Investment Office ANRS

Project Profile on the Establishment of Chaff

Cutter Fabrication 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...................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...............................................................................2
3.2 Plant Capacity......................................................................................................2
3.3 Production Program.............................................................................................2
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........................................................................................5
7. Human Resource and Training Requirement......................................5
7.1 Human Resource..................................................................................................5
7.2 Training Requirement..........................................................................................6
8. Financial Analysis...................................................................................6
8.1 Underlying Assumption.......................................................................................6
8.2 Investment............................................................................................................7
8.3 Production Costs..................................................................................................8
8.4 Financial Evaluation............................................................................................8
9. Economic and Social Benefit and Justification....................................9
ANNEXES....................................................................................................11
 1. Executive Summary

This project envisages fabrication of 10,000 pieces of manually operated Chaff Cutter per
annum. The total investment requirement of the project including the working capital is
estimated at about Birr 1,786 thousand; of which nearly Birr 624 thousand is the cost of the
working capital and Birr 308 thousand is for machinery and equipments. Based on the cash flow
statement, the calculated internal rate of return (IRR) and simple rate of return of the project are
35.3 % and 32.6 %; and, the net present value (NPV) at 18 % discounting rate is about Birr 2,615
thousand. The plant is expected to create employment opportunities for about 12 persons.

2. Product Description and Application

Chaff cutter is a small manually operated machine by which cattle fodder including straw is
chopped so as to make the fodder easy to be swallowed. Chopping the fodder using the cutter
enables the livestock to consume more feed which results in more milk or meat or drawing
power.

3. Market Study, Plant Capacity and Production Program

3.1 Market Study
3.1.1 Present Demand and Supply

Though the ANRS has more than 22 million heads of cattle, sheep, goats, donkeys, mules and
camels, the farmers do not use chaff cutters for feeding their animals. The reason is that the use
of this agricultural implement is not known in the region and the product is not available. With
3.4 million farming families in the region and with 22 million livestock, there will be a large
market for chaff cutters if the use of the product is demonstrated widely to farmers. Since
government is giving emphasis to agriculture and dairy farming there is a wide scope for
agricultural implements fabricating industries. It is expected that agricultural production along
with dairy farming to continue to grow in the future.

3.1.2 Projected Demand

If we conservatively assume that only one percent of farming families will buy the product at the
initial stage, the present demand for the item will be 34,000 units at ANRS level. If we further

1
assume that additional 1 % of the farming family in ANRS use chaff cutter for the coming 10
years, then the demand for the item will be more than 34,000 units per annum during the project
period considered for the financial analysis purpose. It should be noted that, however, there is
also demand for the item throughout of the country. This is much larger than the economic size
of a viable plant fabricating chaff cutter.

3.1.3 Pricing and Distribution

Since chaff cutter is not known in Ethiopia it is not possible to get the current market price of the
item in the domestic market. Based on the average production cost of the product, however, the
envisaged plant plans to sell the item at a factory get price of Birr 100 per piece. And this price is
believed to be reasonable as compared to the service that chaff cutter provides, and affordable by
most Ethiopian farmers.

3.2 Plant Capacity

The envisaged plant has a production capacity of 10,000 pieces of chaff cutter per annum; which
is a small fraction of the projected demand of the region. The plant will operate 275 days a year.
Sundays and national holidays, amounting to 65 days a year, are registered holidays for the plant.
For maintenance and repair work as well as for contingence of unexpected work interruption
additional 25 days are assigned.

3.3 Production Program

The production program follows gradual capacity utilization due to technical and market reasons.
Technical reasons refer to the relatively longer time that the technical staffs take to produce a
unit of the product during the early stage of production while the market problem is related with
the time requirement to introduce the product. Accordingly, 65 %, 75 % and 85 % capacity
utilization are assumed during the first, the second and the third years of the operation,
respectively. The fourth year onwards, 100% capacity utilization is assumed.

