Investment Office ANRS

Project Profile on the Establishment of

Agricultural Mechanization Services

Development Studies Associates

(DSA)

July 2016
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 Service 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............................................................................4
6.1 Production Process...........................................................................................................4
6.2 Machinery and Equipment...............................................................................................4
6.3 Civil Engineering Cost....................................................................................................4
7. Human Resource and Training Requirement................................................5
7.1 Human Resource..............................................................................................................5
7.2 Training Requirement......................................................................................................5
8. Financial Analysis.............................................................................................5
8.1 Underlying Assumption...................................................................................................5
8.2 Investment........................................................................................................................7
8.3 Production Costs..............................................................................................................7
8.4 Financial Evaluation........................................................................................................8
9. Economic and Social Benefit and Justification...............................................9
ANNEXES..............................................................................................................11

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 1. Executive Summary
This project envisages the provision of agricultural mechanization services. The total investment
requirement of the project including the working capital is estimated at about Birr 10.8 million;
of which Birr 8.9 million is for machinery and equipments and Birr 898 thousand is the cost of
civil works. Based on the cash flow statement, the calculated internal rate of return (IRR) and
simple rate of return (SRR) of the project are 29 % and 28.4 %, respectively. The net present
value (NPV) at 18 % discounting rate is about Birr 753,788. The plant is expected to create
employment opportunities for about 21 persons.

2. Product Description and Application

The other familiar name of agricultural mechanization service is rental service of agricultural
machinery, equipments, tools and technical advices. These services include the provision of
modern agricultural machinery and equipment for plowing, harvesting, processing, transporting
and storing on rental basis; and the acquisition of technical know-how through technical advices
by paying fees for advisors.

3. Market Study, Plant Capacity and Production Program

3.1 Market Study

3.1.1 Present Demand and Supply

Services that are provided through agricultural mechanization are substitutes for mechanization
of farms and other agricultural activities by owning the machinery and equipment. These types
of services enable farmers to use modern farm machinery and equipment without burdening each
farmer or group of farmers in owning expensive farm machinery and equipment. Agricultural
mechanization services reduce farming time and enable farmers to plow, harvest and store their
farm produce in optimal periods of each season thereby increasing productivity and production
volume. These agricultural machinery rental centers could also have middle level technical
advisors who will consult farmers on the different activities of farming and livestock rising. The

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consultation will be done with payment of reasonable fees. The main advantage of these rental
centers to farmers is, they enable group of farmers with adjacent farms to rent (in group)
agricultural machinery such as a tractor for plowing all the farm lands in group. This will reduce
the rental cost for each farmer and will also minimize the operation expenses of the farm
mechanization service center.

More than 3 million hectares of land in the Amhara Region is under cultivation. Under normal
conditions, one tractor plows about 10 hectares per day. For one cycle of plowing, 300,000
tractor-days are needed to plow the 3 million hectares of farm lands of the Region. This is the
highest potential demand for tractor services in the Region. But many farms in the Region are
too steep and/or too rugged for using tractors for plowing. In addition many other farms are also
filled with small and big boulders which make them unsuitable for tractor plowing. Given these
unfavorable conditions, we can assume that about 40 percent of farms in the Region are suitable
for tractor plowing. This means about 120,000 tractor-days are required to perform one cycle of
plowing in the Region. This is the highest realistic potential demand for tractor rental services.

Let us get closer to the ground and see the potential zones of the Region which will use tractor
services with the highest economic and financial benefits. The first candidates are most parts of
East and West Gojjam and Awe zones, areas around Lake Tana in North and South Gondar
Zones and West Gojjam, some valley plains in North and South Wollo zones, and the highland
plateau of North Shewa. These areas of the Amhara Region can have sufficient demand for
agricultural machinery rental services which will make the center financially viable.

3.1.2 Projected Demand

With in agricultural mechanization services the major one is plowing by tractor. In this regard, it
is already said that 120 thousand tractor-days are the highest realistic potential demand for
tractor rental services. However, this can increase in the future as the size of arable land expands.

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 3.1.3 Pricing and Distribution

Based on the market research result and the cost of the envisaged mechanization service center,
the fee of one tractor-hour is set to be Birr 513. Developing and implementing an effective and
appropriate marketing strategy is important to make known the services.

