ANRS INVESTMENT COMMISSIN

www.investamhara.gov.et

Project Profile on the Establishment of Print

ink making 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..............................2
3.1 Market Study...................................................................................................................2
3.1.1 Present Demand and Supply....................................................................................2
3.1.2 Projected Demand....................................................................................................3
3.1.3 Pricing and Distribution...........................................................................................4
3.2 Plant Capacity..................................................................................................................5
3.3 Production Program.........................................................................................................5
4. Raw Materials and Utilities..............................................................................5
4.1 Availability and Source of Raw Materials.......................................................................5
4.2 Annual Requirement and Cost of Raw Materials and Utilities.......................................5
5. Location and Site...............................................................................................7
6. Technology and Engineering............................................................................7
6.1 Production Process...........................................................................................................7
6.2 Machinery and Equipment...............................................................................................7
6.3 Civil Engineering Cost....................................................................................................8
7. Human Resource and Training Requirement................................................9
7.1 Human Resource..............................................................................................................9
7.2 Training Requirement......................................................................................................9
8. Financial Analysis...........................................................................................10
8.1 Underlying Assumption.................................................................................................10
8.2 Investment......................................................................................................................11
8.3 Production Costs............................................................................................................11
8.4 Financial Evaluation......................................................................................................12
9. Economic and Social Benefit and Justification.............................................13
ANNEXES...............................................................................................................15
 1. Executive Summary

This project profile deals with print ink manufacturing plant in Amhara National Regional State.
The following presents the main findings of the study

Demand projection divulges that the domestic demand for printing ink is substantial and is
increasing with time. Accordingly, the planned plant is set to produce 90 ton annually. The total
investment cost of the project including working capital is estimated at Birr 7.07 million and
creates 25 job opportunity and 687,277 Birr of income

The financial result indicates that the project will generate profit beginning from the first year of
operation. Moreover, the project will break even at 19.5% of capacity utilization and it will
payback fully the initial investment less working capital in 2 years. The result further show that
the calculated IRR of the project is 35.7% with NPV discounted at 18% of Birr 4.22 million

In addition to this, the proposed project possesses wide range of economic and social benefits
such as increasing the level of investment, tax revenue, employment creation and import
substitution

Generally’ the project is technically feasible, financially and commercially viable as well as
socially and economically acceptable. Hence the project is worth implementing.

2. Product Description and Application

Printing inks are one of the most important ingredients of printing industry and with the
advancement of printing industry, need for the development of new type of printing inks has also
enhanced considerably. Printing ink is a combination of pigments, vehicles, and binders
(extenders) plasticizers to give desirable properties.

Printing inks are basically made in the form of paste and liquid ink depending upon the type of
application. For letter press, offset and screen printing the paste type of printing ink is required
while flexographic, gravure and rotary newsprint requires liquid form of ink for printing. The
different constituents of printing ink have different functions. For example the pigments import

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the basic coloring effect, vehicle provide the facility of transporting the coloring pigments to the
plate of the printing machine. Similarly to produce printing inks for specific purpose other
additives like binders, extenders and plasticizers are added.

Printing inks are used in every type of printing activity. This includes die, newspapers, books,
magazines, periodicals, advertisement materials, packaging and labeling.

3. Market Study, Plant Capacity and Production Program

3.1 Market Study

3.1.1 Present Demand and Supply
The whole demand for printing ink is met through import. The major sources are Japan, China,
United Kingdom, Netherland and United Arab Emirates. The annual demand for the last 10 years
is presented in table 1 below.
Table 1: Import of Printing Ink (in ton)

Year Import of Printing Ink

1997/98 106.4
1998/99 86.2
1999/00 95.4
2000/01 117.6
2001/02 145.2
2002/03 160.6
2003/04 307.2
2004/05 415.9
2005/06 379.8
2006/07 403.9
Source: Customs Authority, (various yeas)

The above table shows that the demand for printing ink has shown a continuous increase except
for two years (1998/99 and 2005/06). The average growth in demand do not exhibit similar
pattern. For instance, if we take the whole data of table 1 the average demand growth will be
about 19%. On the other hand, demand has grown by 6.3% in 2006/07 when compared from
2005/06. Whatever consideration is employed the trend clearly indicates the presence of ample
and growing demand to the product and the promising future of establishing a small producing
plant.