4. Raw Materials and Utilities

4.1 Availability and Source of Raw Materials

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Chaff cutter is mainly made from high carbon steel; and this will be imported.

4.2 Annual Requirement and Cost of Raw Materials and Utilities

Full capacity raw materials requirement of the plant and the corresponding cost estimates are
given in Table 4.1.

Table 4.1
RAW MATERIALS REQUIREMENT

Qty. Cost In Birr

NO Material
Ton Foreign Local Total
1 Cast Iron 898,100 0 898,100
2 Steel for Blades 0 192,450 192,450
3 Steel For Handles 0 128,300 128,300
4 Miscellaneous 0 64,150 64,150
Total 1,283,0
898,100 00
898,100
Annual electric consumption at 100% capacity utilization in a single shift operation of the plant
shall be 60 MWH. Total cost of electricity is estimated at Birr 84,678 per annum. The plant does
not need water for the purpose of production but it is normally needed for general cleaning.
Based on this, yearly water consumption is estimated to be1000 m 3, and its cost amounts Birr
6,800.

Table 4.2
UTILITIES REQUIREMENT

No. Utility Requirement Unit Price Cost

(Annual) (Birr)
1. Electricity 60 MWH Birr 0.55 /KWH 33,000
2. Water 1000 m3 Birr 2.65 /m3 2,650
Total 35,650

5. Location and Site

For its convenience for distribution to different parts of the ANRS, Debre-Markos is an
appropriate choice for the Chaff Cutter Fabrication plant in the region.

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 6. Technology and Engineering
6.1 Production Process

The frame is cast in green sand moulds by cast iron, and the blades and handles are made of
steel. The mould is made in sand and clay, and molten CI is poured into it to make the main body
of the tool. The axle and handle are separately made mostly from steel, and assembled. They can
be made in the unit or purchased from outside by order. For the purpose of this project the later
option is taken.
[

Alternatively, it is possible to fabricate a chaff cutter that operates with electric power. This
increases both the initial investment requirement and the cost of production, and hence, the price.

6.2 Machinery and Equipment

Table 6.1
MACHINERY & EQUIPMENT

Item
1. Small Cupola
2. Motorized Sand Muffler
3. C.I. Molding Boxes
4. Bricks Constructed Oven
5. Foundry Tools
6. C.I. and Aluminum Metal Patterns

The total cost of machinery/equipment is estimated at Birr 307920

of which Birr 256,600 is in foreign currency.

Suppliers Address:
Company Name: Nan'An Southeast Mechanical Muffler Co., Ltd. 
Company Address: Qinglinge, Jintao, Nanancity, Quanzhou, Fujian, China 
City/Province: Xiamen/Fujian 
Country/Region: China 
Zip/Postal Code: 362314 

6.3 Civil Engineering Cost

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The building area required by the plant is estimated to be 150m 2, and it costs Birr 769,800. This
would include cost of land preparation and associated civil works. The total land area of the
plant, including the open space, is 500 m2 and its lease cost equals Birr 69,924. The cost of the
land lease is as per ANRS land lease rate for Debre-Markos which is equal to Birr 60 per sq m
for industrial 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
Description No Monthly Salary Annual
(Birr) Salary (Birr)
A. Administration
1. Supervisors 1 2566 30792
2. Salesman 1 2052.8 24633.6
3. Secretary and Cashier 1 1539.6 18475.2
4.Guards 2 769.8 18475.2
Sub-total 5 0 92376
B. Production 0 0
1. Skilled workers (operators) 4 2052.8 98534.4
2. Unskilled Workers (laborers) 3 1026.4 36950.4
Benefits (20%) 0 45572.16
12 0 273432.96

The total annual wages and salary, including 20 % benefits, amount to Birr 273,433

7.2 Training Requirement

One month on job training is required for the technical personnel. And, this can be managed by
hiring one expert in the area locally.

