Vegetable F Production: Biru Gidi Irrigated

BIRU GIDI IRRIGATED VEGETABLES AND
FRUITS PRODUCTION
INVESTMENT PROPOSAL
PROJECT LOCATION:
OROMIA REGION, EAST WOLLEGA ZONE,
Guto gida WOREDA, lugo Kebele
PROJECT PROMOTER: MR. BIRU GIDI LEMESSA

(0911-72-19-48)
CONSULTANT: hamen consultancy service plc
Finfinne, Ethiopia
MARCH, 2017
Table of Contents
Executive Summary..............................................................................................................................................................3
1. Introduction.................................................................................................................................................................4
2. Background.................................................................................................................................................................5
@ Biru Gidi vegetable & Fruit crops production investment proposal 1
2.1 Ethiopia’s Current Economic Situation..............................................................................................................5
2.2 The Agriculture Sector........................................................................................................................................6
2.3 Development and socio-economic objectives.....................................................................................................6
2.4 Income distribution and poverty.........................................................................................................................7
3 Project Objectives and Rationales..............................................................................................................................7
4 The project Area.........................................................................................................................................................8
4.1 Physical Features................................................................................................................................................8
4.1.1 Location and Accessibility.........................................................................................................................8
4.1.2 Drainage.....................................................................................................................................................8
4.1.3 Climate...............................................................................................................................................................8
4.1.4 Soils...................................................................................................................................................................8
4.2 Economic Base....................................................................................................................................................9
4.2.1 Crop Production.................................................................................................................................................9
4.2.2 Livestock............................................................................................................................................................9
4.2.3 Land Use Pattern................................................................................................................................................9
4.2.4 Input Supply and Product Markets....................................................................................................................9
4.3 Infrastructure and Institutions..................................................................................................................................10
5 The Project................................................................................................................................................................10
5.1 Project Description............................................................................................................................................10
5.2 Project Objectives.............................................................................................................................................10
5.3 Types of technology Use..................................................................................................................................10
5.4 Production Capacity..........................................................................................................................................10
5.5 Land Use Plan and Action Plan........................................................................................................................11
6 Market Prospects.......................................................................................................................................................11
6.1 Demands and Main Customers.........................................................................................................................11
7 Organizations and Management...............................................................................................................................12
7.1 Business Form...................................................................................................................................................12
7.2 Organization Structure of the Project...............................................................................................................12
7.3 Manpower Requirement with Qualification.....................................................................................................12
8 Financial Study.........................................................................................................................................................13
8.1 Financial Requirements....................................................................................................................................13
8.1.1 Project Capital Costs................................................................................................................................13
8.1.2 Project Operating Costs...........................................................................................................................16
8.1.3 Project Working Capital..........................................................................................................................17
8.1.4 Total Financial requirements...................................................................................................................17
8.2 Forecasted Production.......................................................................................................................................18
8.3 Forecasted Sales Revenues...............................................................................................................................18
8.4 Depreciation calculations..................................................................................................................................18
8.5 Loan Repayment Schedule and Interest Expense.............................................................................................18
8.6 Forecasted Income Statement...........................................................................................................................19
