rise to full capacity is
necessary. Therefore, the envisaged plant is expected to operate at 70 % and 90 % in the first and
the second years of the production period, respectively. The third year on wards, the plat will
operate at its full capacity.

4. Raw Materials and Utilities

4.1 Availability and Source of Raw Materials

Production of vegetables is more prominent in areas around Bahir Dar, along Bahir Dar-Woreta
road, around Gondar, near Dessie and Combolcha. Thus, there will be adequate supply of raw
materials in the region.

4.2 Annual Requirement and Cost of Raw Materials and Utilities

The annual requirement of main raw materials for the manufacturing of 300 tons dehydrated and
canned fruits and vegetables at 100 % capacity utilization is given as follows:

3
 Table 4.1
Raw Material Requirement and Costs

Unit Qty. Unit Total

No. Type of Raw Material
Price Cost
1. Peas Tons 100 2000 200000
2. Potato ,, 110 1000 110000
3. Onions ,, 90 1500 135000
4. Garlic ,, 20 4000 80000
5. Cauliflower ,, 20 1500 30000
6. Cabbage ,, 20 1000 20000
7. Ginger ,, 20 2000 40000
8. Spinach ,, 20 2000 40000
9. Chemicals 65000
10. Packaging 300000
Total 400 1,020,000

The major utilities required for the plant are fuel oil, water and electricity. Fuel oil is used for the
boiler, water is used for washing the vegetables, and electric power is used as an energy source
for boiler and for driving the motors of the production machinery. The annual consumption of
these utilities in terms of quantity is 30 tons of fuel oil, 4,000 m 3 of water and 13.2 MWH. In
terms of value, fuel oil is estimated to cost Birr 90,000 and electricity costs Birr 7,260 while the
cost of water amounts Birr 10,600.

Table 4.2
UTILITIES REQUIREMENT

No. Utility Requirement Cost

(Annual) (Birr)
1. Electricity 13200 KWH 7,260
2. Water 4000 m3 10,600
3. Fuel Oil 30 tons 120,000
Total 137,860

5. Location and Site

For its convenience to procure different types of raw materials, Bahir-Dar is an appropriate town
to establish the plant.

4
 6. Technology and Engineering
6.1 Production Process

The modern process of dehydration consists of removal of moisture from foods by the
application of heat usually in the presence of controlled flow of air. The proposed unit may have
facilities for dehydration of a variety of vegetables. Different types of vegetables require
different treatments for preparing them for dehydration. The treatments include besides selection
of proper size and quality, washing peeling and cutting to required size and in some cases
blanching also. Vegetables are dehydrated in various types of dehydrators like cabinets, stack
dryer, kiln dryers or tunnel dryers. However, now-a-days the most prevalent practice is
dehydrating in tunnel dryers. A tunnel dryer normally consists of a tunnel type chamber through
which the product to be dehydrated moves progressively on trays. Hot air is blown from one end
of the drying chamber or tunnel and moist and cooled air exits from the other end. The material
to be dried is usually spread on trays and is carried through the tunnel either on cars or on
runways.

Alternatively, vegetables can be dehydrated in various types of other dehydrators like cabinets,
stack dryer, kiln dryers or tunnel dryers. However, due to its efficiency and effectiveness now-a-
days the most prevalent practice is dehydrating by tunnel dryers.

6.2 Machinery and Equipment

The list of machinery and equipment that are required to dehydrate vegetables is given in Table
6.1.

5
 Table 6.1
LIST OF MACHINERY & EQUIPMENT
No. Specification No
1. Boiler 1
2. Can reforming Unit 1
3. Heavy Duty Double Seamers 1
4. Grinding Machine: Screen Type 1
5. Pea Hullers with 1H P Motor 1
6. Spray Washing Machine 1
7. Abrasive peelers 1
8. Halving machine 1
9. Slicing machine 1
10. Pulp machine 1
11. Tunnel Dryer 1
12. Preparation/Filling Tables 2
13. SS Blanching Lye Peeling Equipment 1
14. SS Steam Jacketed Kittle: Tilting Type 1
15. Exhaust Box: Go Round Type 1
16. Pasty Material Filling Unit 1
17. Retort System With Spare Crates 1
18. Cooling Tank for Processed Cans 1
19. Cain Hoist 1
20. Counter Weight Scale 1
21. SS Knives 1
22. Utensil of Aluminum 1
23. Empty Can Wash 1
The Price for Machinery and
Equipment is Approx Birr 2.5 million

Most these machineries and equipment are to be imported. The total cost of machinery and
equipment to be imported is estimated to be Birr 2.2 million while the balance 300 thousand are
procured locally.