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 3.1.2 Projected Demand

The demand for printing ink is a derived demand. That is, it is a function of the demand for
newspapers, books, magazines, advertisement materials, packaging, labeling etc. With an
increase in the number of students the demand for books also increases. In this regard, it is
estimated that there are more than 11 million students enrolled in elementary and high schools
throughout the country. With the current huge investment in the education sector and the move to
increase education coverage throughout the country, the number of students is expected to
increase in the coming years. Thus, the demand for printing ink in producing books also
increases substantially in the years ahead. Similarly, with education, modernization and
urbanization the demand for newspapers, magazines etc also increases which in turn amplifies
the demand for printing ink. Furthermore, the growth of modern trade and competition being
witnessed in the country requires advertisement (including billboard, posters etc) and packaging
that will result in growing demand for printing ink. In general, the demand for the product will
increase in the coming years due to the factors stated above.

The future demand for printing ink is forecasted using the linear time trend fitted on the data
presented on table 1. In order to reflect the recent performance only the data between 2003/04 to
2006/07 is used in the forecasting. Accordingly, the following result is obtained.

Where Yi = Demand for printing ink and Xi = time trend

Accordingly, the projected demand for printing ink is given in table 2 below.

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 Table 2: Projected Demand for Printing Ink

Year Projected Demand

2007/08 440.2
2008/09 465.6
2009/10 491
2010/11 516.4
2011/12 541.8
2012/13 567.2
2013/14 592.6
2014/15 618
2015/16 643.4
2016/17 668.8
2017/18 694.2
2018/19 719.6

The projected demand presented in table 2 show that demand for print ink will be 491 ton in
2009/10 and reaches 719.6 within 10 years time. Furthermore, the table indicates that demand
grows on average by about 4.5% which can be considered conservative groth rate in view of the
whole figure given in table1

3.1.3 Pricing and Distribution

Information obtained from Customs Authority reveal that the average CIF price for a kilogram of
printing ink varies on average between Birr 35 to 44 in 2006/07. The overall price importers
have to pay (which is equivalent to producers price) is expected to be far higher than the above
range (at least by about 20%) when customs duty, transit port handling, inland transport and
bank charge is taken in to account.

Thus, based on the market research result and the capacity of the envisaged plant, the selling
price of printing ink is set to be Birr 40 per a kg of the product. Moreover, the available
wholesale network shall be used by the envisaged plant.

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 3.2 Plant Capacity

Given the expected demand for print ink as presented earlier, and the planned technology, the
envisaged plant is set to produce 90 tons of print ink annually.

3.3 Production Program

The program is scheduled based on the consideration that the envisaged plant will work 275 days
in a year in 1 shift, where the remaining days will be holidays and for maintenance. During the
first year of operation the plant will operate at 65 percent capacity and then it grows to 80
percent in the 2nd year and 90% in the 3rd year. The capacity will grow to 100 percent starting
from the 4th year. This consideration is developed based on the assumption that market and
logistics barriers would take place for the first two years of operation.

4. Raw Materials and Utilities

4.1 Availability and Source of Raw Materials

The major raw materials for the production of printing ink are carbon black, ester gum, oils,
calcium carbonates resins, pigments tin containers and other materials. Most of the materials are
imported from abroad

4.2 Annual Requirement and Cost of Raw Materials and Utilities

The annual raw material and utility requirement and the associated cost for the envisaged plant is
listed in table 3 here under.

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 Table 3 Material and Utility Requirement

Total Cost (Birr)

Material and Input Quantity
L.C. F.C.
Carbon Black 10,800 kg 0 415,692
Victoria Blue 6000 kg 0 739,008
Phlocyanine Blue 1632 kg 0 230,324
Phenolic Resin 1680 kg 0 35,349
Metallic Resin 1680 kg 0 73,285
Alkyd Resin 960 kg 41,631 0
Prussian Blue 624 kg 0 216,160
Ester Gum 18,000 kg 0 923,760
Bitumen 5784 kg 0 69,015
Calcium Carbonate 10,200 kg 0 44,494
Linseed Oil 7320 kg 0 422,620
Stand Oil 768 kg 0 29,560
Aromax Solvent 252 kg 0 13,579
Aluminum Hydrate 252 kg 0 1616.58
White Spirit 24 lt 0 739.008
Chrome Pigment 528 kg 0 101,614
Cobalt Drier 708 kg 0 545,018
Other oils (Grease and machine
12,000 kg 585,048 0
oil)
Tin Container (for 10 kg pack) 9000 pcs 92,376 0
Total Material Cost   719,055 3,861,835
Utility      
137500
Electricity 75,625  
kwh
Water 5000m3 6,625  
Total Utility Cost   82,250  

Based on the above table the total material and utility requirement at full capacity of operation is
estimated to be Birr 1,867,476

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 5. Location and Site
The appropriate locations for the envisaged project in view of the availability of infrastructure as
well as proximity to the market for the output are major towns of the region mainly Bahir Dar,
Kombolcha and Debre Birhan.