8.7 Forecasted Cash Flow Statement......................................................................................................................19
8.8 Forecasted Balance Sheet.................................................................................................................................19
8.9 Overall Financial Assessment...........................................................................................................................19
9 Environmental Impact Analysis................................................................................................................................21
10 Conclusion and Recommendation............................................................................................................................22
Annex.................................................................................................................................................................................23
Executive Summary
Project Title: This project may be named as “Biru Gidi Vegetables and Fruits Production Project”.
Project Owner: Mr, Biru Gidi Lemessa
Project Description: The project adopts irrigation production system: starting from its first year of
operation, the promoter is expected to fully develop the land 30 ha with irrigation system.
Project Components:
The project consists of productions of fruits (40 percent of the land to be covered by oranges,
bananas, papaya, and avocado); vegetables crop production (30 percent of the land to be covered
by pepper and tomatoes); root cops production (26 percent of the land to be covered by onions and
garlic). Most of these crops are high valued products which fetch high foreign exchanges for the
country on one hand and inadequately supplied even in the domestic market on the other hand.
Project Location: The project is located Oromia region, at East Wollega Zone, Guto Gida Woreda,
Lugo kebele. The land size is estimated to be 50 ha.
Project Beneficiaries: The project will benefit those local people both in the form of providing
employment opportunities and modern agricultural technology supplies. The project is expected to
create employment opportunities for more than 23 permanent employees and more than 3,210
casual workers per year. In addition the country as a whole will be benefited from the project as it
is expected to generate substantial foreign currencies through producing exportable commodities at
higher quality.
Project Cost: During its first year of operation, the total project costs is estimated to be Birr
8,193,756.00 consisting of Birr 6,589,342 as project fixed costs, Birr 1,481,527.00 as operating
costs and Birr 1, 228, 88.00 as working capital cost. Please refer to page 17 of this report for
further information.
Source of Fund: The above specified project cost is supposed to be financed as : 70 percent (Birr
5,735,629 on a medium term 10 years bank loan from Development Bank of Ethiopia at 8.5 percent
simple interest rate and the remaining 30 percent ( Birr 2,458,127) to be fully financed by the
project promoter.
Statement of Feasibility: - the project was found to be viable on all aspects of the study.
Recommendation: - considering the viability of the project, as aforementioned, the project is
recommended for implementation.
1. Introduction
Since 1994, Agricultural Development Led Industrialization (ADLI) has long been the central pillar
of successive national development and poverty reduction plans of Ethiopia. It remains so under the
current Growth and Transformation Plan (GTP) of economic policy of Ethiopia. With
implementations of a series of agricultural and rural development polices which are anchored to this
ADLI, the economy of Ethiopia in general and to some extent, the agricultural sector has
performed well over most of the last decade, although there is still substantial potential to improve
productivity and production in the agriculture sector. Despite the good performance of the
economy, however, the share of agriculture sector in the GDP has been steadily declining owing to
the stronger performance in the service sector. The share of agriculture in GDP has dropped from
fairly above 51 percent in 1999/00 to 41 percent in 2010 whereas the contribution of the service
sector during the same period has changed from 32 percent to 46 percent.
However, the small contribution of GDP by the agriculture sector to the Ethiopian economy is more
valuable than the largest contribution by the service sector mainly due to the following reasons.
Firstly, agriculture has more forward and backward linkages with other sectors of the economy and
hence development in the agriculture sector drives development in the other sectors as per the
concept of ADLI. Secondly, majority of the rural population (fairly above 84 percent) directly or
indirectly make their living from the agriculture sector and hence development in this sector is more
broad-based than the service sector. Finally, GDP contribution originating from the agriculture
sector has more power of poverty reduction than other sectors (a one percent GDP growth rate
originating in agriculture sector has more potential for poverty reduction than two percent GDP
growth rate originating from the service sector).
Recognizing these facts, the Ethiopian government has demonstrated its continued strong
commitment to the agriculture and rural development through the issuance of GTP, the success of
which hinges on the doubling of production and productivity of the agriculture sector. Thus,
although increasing productivity in smallholder agriculture is one of the top priority areas of the
government, greater private sector participation is also encouraged, both in commercial agricultural
production and in marketing, agro-processing and farm input supply chains. The GTP envisages
that some 3.3 million hectare will be developed for extensive commercial agriculture during the
first five years of the Policy and Investment Framework 1 (PIF) period. According to the PIF, around
USD 3-4 billion (which is equivalent to 52.56 to 70.08 billion Birr at the current exchange rate) of
private investment would be required to reach this target. In addition, following the issuance of PIF
and GTP II, there has been a call for shifting from low value land extensive production to high
value and land intensive form of agriculture is made. Accordingly, this Vegetables crop production
project is proposed by visionary emerging domestic investor Mr.Biru Gidi Lemessa.
It is against this background that this project study is being undertaken to assess the profitability of
the project so as to provide the investor and Oromia Investment Commission with a tool to use in
determining the feasibility of enterprises and monitoring its performance. In making this project
feasibility study, the consultant team has devoted a great deal of time in searching and collecting
information on specific aspects of the project. The information was collected by reviewing both
print and electronic documents from research publications (library and on-line reprints and
databases).
1
PIF provides a clear statement of the goal and development objectives of the country in sustained and coordinated manner spanning the next ten
years (as a minimum) which has broad consensus support amongst government, development partners and other stakeholders.