Machinery Suppliers Address:

Geeta Food Engineering
Plot No.C-7/1 Pawne Midc Savita Chemicals, Thane-Belapur Road,
Navi Mumbai-4000705,
Maharashatra, India

6
 6.3 Civil Engineering Cost

It is estimated that a total area of 800 m 2 of land will be required for the envisaged project, out of
which 400 m2 is built-up area. The total cost of the building, including the civil work, is about
Birr 1,000,000. The total cost of land lease is equal to Birr 48,000; which is based on the land
lease price of Dessie for industrial purpose- which is Birr 60 per square meter. Of the total cost
of the lease, 5 % is paid in the beginning while the rest will be paid in 40 years.

7. Human Resource and Training Requirement

7.1 Human Resource

The man power required for operating the plant on a single shift basis is indicated in Table 7.1.
Table 7.1
MANPOWER REQUIREMENT
Description No Monthly Salary Annual
(Birr) Salary (Birr)
A. Administration
1. Manager 1 5000 60000
3 Chemist 1 2500 30000
4. Technicians 2 1500 36000
5. Personnel Officer 1 1500 18000
6. Accountant 1 1500 18000
7.Seretary 1 800 9600
8.Slaesman 1 1200 14400
9. Storekeeper 1 800 9600
10.Guards 4 400 19200
11. Driver 1 700 8400
Sub-total 12 223,200
B. Production
1. Skilled Workers (operators) 6 600 43200
2. Unskilled Workers 12 400
(labourers) 57600
Benefits (20%) 64,800
Total 30 388,800

The total annual wages and salary, including 20 % benefits, amount to Birr 388,800.

7
 7.2 Training Requirement

Canning operation demands good knowledge of the hygienic requirements and treatment levels
of the products to be handled. Therefore, the proper on job training should be given to the
workers at least for a month by hiring one or more experts in the area.

8. Financial Analysis
8.1 Underlying Assumption

The financial analysis of Dehydrated Vegetables processing 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%

8
 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 4.4 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
2,400   2,400
Building And Civil Works
1,000,000   1,000,000
Office Equipment
100,000   100,000
Vehicles
250,000   250,000
Plant Machinery & Equipment
300,000 2,200,000 2,500,000
Total Fixed Investment Cost
1,652,400 2,200,000 3,852,400
Pre Production Capital
Expenditure* 82,620 110,000 192,620
Total Initial Investment
1,735,020 2,310,000 4,045,020
Working Capital at Full Capacity
352,190 0 352,190
Total 2,087,210 2,310,000 4,397,210
*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 2.3 million or 52.5 % of the total
investment cost.

9
 8.3 Production Costs

The total production cost at full capacity operation is estimated at Birr 2.8 million (See Table
8.2). Raw materials and utilities account for 41.8 %.

Table 8.2
PRODUCTION COST AT FULL CAPACITY

Raw Material Requirement Cost

1. Local Raw Materials 1,020,000
2. Foreign Raw Materials 0

Total Production Cost at full Capacity

Items Cost
1.      Raw materials 1,020,000
2.      Utilities 137,860
3.      Wages and Salaries 388,800
4.      Spares and Maintenance 115,572
Factory Costs 1,662,232
5.      Depreciation 398,524
6.      Financial Costs
707,975
  Total Production Cost 2,768,731

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.

10
 II. Breakeven Analysis

The breakeven point of the projects is given by the formula:

BEP = Fixed Cost

Sale –Variable Cost at full capacity.

The project will break even at 32.5 % of capacity utilization

III. Payback Period

Investment cost and income statement projection are used in estimating the project payback
period. The project will payback fully the initial investment less working capital in four 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 20.7% 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 23.7 % and the net present value (NPV) at 18 % discount is Birr 933 thousands.

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

11
 A. Profit Generation

The project is found to be financially viable and earns on average a profit of Birr 744 thousand
per year and Birr 7.4 million within the project life. Such result induces the 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 2.9 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

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 3.1 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 30 professionals as well as support
stuffs. Consequently the project creates income of birr 389 thousands per year. This would be
one of the commendable accomplishments of the project.