8. Financial Analysis
8.1 Underlying Assumption

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The financial analysis of Chaff Cutter Fabrication 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 30% Equity and 70% Loan
Tax Holidays 2 Years
Bank Interest Rate 12%
Discount For Cash Flow 18%
Value Of Land Based on Lease Rate of ANRS
Spare Parts, Repair & Maintenance 3% of the Fixed Investment

B. Depreciation

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

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 C. Working Capital (Minimum Days of Coverage)

Raw Material-Local 30 Days

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

8.2 Investment
The total investment cost of the project including working capital is estimated at Birr 1,786
thousand as shown in Table 8.1 below. The owner shall contribute 30 % of the finance in the
form of equity while the remaining 70% is to be financed by bank loan.
TABLE 8.1
TOTAL INITIAL INVESTMENT
Items L.C F.C Total
Land
81,780 0 81,780
Building and Civil Works
769,800 0 769,800
Office Equipment
25,660 0 25,660
Vehicles
0 0 0
Plant Machinery & Equipment
51,320 256,600 307,920
Total Fixed Investment Cost
928,560 256,600 1,185,160
Pre Production Capital Expenditure*
42,513 0 55,343
Total Initial Invest
ment 971,073 256,600 1,240,503
Working Capital at Full Capacity
231,674 391,897 623,574
Total 1,202,747 648,497 1,864,077
*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 649 thousand or 36.3 % of the total
investment cost.

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 8.3 Production Costs

The total production cost at full capacity operation is estimated at Birr 729 thousand (See Table
8.2). Raw materials and utilities account for 73.5 %.
Table 8.2
PRODUCTION COST AT FULL CAPACITY

Raw Material Requirement Cost

1.Local Raw Materials 384,900
2.Foreign Raw Materials 898,100

Total Production Cost at full Capacity

Items Cost
1.      Raw materials 1,283,000
2.      Utilities 35,650
3.      Wages and Salaries 273,433
4.      Spares and Maintenance 33,207
Factory costs 1,625,290
5.      Depreciation 82,918
6.      Financial costs 107,148
  Total Production Cost 1,815,356

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.

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 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 20.3 % 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 two 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 32.6 % at full capacity utilization.

V. Internal Rate of Return and Net Present Value

Based on cash flow statement (See Annex 2) the calculated internal rate of return (IRR) of the
project is 35.3 % and the net present value (NPV) at 18 % discount is Birr 1019 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:

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 A. Profit Generation

The project is found to be financially viable and earns on average a profit of Birr 490 thousand
per year and Birr 4.9 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 1812 thousand 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 12 skilled labor as well as support
staffs. Consequently the project creates income of Birr 275 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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ANNEXES

11
 Annex 1: Total Net Working Capital Requirements (in Birr)
CONSTRUCTION PRODUCTION
  Year 1 Year 2 1 2 3 4

Capacity Utilization (%) 0 0 65% 75% 85% 100%

1. Total Inventory 0.00 0.00 661473.5 763238.6 865003.8 1017652

Raw Materials in Stock- Total 0.00 0.00 282026.7 325415.4 368804.2 433887.3

Raw Material-Local 0.00 0.00 27292.9 31491.83 35690.72 41989.1

Raw Material-Foreign 0.00 0.00 254733.8 293923.6 333113.4 391898.2

Factory Supplies in Stock 0.00 0.00 1250.848 1443.298 1635.748 1924.397

Spare Parts in Stock and Maintenance 0.00 0.00 2354.639 2716.881 3079.123 3622.499