2. Background
Despite good performance of the economy of Ethiopia during the past few decades, food security
remains a critical issue for many households, and for the country as a whole. In addition, most of
the registered growth performance of agriculture sector is achieved as a result of expansion of the
cropped area into more marginal lands, which has led to severe land degradation in some areas.
This is so mainly because of the fact that Ethiopian agriculture is dominated by subsistence, low
input-low output, and rain-fed farming system. The use of chemical fertilizer and improved seeds is
quite limited despite Government efforts to encourage the adoption of modern and intensive
agricultural practices. Low agricultural productivity can be attributed to limited access by
smallholder farmers to agricultural inputs, financial services, improved production technologies,
irrigation and agricultural markets; and, more importantly, to poor land management practices that
have led to severe land degradation. Recent studies show that Ethiopia has one of the highest rates
of soil nutrient depletion in sub-Saharan Africa.
Although the government’s priority attention is still on increasing the productivity and production
by the smallholder farmers, recognizing the high prevalence of rural poverty and the large
productivity gap, due recognition is now given to the private commercial firms in the agriculture
sector. This is reflected in the Policy and Investment Frame work (PIF) objective of the country
which states “to contribute to Ethiopia’s achievement of middle income status by 2020”. The
Development Objective aims to “sustainably increase rural incomes and national food security,
which embodies the concepts of producing more, selling more, nurturing the environment,
eliminating hunger and protecting the vulnerable against shocks. Investments are also directed
towards expanding the extension system, irrigation development, and rural commercialization and
agro-processing. The government is complementing its efforts in food-insecure areas with an
increased commitment to raise national food production by investing in areas with high agricultural
potential, including efforts to attract private agricultural investment in areas with under-utilized land
and water resources.
The owner/promoter: Biru Gidi is the farmer for long period of time. The promoter is a model
farmer and awarded at different times by the officials during the past years. Currently the promoter
is initiated to upgrade and invest on his own land which is under his own possession for many
years.
2.1 Ethiopia’s Current Economic Situation
As a development strategy, Ethiopia has issued Agricultural Development Led Industrialization (ADLI) in 2002 and has
been implementing it through issuance of a series of congruent economic policies including Sustainable Development
and Poverty Reduction Strategy Paper (SDPRSP 2002-2005), Plan for Accelerated and Sustainable Development to
End Poverty (PASDEP 2005-2010) and the currently issued the Second Growth and Transformation Plan (GTP II
2015/16-2019/20). Agriculture is the nucleus of all these series of policies. ADLI it is supposed to enhance the
industrialization process of the country as well as to widely diffuse its benefits to the poor due to its backward and
forward linkages. It is expected not only for facilitating industrialization in the Ethiopian context but also for a
development strategy that aims to ensure that the benefits of development are widely shared so that growth is pro-poor.
Following the framework set in ADLI, agriculture used to lead the economy of Ethiopia for the past decade. However,
since 2009 onwards, it seems lost its leading role to the service sector.
As shown by the above chart and the underneath data, the role of service sector in GDP contribution
has been increasing over time whereas the contribution of the industrial sector seems to remain at
around 13 percent while the contribution of agriculture has been steadily declining from fairly
above 51 percent in 1997/98 to just 41 percent in 2009/10.
2.2The Agriculture Sector
In spite of disproportionately high employment in the sector (fairly above 84 percent of the rural
population) and high poverty reduction power of the sector, the contribution of the agriculture to
GDP of the nation has been declining. Such declining role of the sector is explained mainly by the
small sizes (land holding share of 83 percent by smallholders farming setup less than 2 hectares and
the average size of the small farms is 1.25 hectare) characterized by low utilization of agricultural
inputs, dependence on inconsistent, uneven & unpredictable rains, poor irrigation system, low
technology, little access to know-how (risk management, technology, skill, etc), limited capital,
fragmented plots hampering economic scale production and productivity, that is vulnerable to
natural and man-made changes.
About a third of rural households farm less than 0.5 hectares which, under rain fed agriculture at
current yield levels, cannot produce enough food to meet their requirements. Most agricultural
production is used to meet household consumption needs and, for a very large number of
households, there is a prolonged hunger season during the pre-harvest period. This period is also
characterized by rising in food item prices. When there are surpluses, smallholder farmers are
often constrained by lack of access to markets, and hence sale their outputs at very depressed prices.
Owing to these characteristics of smallholder farmers and the related constraints, crop production
couldn’t keep in pace with the growing demand for such outputs for food and as input for industrial
sector for industrial sector. As a result, Ethiopia has been net importer of cereals and fruit products
despite of decades unreserved government effort to increase the productivity and production of the
smallholder agriculture sector. Hence, food security remains a critical issue for many households,
and for the country as a whole. Moreover, expansion of the cropped area to more marginal lands has
led to severe land degradation in some areas. To fill such growing gap between the supply of crop
products and demand for such items, the government has declared its commitment to increase the
national food production by directing investment in areas with high agricultural potential, including
efforts to attract private agricultural investment in areas with under-utilized land and water
resources.
2.3 Development and socio-economic objectives
The development and social objective of the Ethiopia is compressive and consistent. In addition to
the well articulation of these in the Second national plan (GTP II), it is also reflected in the Policy
and Investment Frame work (PIF) objective of the country which states “to contribute to Ethiopia’s
achievement of middle income status by 2020”. The Development Objective aims to “sustainably
increase rural incomes and national food security”. This objective involves the concepts of
producing more, selling more, nurturing the environment, eliminating hunger and protecting the
vulnerable against shocks; all of which are embodied in various national policy instruments, and are
expressed in terms of four main themes, each with its own Strategic Objective summarized as
follows:
Thematic Area Strategic Objectives (SOs)
Productivity and To achieve a sustainable increase in agricultural