E. Pro Environment Project

The proposed production process is environment friendly.

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ANNEXES

13
 Annex 1: Total Net Working Capital Requirements (in Birr)
CONSTRUCTION PRODUCTION
  Year 1 Year 2 1 2 3 4

Capacity Utilization (%) 0 0 70% 90% 100% 100%

1. Total Inventory 0.00 0.00 284206.10 365407.84 406008.72 406008.72

Raw Materials in Stock- Total 0.00 0.00 77890.91 100145.45 111272.73 111272.73

Raw Material-Local 0.00 0.00 77890.91 100145.45 111272.73 111272.73

Raw Material-Foreign 0.00 0.00 0.00 0.00 0.00 0.00

Factory Supplies in Stock 0.00 0.00 1573.67 2023.29 2248.10 2248.10

Spare Parts in Stock and Maintenance 0.00 0.00 8825.50 11347.07 12607.85 12607.85

Work in Progress 0.00 0.00 39341.71 50582.19 56202.44 56202.44

Finished Products 0.00 0.00 78683.41 101164.39 112404.87 112404.87

2. Accounts Receivable 0.00 0.00 247418.18 318109.09 353454.55 353454.55

3. Cash in Hand 0.00 0.00 40217.67 51708.44 57453.82 57453.82

CURRENT ASSETS 0.00 0.00 493951.05 635079.92 705644.35 705644.35

4. Current Liabilities 0.00 0.00 247418.18 318109.09 353454.55 353454.55

Accounts Payable 0.00 0.00 247418.18 318109.09 353454.55 353454.55

TOTAL NET WORKING CAPITAL REQUIRMENTS 0.00 0.00 246532.86 316970.83 352189.81 352189.81

INCREASE IN NET WORKING CAPITAL 0.00 0.00 246532.86 70437.96 35218.98 0.00

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 406008.72 406008.72 406008.72 406008.72 406008.72 406008.72

Raw Materials in Stock-Total 111272.73 111272.73 111272.73 111272.73 111272.73 111272.73

Raw Material-Local 111272.73 111272.73 111272.73 111272.73 111272.73 111272.73

Raw Material-Foreign 0.00 0.00 0.00 0.00 0.00 0.00

Factory Supplies in Stock 2248.10 2248.10 2248.10 2248.10 2248.10 2248.10

Spare Parts in Stock and Maintenance 12607.85 12607.85 12607.85 12607.85 12607.85 12607.85