Work in Progress 0.00 0.00 31271.51 36082.5 40893.52 48110.01

Finished Products 0.00 0.00 62543.02 72165.03 81787.02 96220.02

2. Accounts Receivable 0.00 0.00 181952.7 209945.4 237938.2 279927.3

3. Cash in Hand 0.00 0.00 25875.49 29856.33 33837.2 39808.46

CURRENT ASSETS 0.00 0.00 587275 677625 767975 903499.9

4. Current Liabilities 0.00 0.00 181952.7 209945.4 237938.2 279927.3

Accounts Payable 0.00 0.00 181952.7 209945.4 237938.2 279927.3

TOTAL NET WORKING CAPITAL REQUIRMENTS 0.00 0.00 405322.3 467679.5 530036.8 623572.7

INCREASE IN NET WORKING CAPITAL 0.00 0.00 405322.3 62357.26 62357.26 93535.91

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 1017652 1017652 1017652 1017652 1017652 1017652

Raw Materials in Stock-Total 433887.3 433887.3 433887.3 433887.3 433887.3 433887.3

Raw Material-Local 41989.1 41989.1 41989.1 41989.1 41989.1 41989.1

Raw Material-Foreign 391898.2 391898.2 391898.2 391898.2 391898.2 391898.2

Factory Supplies in Stock 1924.397 1924.397 1924.397 1924.397 1924.397 1924.397

Spare Parts in Stock and Maintenance 3622.499 3622.499 3622.499 3622.499 3622.499 3622.499

Work in Progress 48110.01 48110.01 48110.01 48110.01 48110.01 48110.01

Finished Products 96220.02 96220.02 96220.02 96220.02 96220.02 96220.02

2. Accounts Receivable 279927.3 279927.3 279927.3 279927.3 279927.3 279927.3

3. Cash in Hand 39808.46 39808.46 39808.46 39808.46 39808.46 39808.46

CURRENT ASSETS 903499.9 903499.9 903499.9 903499.9 903499.9 903499.9

4. Current Liabilities 279927.3 279927.3 279927.3 279927.3 279927.3 279927.3

Accounts Payable 279927.3 279927.3 279927.3 279927.3 279927.3 279927.3

TOTAL NET WORKING CAPITAL REQUIRMENTS 623572.7 623572.7 623572.7 623572.7 623572.7 623572.7

INCREASE IN NET WORKING CAPITAL 0.00 0.00 0.00 0.00 0.00 0.00

Annex 2: Cash Flow Statement (in Birr)

2
 CONSTRUCTION PRODUCTION
  Year 1 Year 2 1 2 3 4
TOTAL CASH INFLOW 581110 1204683 1849853 1952493 2209093 2607989
1. Inflow Funds 581110 1204683 181952.7 27992.72 27992.72 41989.1
Total Equity 232444 481873.1 0 0 0 0
Total Long Term Loan 348666 722809.6 0 0 0 0
Total Short Term Finances 0 0 181952.7 27992.72 27992.72 41989.1
2. Inflow Operation 0 0 1667900 1924500 2181100 2566000
Sales Revenue 0 0 1667900 1924500 2181100 2566000
Interest on Securities 0 0 0 0 0 0
3. Other Income 0 0 0 0 0 0
TOTAL CASH OUTFLOW 581110 581110 1956738 1659399 1973301 2293828
4. Increase In Fixed Assets 581110 581110 0 0 0 0
Fixed Investments 553438.1 553438.1 0 0 0 0
Pre-production Expenditures 27671.9 27671.9 0 0 0 0
5. Increase in Current Assets 0 0 587275 90349.99 90349.99 135525
6. Operating Costs 0 0 1095338 1261893 1428448 1678281
7. Corporate Tax Paid 0 0 0 0 168776.3 215725.4
8. Interest Paid 0 0 274125.7 128577.1 107147.6 85718.05
9.Loan Repayments 0 0 0 178579.3 178579.3 178579.3
10.Dividends Paid 0 0 0 0 0 0
Surplus(Deficit) 0 623572.7 -106886 293093.5 235791.6 314160.8
Cumulative Cash Balance 0 623572.7 516687 809780.5 1045572 1359733