3.2 Plant Capacity

Thus, given the expected potential demand for agricultural mechanization services as presented
earlier, the envisaged center plans to sell 12,000 tractor-days (10 % of the total potential
demand) per annum. Assuming a tractor plow only 120 days a year and taking the fact that a
tractor plows 10 hectares of land per day, the mechanization center needs 10 tractors to plow
12,000 hectares of land in a year.

3.3 Service Program

The service provision program follows gradual capacity utilization due to marketing reasons.
Since strong marketing activity is a must to introduce the services, the new agricultural
mechanization service needs some time to penetrate the market. Accordingly, 75 % and 85 %
capacity utilization are assumed for the first and the second years of the operation, respectively.
The third year onwards, 100 % capacity utilization is assumed.

4. Raw Materials and Utilities

4.1 Availability and Source of Raw Materials

This project idea deals with the provision of services and as such it does not require the use of
"raw materials". However, the main inputs for the provision of the services will be the diesel oil
required to make operational the agricultural machinery and equipments.

4.2 Annual Requirement and Cost of Raw Materials and Utilities

Raw material requirements for a full capacity utilization of tractors are given in Table 4.1.

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 TABLE 4.1
RAW MATERIALS REQUIREMENT
Total Cost
Material and Input Quantity L.C. F.C.
Utility    
Electricity 10,000kwh 5,500  
Diesel Oil 36,000 lit 1,422,221  
Water 1000m3 2,650  
Total Utility Cost   1,430,371  

According to the above table the annual cost of input and utility is estimated to be Birr 224, 150.

5. Location and Site

For its good landscape to use tractor, East Gojam zone (Dejen) is an appropriate choice for the
establishment of agricultural mechanization services in the Amhara region.

6. Technology and Engineering

6.1 Production Process

The main process or activities for providing agricultural machinery rental services are
establishing the center, constructing machinery shades and a small repair and maintenance
workshop, purchasing the most important pieces of machinery and equipment (such as tractors,
harvesters...), developing and implementing an effective and appropriate marketing strategy and
finally providing dependable machinery rental services.

6.2 Machinery and Equipment

The agricultural mechanization center will have about 10 tractors, one harvester and other
assorted type of agricultural implements and tools. The total cost of these machineries is
estimated to reach at Birr 8.9 million. Of which Birr 7.6 million is in foreign currency.

6.3 Civil Engineering Cost

The shade area required by the center is estimated to be 300 m 2, and it costs Birr 898,100. This
would include cost of land preparation and associated civil works. The total land area of the

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plant, including the open space, is 1000 m2 , and its lease cost equals Birr 18,400. The cost of the
land lease is as per ANRS land lease rate for Dejen which is equal to Birr 18.40 per square meter
for service purpose. 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
Details of the manpower requirement of the plant is shown in Table 7.1
TABLE 7.1
MANPOWER REQUIREMENT

No. Monthly Total Annual

Position Required Salary Salary
Manager 1 6415 76980
Accountant/Cashier 1 2566 30792
Supervisor 1 3849 46188
Mechanics 2 3849 92376
Assistants 2 1539.6 36950.4
Drivers 10 2566 307920
Guards 4 769.8 36950.4
Sub-Total 21 628156.8
Benefit (20%) 125631.4
 Total 21 753788.2

The total annual wages and salary, including 20 % benefits, amount to Birr 753,788.2.

7.2 Training Requirement

No training is required.

8. Financial Analysis
8.1 Underlying Assumption
The financial analysis of Agricultural Mechanization Services is based on the data provided in
the preceding chapters and the following assumptions.

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 A. Construction and Finance

Construction Period 1 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%

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

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 8.2 Investment
The total investment cost of the project including working capital is estimated at Birr 4.2 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
2,360.72 2360.72
Building And Civil Works
898,100 898,100
Office Equipment
51,320 51,320
Vehicles
0 0
Plant Machinery & Equipment
1,283,000 7,698,000 8,981,000
Total Fixed Investment Cost
2,234,780.72 7,698,000 9,932,781
Pre Production Capital
Expenditure* 111,739.036 384,900 496,639
Total Initial Investment
2,346,519.756 8,082,900 10,429,420
Working Capital at Full Capacity
399,215.714 0 399,215.7
Total 2,745,735.47 8,082,900 10,828,635
*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 8.1 million or 74.6 % of the total
investment cost.

8.3 Production Costs

The total production cost at full capacity operation is estimated at Birr 2.9 million (See Table
8.2). Utilities account for 17.3 % , and wages and salaries accounts 22.7 % .