Production productivity and production.
Rural Commercialization To accelerate agricultural commercialization and agro
industrial development.
Natural Resources Management To reduce degradation and improve productivity of

natural resources.
Disaster Risk Management and To achieve universal food security and protect vulnerable
Food Security households from natural disasters.
Thus, the objective of this investment project proposal is well anchored to, and aligned with the
national socioeconomic development of the country. The detail project rational and objectives are
explained under section three “rationale and Objectives of the project”.
2.4 Income distribution and poverty

As this project is proposed to be implemented in area where there is neither commercial private
farm nor state farms operating so far, and as the local smallholder farmers are mainly characterized
by low input and low output vicious, the successful implementation of the project will contribute
toward equitable income distribution and rural poverty reduction. By creating non-farm job
opportunity at their locality, this project will also reverse the seasonal rural-urban migration, which
has been the norm due to in this area due to lack of non-farm income generating activities. Given
the fact that the success or failure of any project is usually measured in terms of its final effect on
these issues, this project will meet the priority area where the government needs more investment.
3 Project Objectives and Rationales

This proposal calling for allocation of land for vegetables crop production recognizes that:
 Creating employment opportunities for the society,
 There has been a call for our smallholder and investors to concentrate on increasing
production and productivity to meet the growing food demands;
 Transferring technology in the area of vegetable crop production,
 Such project with the aim of enhancing production and productivity of fruits and vegetable
crops will minimize the current national budget deficit caused as a result of importing food
items.
 Implementation of this commercial farm project is expected to motivate other investors to
supplement it by investing in agro-processing factors.
4 The project Area
4.1 Physical Features
4.1.1 Location and Accessibility

Guto Gida woreda is bordered with Gidda Ayana, Abe Dongoro and Gudaya Bila to the North,
Wayyu Tuqa and Leka Dulecha to the South, Sasiga, Digga and Benshengul Gumuz in the West
and Sibu Sire and Wayyu Tuka. It covers a total surface area of 814.90 km2. Currently, the District
is divided in to 21 farmer’s associations (kebeles) and one urban center. Guto Gidda Woreda is
divided in to three distinct geographical areas with different proportion; namely, highland 0.26
percent, the midland 46.74 percent and the lowland 53.00 percent. This project is found in the
lowland area of the woreda. This agricultural project which covers 50 hectares of arable land is
located in Oromia region, at East Wollega Zone, Guto Gida Woreda, Lugo kebele. The site is
bounded by Gadise Biru in the North, Small River in the south, common land in the east and Fafate
River in the west.
4.1.2 Drainage
In this district, there are few rivers that continuously drain through the year which are perennial
with catchment area of 696 hectare, namely; Laga Harre, Horo Alalitu and Loko with high volume
and consistent flows. In addition to the above rivers there are some streams which area seasonal and
perennial used for drinking and irrigation and others are flowing permanently to the major rivers of
the environment.
Natural surface drainage facilities are generally excellent to excessive. Excess surface water will
quickly find a natural drainage channel for return to the river. However, such surface wastes could
cause serious erosion problems unless suitable erosion control drop structures of well-grassed
drainage ways are provided. Because of the slope and generally permeable nature of the soil in
association with suitability of natural drains with proper out fall, control of a water table under
irrigation should be easy.
4.1.3 Climate
As the district profiling by the East Wollega Finance and Economic Development Bureau shows,
the district is situated at an altitude above 1350 to 2450 meters above sea level the dominant
climatic condition is a sub tropical type. As a result this area is experienced mean annual
temperature of slightly greater than 150c and mean annual rainfall of 1600 mm to 2000 mm. The
climate of the area is categorized under hot-semi-arid climate.
4.1.4 Soils
the district has different types of soils which are suitable for agriculture. Clay loam is among the
soil types found in the district i.e it covers 16.33% of the total land of the district which has. Sandy
soil covers 55,734.60 hectares of land which is about 23.06% of the total land of the district. The
other soil type exist in the district is loam soil, dominantly found in the district, which good
potentiality for agriculture and covers 42.80 % of the total land of the district.
4.2 Economic Base