6. Technology and Engineering

6.1 Production Process
The process of printing ink manufacturing is simple. It involves first mixing of the ingredients
with additives in stainless steel planetary mixer. After completing mixing, the combination is
passed to triple role mill and 7 to 8 passes are given to achieve the required fineness. Then the
paste form of ink is tested and packed in tin containers.
The technological option available is related to the production capacity of the machineries. That
is, high capacity of operation is accompanied by automated machineries in vehicles preparation
and color dispersion activities. For the envisaged plant, however, the semi automated plant is
more appropriate and relatively cost effective.
6.2 Machinery and Equipment
The machineries and equipment required for manufacturing print ink is detailed in table 4 below.

Table 4: Machinery and Equipment

Machinery and Equipment Quantity

Ball Mill size 4'dia x4'x6' length made of M.S plate with refractory
Lining and 10HP motor 1
Triple Roll Mill with hollow chilled cast iron roll of 12'x26' size with
water cooling arrangements and 12.5 HP motor 1
Varnish Kettle 250 kgs. Cap made of stainless steel 1
Planetary Mixer made of S.S. capacity 250 lts. With dual speed and 5
H.P motor 1
Pot Mill having 3 Porcelain Pot of capacity 2 lts, each with 2 HP motor 1
Storage and Potting Vessel, 100 kgs capacity each 1
Weighing Scale Platform type with capacity 300 kgs 1
Weighing Scale 10 kg capacity 1
Laboratory Equipment 1 set
Colloid mils 1
Other Equipment and Tolls

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The total cost of machinery and equipment including freight insurance and bank cost is estimated
to be about Birr 1,693,560.

The following is machineries supplier address for the envisaged project

S.S. Engineering
31/1/B, A.C. PAUL STREET, KOLKATA
700057, WEST BENGAL, INDIA
Tel: 91-33-25532564
Mob. +919831094800
Fax: 91-33-25532564
Website: http://www.ssenggworks.com

6.3 Civil Engineering Cost

The total site area for the envisaged plant is estimated to be 600m 2 of land with covered area of
400m2. Of this 300m2 is allocated to the production place stores (50m 2) and office buildings and
facilities (50m2). The remaining space is left for parking and for future expansions

7. Human Resource and Training Requirement

7.1 Human Resource
The list of required manpower for the envisaged plant is stated in table 5 below

Table 5: Human Resource Requirement

Monthly Total Annual
Position No. Required
Salary Salary
Manager 1 10,264 123,168
Accountant/Cashier 1 3,079 36,950
Secretary 1 2,053 24,634
Sales Clerk 1 1,540 18,475
Chemist 1 3,849 46,188
Store Keeper 1 1,540 18,475
Technician 2 2,566 61,584
Supervisor 1 2,566 30,792
Operators 6 1,540 110,851
Daily Laborers 3 770 27,713

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Cleaners 2 770 18,475
Messengers 1 770 9,238
Driver 1 1,540 18,475
Guards 3 770 27,713
Benefit (20%) - 114,546
Total 25 - 687,277

The envisaged plant therefore, creates 25 job opportunity and about Birr 687,277 of income. The
professionals and support staffs for the envisaged plant shall be recruited from Amhara region

7.2 Training Requirement

Training of key personnel shall be conducted in collaboration with the suppliers of the plant
machineries. The training should primarily focuses on the production technology and machinery
maintenance and trouble shooting. Birr 25,000 will be allocated as training expense.

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 8. Financial Analysis
8.1 Underlying Assumption
The financial analysis of printing ink manufacturing plant is based on the data provided in the
preceding chapters and the following assumptions.