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 TABLE 8.2
PRODUCTION COST AT FULL CAPACITY

Raw Material Requirement Cost

1. Local Raw Materials 0
2. Foreign Raw Materials 0

Total Production Cost at full Capacity

Items Cost
1.      Raw materials 0
2.      Utilities 224,150
3.      Wages and Salaries
753,788.16
4.      Spares and Maintenance
297,984.448
Service Costs
1,275,922.608
5.      Depreciation
1,047,464.294
6.      Financial Costs
649,718.898
  Total Production Cost 2,973,105.8

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

Sale –Variable Cost at full capacity.

The project will break even at 28.4 % of capacity utilization

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 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 five 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 24.7 % 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 29 % and the net present value (NPV) at 18 % discount is Birr 4,660,082.

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:

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 A. Profit Generation

The project is found to be financially viable and earns on average a profit of Birr 2.2 milion per
year and Birr 22.2 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 8.2 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. 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 21 professionals as well as support
stuffs. Consequently the project creates income of Birr 753 thousands per year. This would be
one of the commendable accomplishments of the project.
D. Pro Environment Project

The proposed production process is environment friendly.

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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 75% 85% 100% 100%

1. Total Inventory 0.00 0.00 190679.8 216103.8 254239.8 254239.8

Raw Materials in Stock- Total 0.00 0.00 0 0 0 0
Raw Material-Local 0.00 0.00 0 0 0 0
Raw Material-Foreign 0.00 0.00 0 0 0 0
Factory Supplies in Stock 0.00 0.00 2188.157 2479.911 2917.542 2917.542
Spare Parts in Stock and Maintenance 0.00 0.00 24380.46 27631.2 32507.29 32507.29
Work in Progress 0.00 0.00 54703.73 61997.59 72938.32 72938.32
Finished Products 0.00 0.00 109407.5 123995.2 145876.7 145876.7
2. Accounts Receivable 0.00 0.00 503869.1 571051.6 671825.4 671825.4
3. Cash in Hand 0.00 0.00 108732.8 123230.6 144977.1 144977.1
CURRENT ASSETS 0.00 0.00 803281.8 910386 1071042 1071042
4. Current Liabilities 0.00 0.00 503869.1 571051.6 671825.4 671825.4
Accounts Payable 0.00 0.00 503869.1 571051.6 671825.4 671825.4
TOTAL NET WORKING CAPITAL REQUIRMENTS 0.00 0.00 299412.7 339334.4 399216.9 399216.9
INCREASE IN NET WORKING CAPITAL 0.00 0.00 299412.7 39921.7 59882.54 0

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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 254239.8 254239.8 254239.8 254239.8 254239.8 254239.8

Raw Materials in Stock-Total 0 0 0 0 0 0
Raw Material-Local 0 0 0 0 0 0
Raw Material-Foreign 0 0 0 0 0 0
Factory Supplies in Stock 2917.542 2917.542 2917.542 2917.542 2917.542 2917.542
Spare Parts in Stock and Maintenance 32507.29 32507.29 32507.29 32507.29 32507.29 32507.29
Work in Progress 72938.32 72938.32 72938.32 72938.32 72938.32 72938.32
Finished Products 145876.7 145876.7 145876.7 145876.7 145876.7 145876.7
2. Accounts Receivable 671825.4 671825.4 671825.4 671825.4 671825.4 671825.4
3. Cash in Hand 144977.1 144977.1 144977.1 144977.1 144977.1 144977.1
CURRENT ASSETS 1071042 1071042 1071042 1071042 1071042 1071042
4. Current Liabilities 671825.4 671825.4 671825.4 671825.4 671825.4 671825.4
Accounts Payable 671825.4 671825.4 671825.4 671825.4 671825.4 671825.4
TOTAL NET WORKING CAPITAL REQUIRMENTS 399216.9 399216.9 399216.9 399216.9 399216.9 399216.9
INCREASE IN NET WORKING CAPITAL 0 0 0 0 0 0