4.2.1 Crop Production
The dominant economic activity in the district is smallholder agriculture. In the district, there is
neither state farm nor large scale commercial private farms. Agricultural inputs are believed to be
the most important factor to attain food self-sufficiency. Without chemical fertilizer, high yield is
not expected & feeding a family of large size would be impossible.
Agricultural calendar of the district differ according to the weather condition of the districts’ in the
zone. The major crop production season in this district is Mehar. Land preparation extends from
the month of March to May whereas the appropriate sowing (planting) extends from May to July
and harvesting is between October and January. The Belg season is not suitable for production in
this district. In addition, there are some constraints on the productivity of agriculture even for the
Mehar season. Among these constraints uneven distribution of rain fall from beginning crop
cultivation, crop diseases and soil conservation problem and insect diseases exist.
4.2.2 Livestock
Like in most peasant smallholder societies in the Oromia region, livestock play a key role in day-to-
day life of the Guto Gida woreda society. They provide meat & milk, transport, manure, skin &
hide & furnish regular and easily realizable cash income. But in contrast to the size of the livestock
population, physical and value productivity are low.
4.2.3 Land Use Pattern

out of the total land of the district the proximate areal coverage of land used for crop cultivation is
67,028.24 hectares of which 59,363.44 hectares of land is used for annual crop cultivation and 7,664.8
hectares of land is used for perennial crop production.
Deforestation is highly practiced by the local farmers through which they gain an income by selling
charcoal, firewood and different lumbering materials. The greatest portion of fuel wood
consumption of the capital town is obtained from this district, in which the major area in the district
where fuel wood possibly comes at large to the town is expected from these forests. As a result, the
Natural forest of the district covers merely total area of 2,723.5 hectares of land. However, there has
been promising initiatives to recover some forest areas. Manmade type of forest is planted to solve
the problem of environmental problem such as soil erosion, desertification, deforestation, and etc.
With the aim of satisfying one of the millennium development goals of United Nations the
inhabitants of the district were participated on the planting and protecting the trees. The area
covered by manmade forest in Guto Gidda district is 930 hectare.
4.2.4 Input Supply and Product Markets

Concerning input supply, there are farmer service cooperatives on delivering service as agricultural
input supplies. In this district the multipurpose agricultural cooperative provides a service as
agricultural inputs and search market for their production and provides different inputs.
4.3 Infrastructure and Institutions

The project area is only about 80 km far from the Nekemte town. There is also access road from
the district town to the project area. Thus, there will be no transportation problems to and from the
project area. In addition, the area is covered by mobile and fixed line telecommunication facilities
and hence there would be easy communication of the project affairs within the project and with the
external bodies. Furthermore, as the project area is bounded by all season flowing rivers, there is no
difficulty of getting potable water.

5 The Project
5.1 Project Description

This project aims at cultivation with irrigation system. Accordingly, the total land area covering of
50 ha, was allocated as: Productions of fruits (40 percent of the land to be covered by oranges,
bananas, papaya, and avocado); vegetables crop production (30 percent of the land to be covered by
pepper and tomatoes); root cops production (27 percent of the land to be covered by onions and
garlic). Most of these crops are high valued products which fetch high foreign exchanges for the
country on one hand and inadequately supplied even in the domestic market on the other hand..
5.2 Project Objectives

The main objective of this project is to increase the production of Fruits like Orange, Banana,
Papaya, and Avocado and vegetable crops like pepper, tomatoes, onion and garlic by modernizing
the irrigation system. In addition, the project has such strategic objectives of creation of job
opportunities to the local people; contributing toward increasing the foreign currency earning
potential of the country through increasing exportable products, and improving the problem of
natural resource management practices through creation of employment opportunity in the project
area (alternative income generation of non-farm activity for the local people).
5.3 Types of Ttechnology Use
The project aims at employing technologies which are environmentally friendly and which can be
effectively utilized by locally existing know-how with the exceptions of some machineries and
equipment which should be imported if there is no domestic source of supply. The project aims at
utilizing locally available technologies so as to encourage the backward and forward linkage of the
project and hence contribute towards the realization of Agricultural Development Led
Industrialization (ADLI) strategy of the country.
5.4 Production Capacity
For each crop types proposed, the project aims at producing the maximum output per hectare as
proved to be achievable at the research stations. The project promoters aim at utilizing the
technologies and practices as per the recommendations of the expertise so as to produce the
maximum output per hectare. Accordingly, the projected output per hectare for each crop will be
presented under sub-section 9 (projected output per hectare).
5.5Land Use Plan and Action Plan