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

3
 PRODUCTION
  5 6 7 8 9 10
TOTAL CASH INFLOW 2566000 2566000 2566000 2566000 2566000 2566000
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 2566000 2566000 2566000 2566000 2566000 2566000
Sales Revenue 2566000 2566000 2566000 2566000 2566000 2566000
Interest on Securities 0 0 0 0 0 0
3. Other Income 0 0 0 0 0 0
TOTAL CASH OUTFLOW 2143303 2131623 2116622 1923042 1923042 1923042
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 1678281 1678281 1678281 1678281 1678281 1678281
7. Corporate Tax Paid 222154.2 231903.7 238332.5 244761.4 244761.4 244761.4
8. Interest Paid 64288.54 42859.03 21429.51 0 0 0
9. Loan Repayments 178579.3 178579.3 178579.3 0 0 0
10.Dividends Paid 0 0 0 0 0 0
Surplus(Deficit) 422697.3 434377.4 449378 642957.9 642957.9 642957.9
Cumulative Cash Balance 1782430 2216808 2666186 3309144 3952102 4595060

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 1667900 1924500 2181100 2566000

1. Inflow Operation 0 0 1667900 1924500 2181100 2566000

Sales Revenue 0 0 1667900 1924500 2181100 2566000

Interest on Securities 0 0 0 0 0 0

2. Other Income 0 0 0 0 0 0

TOTAL CASH OUTFLOW 581110 581110 1500660 1324250 1490805 1987542

3. Increase in Fixed Assets 581110 581110 0 0 0 0

Fixed Investments 553438.1 553438.1 0 0 0 0

Pre-production Expenditures 27671.9 27671.9 0 0 0 0

4. Increase in Net Working Capital 0 0 405322.3 62357.26 62357.26 93535.91

5. Operating Costs 0 0 1095338 1261893 1428448 1678281

6. Corporate Tax Paid 0 0 0 0 0 215725.4

NET CASH FLOW -581110 -581110 167240 600249.9 690294.8 578458.1

CUMMULATIVE NET CASH FLOW -581110 -1162220 -994980 -394730 295564.7 874022.8

Net Present Value (at 18%) -581110 -492466 120109.2 365330.6 356046.4 252849.4

Cumulative Net present Value -581110 -1073576 -953467 -588136 -232090 20759.43

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

5
 PRODUCTION
  5 6 7 8 9 10
TOTAL CASH INFLOW 2566000 2566000 2566000 2566000 2566000 2566000

1. Inflow Operation 2566000 2566000 2566000 2566000 2566000 2566000

Sales Revenue 2566000 2566000 2566000 2566000 2566000 2566000

Interest on Securities 0 0 0 0 0 0

2. Other Income 0 0 0 0 0 0

TOTAL CASH OUTFLOW 1900435 1910184 1916613 1923042 1923042 1923042

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 1678281 1678281 1678281 1678281 1678281 1678281

6. Corporate Tax Paid 222154.2 231903.7 238332.5 244761.4 244761.4 244761.4

NET CASH FLOW 665565.1 655815.7 649386.8 642957.9 642957.9 642957.9

CUMMULATIVE NET CASH FLOW 1539588 2195404 2844790 3487748 4130706 4773664

Net Present Value (at 18%) 246546.3 205877 172761.7 144958.8 122846.4 104107.1

Cumulative Net present Value 267305.8 473182.7 645944.4 790903.1 913749.6 1017857
1,017,856.71
Net Present Value (at 18%)

Internal Rate of Return 35.3%

Annex 4: NET INCOME STATEMENT ( in Birr)

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 PRODUCTION
  1 2 3 4 5
Capacity Utilization (%) 65% 75% 85% 100% 100%