A. Construction and Finance

Construction period 2 year

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 fixed investment
B. Depreciation

Building 5%
Machinery and equipment 10%
Office furniture 10%
Vehicles 20%
Pre-production (amortization) 20%

C. Working Capital (Minimum Days of Coverage)

Raw Material-Local 30
Raw Material-Foreign 120
Factory Supplies in Stock 30
Spare Parts in Stock and Maintenance 30
Work in Progress 10
Finished Products 15
Accounts Receivable 30
Cash in Hand 30
Accounts Payable 30

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 8.2 Investment
The total investment cost of the project including working capital is estimated at Birr 7.07
million as shown in table 6 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 6: Total initial investment
Items L.C F.C Total
Land 1,800   1,800
Building and civil works 2,052,800 0 2,052,800
Office equipment 89,810 0 89,810
Vehicles 641,500 0 641,500
Plant machinery & equipment 0 1,693,560 1,693,560
Total fixed investment cost 2,785,910 1,693,560 4,479,470
Pre-production capital
224,114   224,114
expenditure*
Total initial investment 3,010,024 1,693,560 4,703,584
Working capital at full capacity 686,754 1,685,164 2,371,918
Total 3,696,778 3,378,724 7,075,502
*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 47.7% of the total investment cost.

8.3 Production Costs

The total production cost at full capacity operation is estimated at Birr 2.52 million as detailed in
table 7 below.

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 Table 7: Production Cost

Items Cost
1.      Raw materials 4,580,890
2.      Utilities 82,250
3.      Wages and Salaries 687,277
4.      Spares and Maintenance 44,823
Factory costs 5,524,044
5.      Depreciation 454,100
6.      Financial costs 509,638
Total Production Cost 6,487,782

8.4 Financial Evaluation

I. Profitability

According to the projected income statement attached in the annex part (see annex 4) the project
will generate profit beginning from the first year of operation. Ratios such as the percentage of
net profit to total sales, return on equity and return on total investment are 14%, 29% and 30% in
the first year and are gradually rising. Furthermore, the income statement and other profitability
indicators show that the project is viable.

II. Breakeven Analysis

The breakeven point of the project is estimated by using income statement projection.
Accordingly, the project will break even at 19.5% 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 2 years of
time.

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 IV. Simple Rate of Return

For the envisaged plant the simple rate of return equals to 32.7%

V. Internal Rate of Return and Net Present Value

Based on cash flow statement described in the annex part, the calculated IRR of the project is
35.7% and the net present value at 18 % discount is Birr 4.22 million

VI. Sensitivity Analysis

The envisaged plant is profitable even with considerable cost increment. That is the plant
maintains to be profitable starting from the first year when 10 % cost increment takes place in
the sector. This result is accompanied by more or less unchanged IRR and payback period.

9. Economic and Social Benefit and Justification

The envisaged project possesses wide range of benefits that help promote the socio-economic
goals and objectives stated in the strategic plan of the Amhara National Regional State. It also
plays positive role in diversifying the economic activity by enhancing the industrial sector of the
region. The other major benefits are listed as follows:

A. Profit Generation

The project is found to be financially viable and earns a profit of Birr 20.015 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

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 C. Import Substitution and Foreign Exchange Saving
Based on the projected figure we learn that in the project life an estimated amount of US Dollar
8.23 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
region. That is, it will provide permanent employment to 25 professionals as well as support
stuffs. Consequently the project creates income of Birr 267.84 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

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 Annex 1: Total Net Working Capital Requirements (in Birr)
CONSTRUCTION PRODUCTION
Year 1 Year 2 1 2 3 4
Capacity Utilization (%) 0% 0% 65% 80% 90% 100%
1. Total Inventory 0 0 2,624,391 3,230,020 3,633,773 4,037,525
Raw Materials in Stock- Total 0 0 1,146,344 1,410,885 1,587,246 1,763,607
Raw Material-Local 0 0 50,988 62,754 70,598 78,442
Raw Material-Foreign 0 0 1,095,357 1,348,132 1,516,648 1,685,164
Factory Supplies in Stock 0 0 4,239 5,217 5,869 6,522
Spare Parts in Stock and Maintenance 0 0 9,535 11,735 13,202 14,669
Work in Progress 0 0 105,976 130,432 146,736 163,040
Finished Products 0 0 211,952 260,864 293,472 326,081
2. Accounts Receivable 0 0 655,030 806,191 906,964 1,007,738
3. Cash in Hand 0 0 63,700 78,400 88,200 98,000
CURRENT ASSETS 0 0 2,196,777 2,703,725 3,041,691 3,379,656
4. Current Liabilities 0 0 655,030 806,191 906,964 1,007,738
Accounts Payable 0 0 655,030 806,191 906,964 1,007,738
TOTAL NET WORKING CAPITAL REQUIRMENTS 0 0 1,541,747 1,897,535 2,134,726 2,371,918
INCREASE IN NET WORKING CAPITAL 0 0 1,541,747 355,788 237,192 237,192