Work in Progress 56202.44 56202.44 56202.44 56202.44 56202.44 56202.44

Finished Products 112404.87 112404.87 112404.87 112404.87 112404.87 112404.87

2. Accounts Receivable 353454.55 353454.55 353454.55 353454.55 353454.55 353454.55

3. Cash in Hand 57453.82 57453.82 57453.82 57453.82 57453.82 57453.82

CURRENT ASSETS 705644.35 705644.35 705644.35 705644.35 705644.35 705644.35

4. Current Liabilities 353454.55 353454.55 353454.55 353454.55 353454.55 353454.55

Accounts Payable 353454.55 353454.55 353454.55 353454.55 353454.55 353454.55

TOTAL NET WORKING CAPITAL REQUIRMENTS 352189.81 352189.81 352189.81 352189.81 352189.81 352189.81

INCREASE IN NET WORKING CAPITAL 0.00 0.00 0.00 0.00 0.00 0.00

2
 Annex 2: Cash Flow Statement (in Birr)
CONSTRUCTION PRODUCTION
  Year 1 Year 2 1 2 3 4
TOTAL CASH INFLOW 2022510.00 2374699.81 2515418.18 2986690.91 3275345.45 3240000.00
1. Inflow Funds 2022510.00 2374699.81 247418.18 70690.91 35345.45 0.00
Total Equity 809004.00 949879.92 0.00 0.00 0.00 0.00
Total Long Term Loan 1213506.00 1424819.88 0.00 0.00 0.00 0.00
Total Short Term Finances 0.00 0.00 247418.18 70690.91 35345.45 0.00
2. Inflow Operation 0.00 0.00 2268000.00 2916000.00 3240000.00 3240000.00
Sales Revenue 0.00 0.00 2268000.00 2916000.00 3240000.00 3240000.00
Interest on Securities 0.00 0.00 0.00 0.00 0.00 0.00
3. Other Income 0.00 0.00 0.00 0.00 0.00 0.00
TOTAL CASH OUTFLOW 2022510.00 2022510.00 2338677.34 2347653.76 2672263.12 2564762.12
4. Increase In Fixed Assets 2022510.00 2022510.00 0.00 0.00 0.00 0.00
Fixed Investments 1926200.00 1926200.00 0.00 0.00 0.00 0.00
Pre-production
Expenditures 96310.00 96310.00 0.00 0.00 0.00 0.00
5. Increase in Current Assets 0.00 0.00 493951.05 141128.87 70564.44 0.00
6. Operating Costs 0.00 0.00 1136751.29 1450204.80 1606931.56 1606931.56
7. Corporate Tax Paid 0.00 0.00 0.00 0.00 291213.56 307043.51
8. Interest Paid 0.00 0.00 707975.00 316599.11 263832.59 211066.07
9.Loan Repayments 0.00 0.00 0.00 439720.98 439720.98 439720.98
10.Dividends Paid 0.00 0.00 0.00 0.00 0.00 0.00
Surplus(Deficit) 0.00 352189.81 176740.84 639037.15 603082.33 675237.88
Cumulative Cash Balance 0.00 352189.81 528930.64 1167967.79 1771050.13 2446288.01

3
 Annex 2: Cash Flow Statement (in Birr): Continued
PRODUCTION
  5 6 7 8 9 10
TOTAL CASH INFLOW 3240000.00 3240000.00 3240000.00 3240000.00 3240000.00 3240000.00
1. Inflow Funds 0.00 0.00 0.00 0.00 0.00 0.00
Total Equity 0.00 0.00 0.00 0.00 0.00 0.00
Total Long Term Loan 0.00 0.00 0.00 0.00 0.00 0.00
Total Short Term Finances 0.00 0.00 0.00 0.00 0.00 0.00
2. Inflow Operation 3240000.00 3240000.00 3240000.00 3240000.00 3240000.00 3240000.00
Sales Revenue 3240000.00 3240000.00 3240000.00 3240000.00 3240000.00 3240000.00
Interest on Securities 0.00 0.00 0.00 0.00 0.00 0.00
3. Other Income 0.00 0.00 0.00 0.00 0.00 0.00
TOTAL CASH OUTFLOW 2527825.56 2517446.20 2480509.64 2003852.09 2003852.09 2003852.09
4. Increase In Fixed Assets 0.00 0.00 0.00 0.00 0.00 0.00
Fixed Investments 0.00 0.00 0.00 0.00 0.00 0.00
Pre-production
Expenditures 0.00 0.00 0.00 0.00 0.00 0.00
5. Increase in Current Assets 0.00 0.00 0.00 0.00 0.00 0.00
6. Operating Costs 1606931.56 1606931.56 1606931.56 1606931.56 1606931.56 1606931.56
7. Corporate Tax Paid 322873.47 365260.62 381090.58 396920.53 396920.53 396920.53
8. Interest Paid 158299.55 105533.04 52766.52 0.00 0.00 0.00
9. Loan Repayments 439720.98 439720.98 439720.98 0.00 0.00 0.00
10.Dividends Paid 0.00 0.00 0.00 0.00 0.00 0.00
Surplus(Deficit) 712174.44 722553.80 759490.36 1236147.91 1236147.91 1236147.91
Cumulative Cash Balance 3158462.45 3881016.25 4640506.61 5876654.52 7112802.43 8348950.34

4
 Annex 3: DISCOUNTED CASH FLOW-TOTAL CAPITAL INVESTED
CONSTRUCTION PRODUCTION
  Year 1 Year 2 1 2 3 4
TOTAL CASH INFLOW 0.00 0.00 2268000.00 2916000.00 3240000.00 3240000.00