1. Total Income 1667900 1924500 2181100 2566000 2566000

Sales Revenue 1667900 1924500 2181100 2566000 2566000
Other Income 0 0 0 0 0
2. Less Variable Cost 1011516 1167134 1322751 1556178 1556178
VARIABLE MARGIN 656384.3 757366.5 858348.7 1009822 1009822
(In % of Total Income) 100.9721 100.9721 100.9721 100.9721 100.9721
3. Less Fixed Costs 166738.8 177676.1 188613.4 205019.4 205019.4
OPERATIONAL MARGIN 489645.5 579690.4 669735.3 804802.6 804802.6
(In % of Total Income) 75.33776 77.28792 78.80186 80.46976 80.46976
4. Less Cost of Finance 274125.7 128577.1 107147.6 85718.05 64288.54
5. GROSS PROFIT 215519.8 451113.3 562587.7 719084.5 740514.1
6. Income (Corporate) Tax 0 0 168776.3 215725.4 222154.2
7. NET PROFIT 215519.8 451113.3 393811.4 503359.2 518359.8
RATIOS (%)  
Gross Profit/Sales 12.92% 23.44% 25.79% 28.02% 28.86%
Net Profit After Tax/Sales 12.92% 23.44% 18.06% 19.62% 20.20%
Return on Investment 31.24% 35.57% 29.60% 32.99% 32.63%
Return on Equity 30.17% 63.15% 55.13% 70.47% 72.57%

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 2566000 2566000 2566000 2566000 2566000

Sales Revenue 2566000 2566000 2566000 2566000 2566000
Other Income 0 0 0 0 0
2. Less Variable Cost 1556178 1556178 1556178 1556178 1556178
VARIABLE MARGIN 1009822 1009822 1009822 1009822 1009822
(In % of Total Income) 100.9721 100.9721 100.9721 100.9721 100.9721
3. Less Fixed Costs 193950.6 193950.6 193950.6 193950.6 193950.6
OPERATIONAL MARGIN 815871.3 815871.3 815871.3 815871.3 815871.3
(In % of Total Income) 81.5988 81.5988 81.5988 81.5988 81.5988
4. Less Cost of Finance 42859.03 21429.51 0 0 0
5. GROSS PROFIT 773012.3 794441.8 815871.3 815871.3 815871.3
6. Income (Corporate) Tax 231903.7 238332.5 244761.4 244761.4 244761.4
7. NET PROFIT 541108.6 556109.3 571109.9 571109.9 571109.9
RATIOS (%)  
Gross Profit/Sales 30.13% 30.96% 31.80% 31.80% 31.80%
Net Profit After Tax/Sales 21.09% 21.67% 22.26% 22.26% 22.26%
Return on Investment 32.70% 32.34% 31.98% 31.98% 31.98%
Return on Equity 75.75% 77.85% 79.95% 79.95% 79.95%

Annex 5: Projected Balance Sheet (in Birr)

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 CONSTRUCTION PRODUCTION
  Year 1 Year 2 1 2 3 4
TOTAL ASSETS 581110 1785793 2183265 2483792 2727017 3093786
1. Total Current Assets 0 623572.7 1103962 1487406 1813547 2263233
Inventory on Materials and Supplies 0 0 285632.2 329575.6 373519 439434.2
Work in Progress 0 0 31271.51 36082.5 40893.52 48110.01
Finished Products in Stock 0 0 62543.02 72165.03 81787.02 96220.02
Accounts Receivable 0 0 181952.7 209945.4 237938.2 279927.3
Cash in Hand 0 0 25875.49 29856.33 33837.2 39808.46
Cash Surplus, Finance Available 0 623572.7 516687 809780.5 1045572 1359733
Securities 0 0 0 0 0 0
2. Total Fixed Assets, Net of Depreciation 581110 1162220 1079303 996386.5 913469.7 830552.9
Fixed Investment 0 553438.1 1106876 1106876 1106876 1106876
Construction in Progress 553438.1 553438.1 0 0 0 0
Pre-Production Expenditure 27671.9 55343.82 55343.82 55343.82 55343.82 55343.82
Less Accumulated Depreciation 0 0 82916.77 165833.5 248750.3 331667
3. Accumulated Losses Brought Forward 0 0 0 0 0 0
4. Loss in Current Year 0 0 0 0 0 0
TOTAL LIABILITIES 581110 1785793 2183265 2483792 2727017 3093786
5. Total Current Liabilities 0 0 181952.7 209945.4 237938.2 279927.3
Accounts Payable 0 0 181952.7 209945.4 237938.2 279927.3
Bank Overdraft 0 0 0 0 0 0
6. Total Long-term Debt 348666 1071476 1071476 892896.3 714317.1 535737.8
Loan A 348666 1071476 1071476 892896.3 714317.1 535737.8
Loan B 0 0 0 0 0 0
7. Total Equity Capital 232444 714317.1 714317.1 714317.1 714317.1 714317.1
Ordinary Capital 232444 714317.1 714317.1 714317.1 714317.1 714317.1
Preference Capital 0 0 0 0 0 0
Subsidies 0 0 0 0 0 0
8. Reserves, Retained Profits Brought Forward 0 0 0 215519.8 666633.1 1060445
9.Net Profit After Tax 0 0 215519.8 451113.3 393811.4 503359.2
Dividends Payable 0 0 0 0 0 0
Retained Profits 0 0 215519.8 451113.3 393811.4 503359.2
Annex 5: Projected Balance Sheet (in Birr): Continued
  PRODUCTION