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 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 4,037,525 4,037,525 4,037,525 4,037,525 4,037,525 4,037,525
Raw Materials in Stock-Total 1,763,607 1,763,607 1,763,607 1,763,607 1,763,607 1,763,607
Raw Material-Local 78,442 78,442 78,442 78,442 78,442 78,442
Raw Material-Foreign 1,685,164 1,685,164 1,685,164 1,685,164 1,685,164 1,685,164
Factory Supplies in Stock 6,522 6,522 6,522 6,522 6,522 6,522
Spare Parts in Stock and Maintenance 14,669 14,669 14,669 14,669 14,669 14,669
Work in Progress 163,040 163,040 163,040 163,040 163,040 163,040
Finished Products 326,081 326,081 326,081 326,081 326,081 326,081
2. Accounts Receivable 1,007,738 1,007,738 1,007,738 1,007,738 1,007,738 1,007,738
3. Cash in Hand 98,000 98,000 98,000 98,000 98,000 98,000
CURRENT ASSETS 3,379,656 3,379,656 3,379,656 3,379,656 3,379,656 3,379,656
4. Current Liabilities 1,007,738 1,007,738 1,007,738 1,007,738 1,007,738 1,007,738
Accounts Payable 1,007,738 1,007,738 1,007,738 1,007,738 1,007,738 1,007,738
TOTAL NET WORKING CAPITAL REQUIRMENTS 2,371,918 2,371,918 2,371,918 2,371,918 2,371,918 2,371,918
INCREASE IN NET WORKING CAPITAL - - - - - -

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 Annex 2: Cash Flow Statement (in Birr)
CONSTRUCTION PRODUCTION
Year 1 Year 2 1 2 3 4
TOTAL CASH INFLOW 2,353,202 4,725,120 6,659,470 7,541,241 8,414,614 9,338,374
1. Inflow Funds 2,353,202 4,725,120 655,030 151,161 100,774 100,774
Total Equity 941,281 1,890,048 - - - -
Total Long Term Loan 1,411,921 2,835,072 - - - -
Total Short Term Finances - - 655,030 151,161 100,774 100,774
2. Inflow Operation - - 6,004,440 7,390,080 8,313,840 9,237,600
Sales Revenue - - 6,004,440 7,390,080 8,313,840 9,237,600
Interest on Securities - - - - - -
3. Other Income - - - - - -
TOTAL CASH OUTFLOW 2,353,202 2,353,202 6,933,474 6,202,638 7,223,493 7,828,893
4. Increase In Fixed Assets 2,353,202 2,353,202 - - - -
Fixed Investments 2,241,144 2,241,144 - - - -
Pre-production Expenditures 112,057 112,057 - - - -
5. Increase in Current Assets - - 2,196,777 506,948 337,966 337,966
6. Operating Costs - - 3,647,368 4,478,219 5,032,119 5,586,019
7. Corporate Tax Paid - - - - 720,877 857,316
8. Interest Paid - - 1,089,329 509,639 424,699 339,759
9.Loan Repayments - - - 707,832 707,832 707,832
10.Dividends Paid - - - - - -
Surplus(Deficit) - 2,371,918 (274,004) 1,338,602 1,191,121 1,509,481
Cumulative Cash Balance - 2,371,918 2,097,914 3,436,517 4,627,638 6,137,119

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Annex 2: Cash Flow Statement (in Birr): Continued