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 Annex 2: Cash Flow Statement (in Birr)
CONSTRUCTION PRODUCTION
  Year 1 Year 2 1 2 3 4
TOTAL CASH INFLOW 5214710 5613927 5122669 5301823 6259174 6158400
1. Inflow Funds 5214710 5613927 503869.1 67182.55 100773.8 0
Total Equity 2085884 2245571 0 0 0 0
Total Long Term Loan 3128826 3368356 0 0 0 0
Total Short Term Finances 0 0 503869.1 67182.55 100773.8 0
2. Inflow Operation 0 0 4618800 5234640 6158400 6158400
Sales Revenue 0 0 4618800 5234640 6158400 6158400
Interest on Securities 0 0 0 0 0 0
3. Other Income 0 0 0 0 0 0
TOTAL CASH OUTFLOW 5214710 5214710 3677027 3222425 4250909 3999292
4. Increase In Fixed Assets 5214710 5214710 0 0 0 0
Fixed Investments 4966390 4966390 0 0 0 0
Pre-production Expenditures 248319.5 248319.5 0 0 0 0
5. Increase in Current Assets 0 0 803281.8 107104.2 160656.4 0
6. Operating Costs 0 0 1117225 1252795 1456150 1456150
7. Corporate Tax Paid 0 0 0 0 901520 940503.1
8. Interest Paid 0 0 1756520 779661.8 649718.2 519774.6
9. Loan Repayments 0 0 0 1082864 1082864 1082864
10. Dividends Paid 0 0 0 0 0 0
Surplus(Deficit) 0 399216.9 1445643 2079398 2008265 2159108
Cumulative Cash Balance 0 399216.9 1844859 3924257 5932522 8091631

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

15
 PRODUCTION
  5 6 7 8 9 10
TOTAL CASH INFLOW 6158400 6158400 6158400 6158400 6158400 6158400
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 6158400 6158400 6158400 6158400 6158400 6158400
Sales Revenue 6158400 6158400 6158400 6158400 6158400 6158400
Interest on Securities 0 0 0 0 0 0
3. Other Income 0 0 0 0 0 0
TOTAL CASH OUTFLOW 3908331 3847169 3756208 2582384 2582384 2582384
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 1456150 1456150 1456150 1456150 1456150 1456150
7. Corporate Tax Paid 979486.2 1048268 1087251 1126234 1126234 1126234
8. Interest Paid 389830.9 259887.3 129943.7 0 0 0
9. Loan Repayments 1082864 1082864 1082864 0 0 0
10. Dividends Paid 0 0 0 0 0 0
Surplus(Deficit) 2250069 2311231 2402192 3576016 3576016 3576016
Cumulative Cash Balance 10341700 12652931 15055123 18631139 22207155 25783170

Annex 3: DISCOUNTED CASH FLOW-TOTAL CAPITAL INVESTED

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 CONSTRUCTION PRODUCTION
  Year 1 Year 2 1 2 3 4
TOTAL CASH INFLOW 0 0 4618800 5234640 6158400 6158400
1. Inflow Operation 0 0 4618800 5234640 6158400 6158400
Sales Revenue 0 0 4618800 5234640 6158400 6158400
Interest on Securities 0 0 0 0 0 0
2. Other Income 0 0 0 0 0 0
TOTAL CASH OUTFLOW 5214710 5214709.88 1416638 1292717 1516033 2396653
3. Increase in Fixed Assets 5214710 5214709.88 0 0 0 0
Fixed Investments 4966390 4966390.36 0 0 0 0
Pre-production Expenditures 248319.5 248319.518 0 0 0 0
4. Increase in Net Working Capital 0 0 299412.7 39921.7 59882.54 0
5. Operating Costs 0 0 1117225 1252795 1456150 1456150
6. Corporate Tax Paid 0 0 0 0 0 940503.1
NET CASH FLOW -5214710 -5214709.88 3202162 3941923 4642367 3761747
CUMMULATIVE NET CASH FLOW -5214710 -10429419.8 -7227257 -3285334 1357033 5118780
Net Present Value (at 18%) -5214710 -4419245.67 2299743 2399176 2394481 1644294
Cumulative Net present Value -5214710 -9633955.55 -7334212 -4935036 -2540555 -896261

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

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 PRODUCTION
  5 6 7 8 9 10
TOTAL CASH INFLOW 6158400 6158400 6158400 6158400 6158400 6158400
1. Inflow Operation 6158400 6158400 6158400 6158400 6158400 6158400
Sales Revenue 6158400 6158400 6158400 6158400 6158400 6158400
Interest on Securities 0 0 0 0 0 0
2. Other Income 0 0 0 0 0 0
TOTAL CASH OUTFLOW 2435636 2504417.9 2543401 2582384 2582384 2582384
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 1456150 1456150.27 1456150 1456150 1456150 1456150
6. Corporate Tax Paid 979486.2 1048267.63 1087251 1126234 1126234 1126234
NET CASH FLOW 3722764 3653982.1 3614999 3576016 3576016 3576016
CUMMULATIVE NET CASH FLOW 8841543 12495525.2 16110524 19686540 23262556 26838572
Net Present Value (at 18%) 1379029 1147076.44 961727.7 806234.5 683249.6 579025.1
Cumulative Net present Value 482768.2 1629844.71 2591572 3397807 4081056 4660082
Net Present Value (at 18%) 4,660,082