The following table shows the proposed land use and crops for which the land is to be used.
Table 1: Land use plan for 50 hectares
Land allocated to Land Use and Development Plan over the life of the Land
project allocatio
Production by Irrigation n (%)
facility
Crop type Crop name 1 2 3 4 5 6 7 8 9 10 to 25
Fruits Oranges 5 5 5 5 5 5 5 5 5 5 10%
Bananas 5 5 5 5 5 5 5 5 5 5 10%
Papaya 5 5 5 5 5 5 5 5 5 5 10%
Avocado 5 5 5 5 5 5 5 5 5 5 10%
Sub-total 20 20 20 20 20 20 20 20 20 20 40%
Vegetables Pepper 5 5 5 5 5 5 5 5 5 5 10%
Tomatoes 10 10 10 10 10 10 10 10 10 10 20%
Sub-total 15 15 15 15 15 15 15 15 15 15 30%
Root crops Onions 9 9 9 9 9 9 9 9 9 9 18%
Garlic 4 4 4 4 4 4 4 4 4 4 8%
Sub-total 13 13 13 13 13 13 13 13 13 13 26%
Total production 48 48 48 48 48 48 48 48 48 48 96%
Construction Plots 1 1 1 1 1 1 1 1 1 1 2%
Total Farm Area 49 49 49 49 49 49 49 49 49 49 98%
Forest Area 1 1 1 1 1 1 1 1 1 1 2%
Total Investment area 50 50 50 50 50 50 50 50 50 50 100
As the above table shows, the total farm land is allocated to production of various high valued items
such as: Productions of fruits 40 percent and vegetables 56 percent. The construction plots are
expected to cover only 1 hectares and the remaining land at least 2 percent of the allotted land for
investment as per the Oromia Rural Land use and Administration Proclamation No. 130/ 2007,
which will be 1 hectare).
6 Market Prospects
6.1 Demands and Main Customers

As socio-economic development of a country proceeds, it is expected that the preference of a
society for goods and services changes. This logic is also true in Ethiopia. We observe that as our
economy improves over time, demand for food items in general and preference for high valued
products are increasing. In addition, the number of colleges, universities, research centers and other
institutions are being located at the nearby towns. More importantly, Nekemte town is becoming
considered as the western Ethiopia development corridor being fulfilled with infrastructural
facilities, the project will enjoy lucrative international market.
6.2 Competition analysis and Selling Prices

As the demand for the project outputs are expected to keep growing in the face of very limited
potential suppliers, it could be possible even to charge exorbitant price per units of the products to
be produced for the domestic market. However, since the very motive of the project owner is not
just to reap profits at the expense of the consumers, the price for each product will be set at
affordable prices by considering the forces of supply and demand operating during each year of
production. In all cases, we assume prices of each commodity to increase at least by 5 percent each

year and accordingly we have full projections for the selling price per quintal of each product
presented under sub-section 9 (projections of revenues).
7 Organizations and Management
7.1 Business Form

Biru Gidi Vegetable and fruits crop production project is a project established by sole proprietor
Mr.Biru Gidi Lemessa. Accordingly, its organizational structure is presented below.
7.2 Organization Structure of the Project
General Manager
Administration
Horticulturist
Tractor Accountant Secretary Project Others

Operator supervisors
Fig.1: Organizational Structure of Biru Gidi Vegetable and fruits crop production
Note that this organizational structure depicts the overall flows of accountability and reporting
structure of the project staffs.
7.3 Manpower Requirement with Qualification

Manpower is the decisive factor for the successful implementation and operation of any project.
Hence, careful identification of the number and qualification of the manpower requirement of the
project is in order. Accordingly, the following table shows the manpower requirement with
qualifications for the project:
Table 2. Manpower Requirement (with qualifications, number and estimated monthly salaries in
Birr)
S.No Position Quantity Monthly Total Total yearly
Salary Monthly
1 General Manager 1 6000 6000 72,000.00
2 Marketing Manager 1 4500 4500 54,000.00
3 Financial Manger 1 4500 4500 54,000.00
4 Agronomist 1 3000 3000 36,000.00
5 Horticulturalist 1 3000 3000 36,000.00
6 Tractor Operators 1 4000 4000 48,000.00
7 Secretaries 1 2000 2000 24,000.00
8 Accountants 1 3000 3000 36,000.00
9 Cashiers 1 2500 2500 30,000.00
10 Irrigation experts 1 2500 2500 30,000.00
11 Store keepers 1 2500 2500 30,000.00
12 Purchasers 1 2500 2500 30,000.00
13 Janitors 1 600 600 7,200.00
14 Driver 1 1500 1500 18,000.00
15 Guards 4 600 2400 28,800.00
16 Water pump operator 1 1500 1500 18,000.00
17 Forman 4 600 2400 28,800.00
Total Human Resource 23 44800 48400 580,800.00
Requirement (permanent)
Note that the employees’ salary is expected to increase by a minimum of five per cent each year.
8 Financial Study
In this section, both the cash outflow requirements and the projected inflows are projected and
analyzed.
8.1 Financial Requirements

The yearly financial requirements of the project are classified as capital costs, operating costs and
working capital requirements as follows.
8.1.1 Project Capital Costs

The project capital costs include such costs as construction costs, expenditures on office
equipments, investment in farm equipments, and other costs which are supposed to be capitalized as
cost of the project and are gradually depreciated over the life of the project. Accordingly, the
following are the projected capital costs of the project summarized under different sections.
Construction costs: - these include expenditures related with the constructions of Residential
house, store and bath room, offices, cafeteria etc. The following table shows just the summaries of
the construction items and their respective costs.
Table 3. Summaries of the project construction costs (in Birr)