4
 PRODUCTION
5 6 7 8 9 10
TOTAL CASH INFLOW 9,237,600 9,237,600 9,237,600 9,237,600 9,237,600 9,237,600
1. Inflow Funds - - - - - -
Total Equity - - - - - -
Total Long Term Loan - - - - - -
Total Short Term Finances - - - - - -
2. Inflow Operation 9,237,600 9,237,600 9,237,600 9,237,600 9,237,600 9,237,600
Sales Revenue 9,237,600 9,237,600 9,237,600 9,237,600 9,237,600 9,237,600
Interest on Securities - - - - - -
3. Other Income - - - - - -
TOTAL CASH OUTFLOW 7,431,469 7,423,948 7,364,490 6,597,200 6,597,200 6,597,200
4. Increase In Fixed Assets - - - - - -
Fixed Investments - - - - - -
Pre-production Expenditures - - - - - -
5. Increase in Current Assets - - - - - -
6. Operating Costs 5,586,019 5,586,019 5,586,019 5,586,019 5,586,019 5,586,019
7. Corporate Tax Paid 882,798 960,217 985,699 1,011,181 1,011,181 1,011,181
8. Interest Paid 254,820 169,880 84,940 - - -
9. Loan Repayments 707,832 707,832 707,832 - - -
10.Dividends Paid - - - - - -
Surplus(Deficit) 1,806,131 1,813,652 1,873,110 2,640,400 2,640,400 2,640,400
Cumulative Cash Balance 7,943,250 9,756,902 11,630,011 14,270,411 16,910,811 19,551,210

Annex 3: DISCOUNTED CASH FLOW-TOTAL CAPITAL INVESTED

CONSTRUCTION PRODUCTION
Year 1 Year 2 1 2 3 4
TOTAL CASH INFLOW - - 6,004,440 7,390,080 8,313,840 9,237,600
1. Inflow Operation - - 6,004,440 7,390,080 8,313,840 9,237,600
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Sales Revenue - - 6,004,440 7,390,080 8,313,840 9,237,600
Interest on Securities - - - - - -
2. Other Income - - - - - -
TOTAL CASH OUTFLOW 2,353,202 2,353,202 5,189,115 4,834,006 5,990,187 6,680,527
3. Increase in Fixed Assets 2,353,202 2,353,202 - - - -
Fixed Investments 2,241,144 2,241,144 - - - -
Pre-production Expenditures 112,057 112,057 - - - -
4. Increase in Net Working Capital - - 1,541,747 355,788 237,192 237,192
5. Operating Costs - - 3,647,368 4,478,219 5,032,119 5,586,019
6. Corporate Tax Paid - - - - 720,877 857,316
NET CASH FLOW (2,353,202) (2,353,202) 815,325 2,556,074 2,323,653 2,557,073
CUMMULATIVE NET CASH FLOW (2,353,202) (4,706,403) (3,891,078) (1,335,005) 988,648 3,545,720
Net Present Value (at 18%) (2,353,202) (1,994,239) 585,554 1,555,705 1,198,514 1,117,720
Cumulative Net present Value (2,353,202) (4,347,440) (3,761,887) (2,206,181) (1,007,667) 110,053

Annex 3: DISCOUNTED CASH FLOW-TOTAL CAPITAL INVESTED (Continued)

PRODUCTION
5 6 7 8 9 10
TOTAL CASH INFLOW 9,237,600 9,237,600 9,237,600 9,237,600 9,237,600 9,237,600
1. Inflow Operation 9,237,600 9,237,600 9,237,600 9,237,600 9,237,600 9,237,600

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Sales Revenue 9,237,600 9,237,600 9,237,600 9,237,600 9,237,600 9,237,600
Interest on Securities - - - - - -
2. Other Income - - - - - -
TOTAL CASH OUTFLOW 6,468,818 6,546,236 6,571,718 6,597,200 6,597,200 6,597,200
3. Increase in Fixed Assets - - - - - -
Fixed Investments - - - - - -
Pre-production Expenditures - - - - - -
4. Increase in Net Working Capital - - - - - -
5. Operating Costs 5,586,019 5,586,019 5,586,019 5,586,019 5,586,019 5,586,019
6. Corporate Tax Paid 882,798 960,217 985,699 1,011,181 1,011,181 1,011,181
NET CASH FLOW 2,768,782 2,691,364 2,665,882 2,640,400 2,640,400 2,640,400
CUMMULATIVE NET CASH FLOW 6,314,503 9,005,867 11,671,748 14,312,148 16,952,548 19,592,947
Net Present Value (at 18%) 1,025,644 844,886 709,226 595,294 504,487 427,531
Cumulative Net present Value 1,135,697 1,980,584 2,689,810 3,285,104 3,789,591 4,217,122
Net Present Value (at 18%) 4,217,121.57
Internal Rate of Return 35.70%