Internal Rate of Return 29.0%

Annex 4: NET INCOME STATEMENT ( in Birr)

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 PRODUCTION
  1 2 3 4 5
Capacity Utilization (%) 75% 85% 100% 100% 100%

1. Total Income 4618800 5234640 6158400 6158400 6158400

Sales Revenue 4618800 5234640 6158400 6158400 6158400
Other Income 0 0 0 0 0
2. Less Variable Cost 790639.4 896058 1054185.85 1054186 1054186
VARIABLE MARGIN 3828161 4338582 5104214.15 5104214 5104214
(In % of Total Income) 82.88 82.88 82.88 82.88 82.88
3. Less Fixed Costs 1374050 1404202 1449429.22 1449429 1449429
OPERATIONAL MARGIN 2454110 2934380 3654784.93 3654785 3654785
(In % of Total Income) 53.13 56.06 59.35 59.35 59.35
4. Less Cost of Finance 1756520 779661.8 649718.205 519774.6 389830.9
5. GROSS PROFIT 697590.4 2154718 3005066.72 3135010 3264954
6. Income (Corporate) Tax 0 0 901520.016 940503.1 979486.2
7. NET PROFIT 697590.4 2154718 2103546.7 2194507 2285468
RATIOS (%)  
Gross Profit/Sales 15.10% 41.16% 48.80% 50.91% 53.02%
Net Profit After Tax/Sales 15.10% 41.16% 34.16% 35.63% 37.11%
Return on Investment 22.87% 27.25% 25.43% 25.07% 24.71%
Return on Equity 16.11% 49.75% 48.56% 50.66% 52.76%

Annex 4: NET INCOME STATEMENT (in Birr):Continued

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

1. Total Income 6158400 6158400 6158400 6158400 6158400

Sales Revenue 6158400 6158400 6158400 6158400 6158400
Other Income 0 0 0 0 0
2. Less Variable Cost 1054186 1054186 1054185.85 1054186 1054186
VARIABLE MARGIN 5104214 5104214 5104214.15 5104214 5104214
(In % of Total Income) 82.88 82.88 82.88 82.88 82.88
3. Less Fixed Costs 1350101 1350101 1350101.41 1350101 1350101
OPERATIONAL MARGIN 3754113 3754113 3754112.73 3754113 3754113
(In % of Total Income) 60.96 60.96 60.96 60.96 60.96
4. Less Cost of Finance 259887.3 129943.7 0 0 0
5. GROSS PROFIT 3494225 3624169 3754112.73 3754113 3754113
6. Income (Corporate) Tax 1048268 1087251 1126233.82 1126234 1126234
7. NET PROFIT 2445958 2536918 2627878.91 2627879 2627879
RATIOS (%)  
Gross Profit/Sales 56.74% 58.85% 60.96% 60.96% 60.96%
Net Profit After Tax/Sales 39.72% 41.19% 42.67% 42.67% 42.67%
Return on Investment 24.99% 24.63% 24.27% 24.27% 24.27%
Return on Equity 56.47% 58.57% 60.67% 60.67% 60.67%

Annex 5: Projected Balance Sheet (in Birr)