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TOTAL ASSETS 3433566 3796096 4173626 4744736 5315846 5886956
1. Total Current Assets 2685930 3120308 3569686 4212644 4855602 5498559
Inventory on Materials and Supplies 439434.2 439434.2 439434.2 439434.2 439434.2 439434.2
Work in Progress 48110.01 48110.01 48110.01 48110.01 48110.01 48110.01
Finished Products in Stock 96220.02 96220.02 96220.02 96220.02 96220.02 96220.02
Accounts Receivable 279927.3 279927.3 279927.3 279927.3 279927.3 279927.3
Cash in Hand 39808.46 39808.46 39808.46 39808.46 39808.46 39808.46
Cash Surplus, Finance Available 1782430 2216808 2666186 3309144 3952102 4595060
Securities 0 0 0 0 0 0
2. Total Fixed Assets, Net of Depreciation 747636.2 675788.2 603940.2 532092.2 460244.2 388396.2
Fixed Investment 1106876 1106876 1106876 1106876 1106876 1106876
Construction in Progress 0 0 0 0 0 0
Pre-Production Expenditure 55343.82 55343.82 55343.82 55343.82 55343.82 55343.82
Less Accumulated Depreciation 414583.8 486431.8 558279.8 630127.8 701975.8 773823.8
3. Accumulated Losses Brought Forward 0 0 0 0 0 0
4. Loss in Current Year 0 0 0 0 0 0
TOTAL LIABILITIES 3433566 3796096 4173626 4744736 5315846 5886956
5. Total Current Liabilities 279927.3 279927.3 279927.3 279927.3 279927.3 279927.3
Accounts Payable 279927.3 279927.3 279927.3 279927.3 279927.3 279927.3
Bank Overdraft 0 0 0 0 0 0
6. Total Long-term Debt 357158.5 178579.3 0 0 0 0
Loan A 357158.5 178579.3 0 0 0 0
Loan B 0 0 0 0 0 0
7. Total Equity Capital 714317.1 714317.1 714317.1 714317.1 714317.1 714317.1
Ordinary Capital 714317.1 714317.1 714317.1 714317.1 714317.1 714317.1
Preference Capital 0 0 0 0 0 0
Subsidies 0 0 0 0 0 0
8. Reserves, Retained Profits Brought
Forward 1563804 2082164 2623272 3179381 3750491 4321601
9. Net Profit After Tax 518359.8 541108.6 556109.3 571109.9 571109.9 571109.9
Dividends Payable 0 0 0 0 0 0
Retained Profits 518359.8 541108.6 556109.3 571109.9 571109.9 571109.9

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