S.N0 Constructions needed unit Quantity Total Budget (Birr)
1 Residential houses construction (for workers) No 1 250,000.00
2 Office & cafeteria construction No 1 150,000.00
3 Water Pump No 1 600,000.00
4 Generator and house No 94,000.00
5 Store and bathing rooms N0 1 950,000.00
Total estimated construction costs 2,044,000
Investment on farm machineries and equipments: - The following table shows the specifications
of the selected machineries from the proforma invoices attached to this report.
Table 4. Summaries cost of the project farm machineries (in Birr)
S.N0 Descriptions of the Items quantity Unit costs Total costs
1 New John Deere 6100D Mfwd Tractor (Mexico 1 930,228.64 930,228.64
Origin)
2 Mounted Four Disc Plough (Make: Nardi, Model: 1 160,000.00 160,000.00
QD 70/E)
3 Mounted Tandem Disc Harrow (Make: Nardi, 1 185,725.00 185,725.00
Model: 28 HOP 56)
4 Nardi Mounted Ridge (Model: PT70/5A45R) 1 103,500.00 103,500.00
5 Toyota Land Cruiser 1 960,000.00 960,000.00
6 Trailer 1 312548 312,548.00
7 ISUZU FSR (Japan Origin) 6 cylinder 24 valve 1 1,450,000.00 1,450,000.00
7790cc SOHC
Estimated machineries (in Birr) 4,102,001.64
Farm tools: - In addition to the above mentioned farm machineries, the following farm tools are
also identified with their respective current unit prices. However, as these items are diverse in kind
and in significant in terms of cost per unit, the costs are forecasted based on the current market price
without the need to collect proforma invoices.
Table 5. Farm tools with their respective per unit cost and quantities needed
S.No Items Quantity Units cost Total cost
1 Chemical Sprayer 12 400 4,800.00
2 Sickles 60 60 3,600.00
3 Axes 30 100 3,000.00
4 Rake 20 90 1,800.00
5 Water can 60 60 3,600.00
6 Tape meter (100 m) 1 450 450.00
7 Wheel borrow 1 3,500 3,500.00
8 Shovel 3 180 540.00
9 Weighing scale 2 30,000 60,000.00
10 Thresher 2 45,000 90,000.00
11 Saw 10 60 600.00
12 Cutlass or Machete 3 40,000 120,000.00
13 Spade hoe 10 900 9,000.00
14 Local hand hoe 20 70 1,400.00
15 Spade 30 98 2,940.00
16 Digging fork 50 400 20,000.00
17 Trovel 4 500 2,000.00
18 Penknife 20 98 1,960.00
19 Pruning knife 20 80 1,600.00
20 Budding knife 20 90 1,800.00
21 Secateurs 10 4,000 40,000.00
= Estimated cost of farm tools (in Birr) 372,590.00
Office Equipments: - The following table shows the prices of office equipments at the time of preparing
this project proposal.
Table 6. Summaries of the office equipments’ costs (in Birr)
S.No Items Unit Units needed Units cost Total cost
1 Desk top Computers N0 1 13,450.00 13,450.00
2 Printers N0 1 8,300.00 8,300.00
3 Shelf N0 2 3,800.00 7,600.00
4 Managerial Chairs N0 2 6,500.00 13,000.00
5 Secretarial Chairs N0 2 1,000.00 2,000.00
6 Guest Chairs N0 10 1200 12,000.00
7 Guest tables N0 1 1200 1,200.00
8 Computer tables N0 1 2,200.00 2,200.00
9 Conference Chairs N0 10 900 9,000.00
10 Conference Tables N0 1 2,000.00 2,000.00
= Estimated cost of Office equipments (in Birr) 70,750.00
8.1.2 Project Operating Costs
Here, the operating costs refer to these costs which are not included in the project capital costs and
hence are not subjected to periodical depreciation. These costs include such costs as labor costs;
costs for equipment operations and maintenance such as fuel cost and repair and maintenance costs;
depreciation costs; utilities expenses such as water bills, electricity bills and telephone charges;
employees salaries; and others miscellaneous expenses.
Labor costs: - In order to determine the periodical labor cost of the project, first we need to
determine labor required to cultivate a hectare of each crop in each project year. Accordingly, the
following are our procedure to determine the labor requirement of the project:
1. First, we started from our land use and cropping pattern proposd throughout the life of the
project as depicted by table 1 land use plan of 50 hectares specified above.
2. Second, we have determined the labor requirements of each crop per hectare per year by the
types of operations throughout the project life as shown by table 7 (annexed). Labor
requirement is expressed in terms of work-day, which is to mean the time devoted by one
person during one day (usually eight hours).
3. Thrid, we have determine the total labor requirement of each crop per year by multiplying the
labor requirement of per hectares by their corresponding total hectares of land planned to plant
each crop (table one). This is represented by table 7 (annexed).
4. Fourth, we have summed the total labor requirement of each crop in each year so as to
determine the annual total labor requirement of the project.
5. Finally, the average wage per day of labor is multiplied by the total labor requirement of the
project for each year. We have taken Birr 50.00 as the average wage per day per worker
applicable to the project location. The average wage per work-day is projected to increase by
minimum of 5 percent each year. This is determined by considering the change in the labor
markete price over the past few years.
Supplies costs: - such costs include costs for technological inputs such as fuel cost for the tractors,
fertilizers, seeds, office supplies and other chemicals. Table 9 & 10 (annexed) shows the detailed
calculations of these cost items, the summary of which is Birr 201,640.00 annual supplies cost. As
usual, we expect these cost items to increase by a minimum of 5 per cent per year. This is presented
by table 12 (annexed).
Repair and maintenance costs: - Operating costs for operations and maintenance of machineries
and equipment is taken to be 2 percent of the initial investment costs starting from its second year
after acquisition until it’s the end of tenth year, after which the rate would be 10 percent.
Accordingly, table 8 (annexed) shows the detailed calculation of this cost item which is summarized
to be Birr 131,786.83 starting from the second year of the project operation to tenth year. This is
presented by table 13 (annexed).
Utilities expenses: - these include such periodical costs as incurrence of liabilities (payments of
cash) for water bills, electricity bills, fuel consumptions and telephone expanses. Although such
types of expenses are changing with the volumes of operations, it is forecasted that a minimum of
Birr 250,000.00 forecasted for the first year of project operation, which is expected to increase by a
minimum of 5 percent per year. This is presented by table 14 (annexed).
Miscellaneous Expense: - are other operating expense for which it is neither economical nor
convenient to give specific account code and hence should be merged together under
“miscellaneous expense” includes entertainment expense, employee benefits, litigation expense and
others. Similar to the utilities expense, such expense are estimated to be Birr 292,287.00 for the first
year and expected to increase at least by 5 percent per year. This is presented by table 14 (annexed).
8.1.3 Project Working Capital