1. Inflow Operation 0.00 0.00 2268000.00 2916000.00 3240000.00 3240000.00

Sales Revenue 0.00 0.00 2268000.00 2916000.00 3240000.00 3240000.00

Interest on Securities 0.00 0.00 0.00 0.00 0.00 0.00

2. Other Income 0.00 0.00 0.00 0.00 0.00 0.00

TOTAL CASH OUTFLOW 2022510.00 2022510.00 1383284.16 1520642.77 1933364.10 1913975.07

3. Increase in Fixed Assets 2022510.00 2022510.00 0.00 0.00 0.00 0.00

Fixed Investments 1926200.00 1926200.00 0.00 0.00 0.00 0.00

Pre-production Expenditures 96310.00 96310.00 0.00 0.00 0.00 0.00

4. Increase in Net Working Capital 0.00 0.00 246532.86 70437.96 35218.98 0.00

5. Operating Costs 0.00 0.00 1136751.29 1450204.80 1606931.56 1606931.56

6. Corporate Tax Paid 0.00 0.00 0.00 0.00 291213.56 307043.51

- -
NET CASH FLOW 2022510.00 2022510.00 884715.84 1395357.23 1306635.90 1326024.93
- - - -
CUMMULATIVE NET CASH FLOW 2022510.00 4045020.00 3160304.16 1764946.92 -458311.02 867713.91
- -
Net Present Value (at 18%) 2022510.00 1713991.53 635389.14 849257.49 673948.26 579617.72
- - - - -
Cumulative Net present Value 2022510.00 3736501.53 3101112.38 2251854.89 1577906.63 -998288.91

5
 Annex 3: DISCOUNTED CASH FLOW-TOTAL CAPITAL INVESTED (Continued)
PRODUCTION
  5 6 7 8 9 10
TOTAL CASH INFLOW 3240000.00 3240000.00 3240000.00 3240000.00 3240000.00 3240000.00

1. Inflow Operation 3240000.00 3240000.00 3240000.00 3240000.00 3240000.00 3240000.00

Sales Revenue 3240000.00 3240000.00 3240000.00 3240000.00 3240000.00 3240000.00

Interest on Securities 0.00 0.00 0.00 0.00 0.00 0.00

2. Other Income 0.00 0.00 0.00 0.00 0.00 0.00

TOTAL CASH OUTFLOW 1929805.03 1972192.18 1988022.14 2003852.09 2003852.09 2003852.09

3. Increase in Fixed Assets 0.00 0.00 0.00 0.00 0.00 0.00

Fixed Investments 0.00 0.00 0.00 0.00 0.00 0.00

Pre-production Expenditures 0.00 0.00 0.00 0.00 0.00 0.00

4. Increase in Net Working Capital 0.00 0.00 0.00 0.00 0.00 0.00

5. Operating Costs 1606931.56 1606931.56 1606931.56 1606931.56 1606931.56 1606931.56

6. Corporate Tax Paid 322873.47 365260.62 381090.58 396920.53 396920.53 396920.53

NET CASH FLOW 1310194.97 1267807.82 1251977.86 1236147.91 1236147.91 1236147.91

CUMMULATIVE NET CASH FLOW 2177908.89 3445716.70 4697694.57 5933842.48 7169990.38 8406138.29

Net Present Value (at 18%) 485337.54 397996.61 333073.89 278697.05 236183.94 200155.88

Cumulative Net present Value -512951.37 -114954.76 218119.13 496816.18 733000.13 933156.01

Net Present Value (at 18%) 933,156.01

Internal Rate of Return 23.7%

6
 Annex 4: NET INCOME STATEMENT ( in Birr)
PRODUCTION
  1 2 3 4 5
Capacity Utilization (%) 70% 90% 100% 100% 100%

1. Total Income 2268000.00 2916000.00 3240000.00 3240000.00 3240000.00

Sales Revenue 2268000.00 2916000.00 3240000.00 3240000.00 3240000.00
Other Income 0.00 0.00 0.00 0.00 0.00
2. Less Variable Cost 988223.29 1270572.80 1411747.56 1411747.56 1411747.56
VARIABLE MARGIN 1279776.71 1645427.20 1828252.44 1828252.44 1828252.44
(In % of Total Income) 56.43 56.43 56.43 56.43 56.43
3. Less Fixed Costs 547052.00 578156.00 593708.00 593708.00 593708.00
OPERATIONAL MARGIN 732724.71 1067271.20 1234544.44 1234544.44 1234544.44
(In % of Total Income) 32.31 36.60 38.10 38.10 38.10
4. Less Cost of Finance 707975.00 316599.11 263832.59 211066.07 158299.55
5. GROSS PROFIT 24749.70 750672.09 970711.85 1023478.37 1076244.89
6. Income (Corporate) Tax 0.00 0.00 291213.56 307043.51 322873.47
7. NET PROFIT 24749.70 750672.09 679498.30 716434.86 753371.42
RATIOS (%)  
Gross Profit/Sales 1.09% 25.74% 29.96% 31.59% 33.22%
Net Profit After Tax/Sales 1.09% 25.74% 20.97% 22.11% 23.25%
Return on Investment 17.07% 24.47% 21.45% 21.09% 20.73%
Return on Equity 1.41% 42.68% 38.63% 40.73% 42.83%