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 CONSTRUCTION PRODUCTION
  Year 1 Year 2 1 2 3 4
TOTAL ASSETS 10828636.7 12030096 13169133 14290590 15402234 10828636.7
1. Total Current Assets 399216.92 2648141 4834643 7003565 9162673 399216.92
Inventory on Materials and Supplies 0 26568.62 30111.09 35424.81 35424.81 0
Work in Progress 0 54703.73 61997.59 72938.32 72938.32 0
Finished Products in Stock 0 109407.5 123995.2 145876.7 145876.7 0
Accounts Receivable 0 503869.1 571051.6 671825.4 671825.4 0
Cash in Hand 0 108732.8 123230.6 144977.1 144977.1 0
Cash Surplus, Finance Available 399216.92 1844859 3924257 5932522 8091631 399216.92
Securities 0 0 0 0 0 0
2. Total Fixed Assets, Net of Depreciation 10429419.8 9381955 8334490 7287025 6239561 10429419.8
Fixed Investment 4966390.36 9932781 9932781 9932781 9932781 4966390.36
Construction in Progress 4966390.36 0 0 0 0 4966390.36
Pre-Production Expenditure 496639.036 496639 496639 496639 496639 496639.036
Less Accumulated Depreciation 0 1047465 2094930 3142394 4189859 0
3. Accumulated Losses Brought Forward 0 0 0 0 0 0
4. Loss in Current Year 0 0 0 0 0 0
TOTAL LIABILITIES 10828636.7 12030096 13169133 14290590 15402234 10828636.7
5. Total Current Liabilities 0 503869.1 571051.6 671825.4 671825.4 0
Accounts Payable 0 503869.1 571051.6 671825.4 671825.4 0
Bank Overdraft 0 0 0 0 0 0
6. Total Long-term Debt 6497182 6497182 5414318 4331455 3248591 6497182
Loan A 6497182 6497182 5414318 4331455 3248591 6497182
Loan B 0 0 0 0 0 0
7. Total Equity Capital 4331454.68 4331455 4331455 4331455 4331455 4331454.68
Ordinary Capital 4331454.68 4331455 4331455 4331455 4331455 4331454.68
Preference Capital 0 0 0 0 0 0
Subsidies 0 0 0 0 0 0
8. Reserves, Retained Profits Brought Forward 0 0 697590.4 2852309 4955855 0
9. Net Profit After Tax 0 697590.4 2154718 2103547 2194507 0
Dividends Payable 0 0 0 0 0 0
Retained Profits 0 697590.4 2154718 2103547 2194507 0

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

  PRODUCTION

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 5 6 7 8 9 10
TOTAL ASSETS 16604837.9 17967932 19421987 22049866 24677745 27305624
1. Total Current Assets 11412742.2 13723973 16126165 19702181 23278197 26854213
Inventory on Materials and Supplies 35424.8104 35424.81 35424.81 35424.81 35424.81 35424.81
Work in Progress 72938.3191 72938.32 72938.32 72938.32 72938.32 72938.32
Finished Products in Stock 145876.664 145876.7 145876.7 145876.7 145876.7 145876.7
Accounts Receivable 671825.45 671825.4 671825.4 671825.4 671825.4 671825.4
Cash in Hand 144977.127 144977.1 144977.1 144977.1 144977.1 144977.1
Cash Surplus, Finance Available 10341699.8 12652931 15055123 18631139 22207155 25783170
Securities 0 0 0 0 0 0
2. Total Fixed Assets, Net of Depreciation 5192095.72 4243959 3295822 2347685 1399548 451410.7
Fixed Investment 9932780.72 9932781 9932781 9932781 9932781 9932781
Construction in Progress 0 0 0 0 0 0
Pre-Production Expenditure 496639.036 496639 496639 496639 496639 496639
Less Accumulated Depreciation 5237324.04 6185461 7133598 8081735 9029872 9978009
3. Accumulated Losses Brought Forward 0 0 0 0 0 0
4. Loss in Current Year 0 0 0 0 0 0
TOTAL LIABILITIES 16604837.9 17967932 19421987 22049866 24677745 27305624
5. Total Current Liabilities 671825.45 671825.4 671825.4 671825.4 671825.4 671825.4
Accounts Payable 671825.45 671825.4 671825.4 671825.4 671825.4 671825.4
Bank Overdraft 0 0 0 0 0 0
6. Total Long-term Debt 2165727.32 1082864 0 0 0 0
Loan A 2165727.32 1082864 0 0 0 0
Loan B 0 0 0 0 0 0
7. Total Equity Capital 4331454.68 4331455 4331455 4331455 4331455 4331455
Ordinary Capital 4331454.68 4331455 4331455 4331455 4331455 4331455
Preference Capital 0 0 0 0 0 0
Subsidies 0 0 0 0 0 0
8. Reserves, Retained Profits Brought Forward 7150362.64 9435830 11881788 14418707 17046586 19674464
9. Net Profit After Tax 2285467.82 2445958 2536918 2627879 2627879 2627879
Dividends Payable 0 0 0 0 0 0
Retained Profits 2285467.82 2445958 2536918 2627879 2627879 2627879

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