7
 Annex 4: NET INCOME STATEMENT ( in Birr)
PRODUCTION
1 2 3 4 5
Capacity Utilization (%) 65% 80% 90% 100% 100%
1. Total Income 6,004,440 7,390,080 8,313,840 9,237,600 9,237,600
Sales Revenue 6,004,440 7,390,080 8,313,840 9,237,600 9,237,600
Other Income - - - - -
2. Less Variable Cost 3,421,659 4,211,273 4,737,682 5,264,091 5,264,091
VARIABLE MARGIN 2,582,781 3,178,807 3,576,158 3,973,509 3,973,509
(In % of Total Income) 43.01 43.01 43.01 43.01 43.01
3. Less Fixed Costs 679,809 721,045 748,537 776,028 776,028
OPERATIONAL MARGIN 1,902,972 2,457,761 2,827,621 3,197,481 3,197,481
(In % of Total Income) 81 85 87 89 89
4. Less Cost of Finance 1,089,329 509,639 424,699 339,759 254,820
5. GROSS PROFIT 813,643 1,948,122 2,402,922 2,857,722 2,942,661
6. Income (Corporate) Tax - - 720,877 857,316 882,798
7. NET PROFIT 813,643 1,948,122 1,682,045 2,000,405 2,059,863
RATIOS (%)
Gross Profit/Sales 14% 26% 29% 31% 32%
Net Profit After Tax/Sales 14% 26% 20% 22% 22%
Return on Investment 30% 37% 31% 33% 33%
Return on Equity 29% 69% 59% 71% 73%

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 Annex 4: NET INCOME STATEMENT (in Birr): Continued
PRODUCTION
6 7 8 9 10
Capacity Utilization (%) 100% 100% 100% 100% 100%
1. Total Income 9,237,600 9,237,600 9,237,600 9,237,600 9,237,600
Sales Revenue 9,237,600 9,237,600 9,237,600 9,237,600 9,237,600
Other Income - - - - -
2. Less Variable Cost 5,264,091 5,264,091 5,264,091 5,264,091 5,264,091
VARIABLE MARGIN 3,973,509 3,973,509 3,973,509 3,973,509 3,973,509
(In % of Total Income) 43.01 43.01 43.01 43.01 43.01
3. Less Fixed Costs 602,905 602,905 602,905 602,905 602,905
OPERATIONAL MARGIN 3,370,604 3,370,604 3,370,604 3,370,604 3,370,604
(In % of Total Income) 36.49 36.49 36.49 36.49 36.49
4. Less Cost of Finance 169,880 84,940 - - -
5. GROSS PROFIT 3,200,724 3,285,664 3,370,604 3,370,604 3,370,604
6. Income (Corporate) Tax 960,217 985,699 1,011,181 1,011,181 1,011,181
7. NET PROFIT 2,240,507 2,299,965 2,359,423 2,359,423 2,359,423
RATIOS (%)
Gross Profit/Sales 35% 36% 36% 36% 36%
Net Profit After Tax/Sales 24% 25% 26% 26% 26%
Return on Investment 34% 34% 33% 33% 33%
Return on Equity 79% 81% 83% 83% 83%

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 Annex 5: Projected Balance Sheet (in Birr)