7
 Annex 4: NET INCOME STATEMENT (in Birr):Continued
PRODUCTION
  6 7 8 9 10
Capacity Utilization (%) 100% 100% 100% 100% 100%

1. Total Income 3240000.00 3240000.00 3240000.00 3240000.00 3240000.00

Sales Revenue 3240000.00 3240000.00 3240000.00 3240000.00 3240000.00
Other Income 0.00 0.00 0.00 0.00 0.00
2. Less Variable Cost 1411747.56 1411747.56 1411747.56 1411747.56 1411747.56
VARIABLE MARGIN 1828252.44 1828252.44 1828252.44 1828252.44 1828252.44
(In % of Total Income) 56.43 56.43 56.43 56.43 56.43
3. Less Fixed Costs 505184.00 505184.00 505184.00 505184.00 505184.00
OPERATIONAL MARGIN 1323068.44 1323068.44 1323068.44 1323068.44 1323068.44
(In % of Total Income) 40.84 40.84 40.84 40.84 40.84
4. Less Cost of Finance 105533.04 52766.52 0.00 0.00 0.00
5. GROSS PROFIT 1217535.40 1270301.92 1323068.44 1323068.44 1323068.44
6. Income (Corporate) Tax 365260.62 381090.58 396920.53 396920.53 396920.53
7. NET PROFIT 852274.78 889211.35 926147.91 926147.91 926147.91
RATIOS (%)  
Gross Profit/Sales 37.58% 39.21% 40.84% 40.84% 40.84%
Net Profit After Tax/Sales 26.30% 27.44% 28.58% 28.58% 28.58%
Return on Investment 21.78% 21.42% 21.06% 21.06% 21.06%
Return on Equity 48.46% 50.56% 52.66% 52.66% 52.66%

8
 Annex 5: Projected Balance Sheet (in Birr)
CONSTRUCTION PRODUCTION
  Year 1 Year 2 1 2 3 4
TOTAL ASSETS 2022510.00 4397209.81 4669377.69 5051019.71 5326142.48 5602856.36
1. Total Current Assets 0.00 352189.81 1022881.69 1803047.71 2476694.48 3151932.36
Inventory on Materials and Supplies 0.00 0.00 88290.08 113515.81 126128.68 126128.68
Work in Progress 0.00 0.00 39341.71 50582.19 56202.44 56202.44
Finished Products in Stock 0.00 0.00 78683.41 101164.39 112404.87 112404.87
Accounts Receivable 0.00 0.00 247418.18 318109.09 353454.55 353454.55
Cash in Hand 0.00 0.00 40217.67 51708.44 57453.82 57453.82
Cash Surplus, Finance Available 0.00 352189.81 528930.64 1167967.79 1771050.13 2446288.01
Securities 0.00 0.00 0.00 0.00 0.00 0.00
2. Total Fixed Assets, Net of Depreciation 2022510.00 4045020.00 3646496.00 3247972.00 2849448.00 2450924.00
Fixed Investment 0.00 1926200.00 3852400.00 3852400.00 3852400.00 3852400.00
Construction in Progress 1926200.00 1926200.00 0.00 0.00 0.00 0.00
Pre-Production Expenditure 96310.00 192620.00 192620.00 192620.00 192620.00 192620.00
Less Accumulated Depreciation 0.00 0.00 398524.00 797048.00 1195572.00 1594096.00
3. Accumulated Losses Brought Forward 0.00 0.00 0.00 0.00 0.00 0.00
4. Loss in Current Year 0.00 0.00 0.00 0.00 0.00 0.00
TOTAL LIABILITIES 2022510.00 4397209.81 4669377.69 5051019.71 5326142.48 5602856.36
5. Total Current Liabilities 0.00 0.00 247418.18 318109.09 353454.55 353454.55
Accounts Payable 0.00 0.00 247418.18 318109.09 353454.55 353454.55
Bank Overdraft 0.00 0.00 0.00 0.00 0.00 0.00
6. Total Long-term Debt 1213506.00 2638325.88 2638325.88 2198604.90 1758883.92 1319162.94
Loan A 1213506.00 2638325.88 2638325.88 2198604.90 1758883.92 1319162.94
Loan B 0.00 0.00 0.00 0.00 0.00 0.00
7. Total Equity Capital 809004.00 1758883.92 1758883.92 1758883.92 1758883.92 1758883.92
Ordinary Capital 809004.00 1758883.92 1758883.92 1758883.92 1758883.92 1758883.92
Preference Capital 0.00 0.00 0.00 0.00 0.00 0.00
Subsidies 0.00 0.00 0.00 0.00 0.00 0.00
8. Reserves, Retained Profits Brought
Forward 0.00 0.00 0.00 24749.70 775421.79 1454920.09
9.Net Profit After Tax 0.00 0.00 24749.70 750672.09 679498.30 716434.86
Dividends Payable 0.00 0.00 0.00 0.00 0.00 0.00
Retained Profits 0.00 0.00 24749.70 750672.09 679498.30 716434.86

9
 Annex 5: Projected Balance Sheet (in Birr): Continued
PRODUCTION
  5 6 7 8 9 10
TOTAL ASSETS 5916506.80 6329060.60 6778550.97 7704698.87 8630846.78 9556994.69
1. Total Current Assets 3864106.80 4586660.60 5346150.97 6582298.87 7818446.78 9054594.69
Inventory on Materials and Supplies 126128.68 126128.68 126128.68 126128.68 126128.68 126128.68
Work in Progress 56202.44 56202.44 56202.44 56202.44 56202.44 56202.44
Finished Products in Stock 112404.87 112404.87 112404.87 112404.87 112404.87 112404.87
Accounts Receivable 353454.55 353454.55 353454.55 353454.55 353454.55 353454.55
Cash in Hand 57453.82 57453.82 57453.82 57453.82 57453.82 57453.82
Cash Surplus, Finance Available 3158462.45 3881016.25 4640506.61 5876654.52 7112802.43 8348950.34
Securities 0.00 0.00 0.00 0.00 0.00 0.00
2. Total Fixed Assets, Net of Depreciation 2052400.00 1742400.00 1432400.00 1122400.00 812400.00 502400.00
Fixed Investment 3852400.00 3852400.00 3852400.00 3852400.00 3852400.00 3852400.00
Construction in Progress 0.00 0.00 0.00 0.00 0.00 0.00
Pre-Production Expenditure 192620.00 192620.00 192620.00 192620.00 192620.00 192620.00
Less Accumulated Depreciation 1992620.00 2302620.00 2612620.00 2922620.00 3232620.00 3542620.00
3. Accumulated Losses Brought Forward 0.00 0.00 0.00 0.00 0.00 0.00
4. Loss in Current Year 0.00 0.00 0.00 0.00 0.00 0.00
TOTAL LIABILITIES 5916506.80 6329060.60 6778550.97 7704698.87 8630846.78 9556994.69
5. Total Current Liabilities 353454.55 353454.55 353454.55 353454.55 353454.55 353454.55
Accounts Payable 353454.55 353454.55 353454.55 353454.55 353454.55 353454.55
Bank Overdraft 0.00 0.00 0.00 0.00 0.00 0.00
6. Total Long-term Debt 879441.96 439720.98 0.00 0.00 0.00 0.00
Loan A 879441.96 439720.98 0.00 0.00 0.00 0.00
Loan B 0.00 0.00 0.00 0.00 0.00 0.00
7. Total Equity Capital 1758883.92 1758883.92 1758883.92 1758883.92 1758883.92 1758883.92
Ordinary Capital 1758883.92 1758883.92 1758883.92 1758883.92 1758883.92 1758883.92
Preference Capital 0.00 0.00 0.00 0.00 0.00 0.00
Subsidies 0.00 0.00 0.00 0.00 0.00 0.00
8. Reserves, Retained Profits Brought
Forward 2171354.95 2924726.37 3777001.15 4666212.50 5592360.41 6518508.31
9. Net Profit After Tax 753371.42 852274.78 889211.35 926147.91 926147.91 926147.91
Dividends Payable 0.00 0.00 0.00 0.00 0.00 0.00
Retained Profits 753371.42 852274.78 889211.35 926147.91 926147.91 926147.91
0

10