CONSTRUCTION PRODUCTION
Year 1 Year 2 1 2 3 4
TOTAL ASSETS 2,353,202 7,078,321 8,546,995 9,938,445 11,013,432 12,406,779
1. Total Current Assets - 2,371,918 4,294,691 6,140,242 7,669,329 9,516,776
Inventory on Materials and Supplies - - 1,160,118 1,427,838 1,606,318 1,784,798
Work in Progress - - 105,976 130,432 146,736 163,040
Finished Products in Stock - - 211,952 260,864 293,472 326,081
Accounts Receivable - - 655,030 806,191 906,964 1,007,738
Cash in Hand - - 63,700 78,400 88,200 98,000
Cash Surplus, Finance Available - 2,371,918 2,097,914 3,436,517 4,627,638 6,137,119
Securities - - - - - -
2. Total Fixed Assets, Net of Depreciation 2,353,202 4,706,403 4,252,303 3,798,203 3,344,104 2,890,004
Fixed Investment - 2,241,144 4,482,289 4,482,289 4,482,289 4,482,289
Construction in Progress 2,241,144 2,241,144 - - - -
Pre-Production Expenditure 112,057 224,114 224,114 224,114 224,114 224,114
Less Accumulated Depreciation - - 454,100 908,200 1,362,300 1,816,400
3. Accumulated Losses Brought Forward - - - - - -
4. Loss in Current Year - - - - - -
TOTAL LIABILITIES 2,353,202 7,078,321 8,546,995 9,938,445 11,013,432 12,406,779
5. Total Current Liabilities - - 655,030 806,191 906,964 1,007,738
Accounts Payable - - 655,030 806,191 906,964 1,007,738
Bank Overdraft - - - - - -
6. Total Long-term Debt 1,411,921 4,246,993 4,246,993 3,539,161 2,831,329 2,123,496
Loan A 1,411,921 4,246,993 4,246,993 3,539,161 2,831,329 2,123,496
Loan B - - - - - -
7. Total Equity Capital 941,281 2,831,329 2,831,329 2,831,329 2,831,329 2,831,329

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Ordinary Capital 941,281 2,831,329 2,831,329 2,831,329 2,831,329 2,831,329
Preference Capital - - - - - -
Subsidies - - - - - -
8. Reserves, Retained Profits Brought Forward - - - 813,643 2,761,766 4,443,811
9.Net Profit After Tax - - 813,643 1,948,122 1,682,045 2,000,405
Dividends Payable - - - - - -
Retained Profits - - 813,643 1,948,122 1,682,045 2,000,405

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

PRODUCTION
5 6 7 8 9 10
TOTAL ASSETS 13,758,810 15,291,485 16,883,618 19,243,040 21,602,463 23,961,886
1. Total Current Assets 11,322,906 13,136,558 15,009,668 17,650,067 20,290,467 22,930,867
Inventory on Materials and Supplies 1,784,798 1,784,798 1,784,798 1,784,798 1,784,798 1,784,798
Work in Progress 163,040 163,040 163,040 163,040 163,040 163,040
Finished Products in Stock 326,081 326,081 326,081 326,081 326,081 326,081
Accounts Receivable 1,007,738 1,007,738 1,007,738 1,007,738 1,007,738 1,007,738
Cash in Hand 98,000 98,000 98,000 98,000 98,000 98,000
Cash Surplus, Finance Available 7,943,250 9,756,902 11,630,011 14,270,411 16,910,811 19,551,210
Securities - - - - - -
2. Total Fixed Assets, Net of Depreciation 2,435,904 2,154,927 1,873,950 1,592,973 1,311,996 1,031,019
Fixed Investment 4,482,289 4,482,289 4,482,289 4,482,289 4,482,289 4,482,289
Construction in Progress - - - - - -
Pre-Production Expenditure 224,114 224,114 224,114 224,114 224,114 224,114
Less Accumulated Depreciation 2,270,499 2,551,476 2,832,453 3,113,430 3,394,407 3,675,384
3. Accumulated Losses Brought Forward - - - - - -
4. Loss in Current Year - - - - - -
TOTAL LIABILITIES 13,758,810 15,291,485 16,883,618 19,243,040 21,602,463 23,961,886
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 5. Total Current Liabilities 1,007,738 1,007,738 1,007,738 1,007,738 1,007,738 1,007,738
Accounts Payable 1,007,738 1,007,738 1,007,738 1,007,738 1,007,738 1,007,738
Bank Overdraft - - - - - -
6. Total Long-term Debt 1,415,664 707,832 - - - -
Loan A 1,415,664 707,832 - - - -
Loan B - - - - - -
7. Total Equity Capital 2,831,329 2,831,329 2,831,329 2,831,329 2,831,329 2,831,329
Ordinary Capital 2,831,329 2,831,329 2,831,329 2,831,329 2,831,329 2,831,329
Preference Capital - - - - - -
Subsidies - - - - - -
8. Reserves, Retained Profits Brought Forward 6,444,216 8,504,079 10,744,586 13,044,551 15,403,973 17,763,396
9. Net Profit After Tax 2,059,863 2,240,507 2,299,965 2,359,423 2,359,423 2,359,423
Dividends Payable - - - - - -
Retained Profits 2,059,863 2,240,507 2,299,965 2,359,423 2,359,423 2,359,423

12