Project working capital refers to cash required to be held at hand at the end of each year for some
operating costs to be incurred at the beginning of the next year. These costs are usually determined
as a given percentage of the next year’s increase in the operating cost requirements. Accordingly,
the following table shows the projected working capital requirement of the project, determined as
the 60 percent of the increase in the operating costs of the next year. This is presented by table 15
(annexed).
Note that the working capital requirement of the first year is determined to be 60 percent of the
increase in the operating cost requirement of the second year Birr 122,769.00 (1,690094 -
1,485,277) which is (Birr 204,867*0.6= 122,769.00). It is estimated that the remaining 40 Percent
increase in each year’s operating expense will be covered by the cash inflows of the preceding year.
The same approach is followed for the rest years. The non-cash expense is not included in the
determinations of the working capital requirements. This is because such expense has no effect on
cash flow streams for which we need to determine working capital requirement. However,
periodical income tax and interest liabilities need to be considered since such items affect cash
flows of an entity. Nonetheless, they are not reflected in this case since we have not yet estimated
such costs by this time.
8.1.4 Total Financial requirements

Total financial requirement for the project is just the sum of the three cost elements we have
determined above: total capital cost, total operating cost and total working capital costs. The
following table summarizes the total finance requirement of the project together with the possible
sources of finance.
Table 16. Total Financial Requirement of the Project
Items Birr
Project construction costs (table 3) 2,044,000.00
Project farm machineries costs (table 4 ) 4,102,001.64
Project farm tools costs (table 5) 372,590.00
Summaries of the office equipments’ costs (table 6) 70,750.00
Total Project Capital Cost 6,589,342
Operating Costs (Table 15) 1,481,527
Working Capital Cost (Table 15) 122,888
Total Financial Requirement at first year (In Birr) 8,193,756
Sources of Finance:
Owner’s Equity Contributions (30 %) 2,458,127
Bank loan at 8.5 % simple interest rate (70%) 5,735,629
Total Financial Requirement at first year (In Birr) 8,193,756
Land size to be irrigated during first year (Ha):
Crops Land area (ha) Average capital (Br)/Ha Total capital (Br)
Fruits 20 87,000 1,740,000
Vegetables 15 60,000 900,000
Root crops 13 23,000 299,000
Sub-total 48 2,939,000
Excess capital above legally required (for contingency) 54,312.00
8.2 Forecasted Production

In order to estimate the per hectare production of each crop, we have utilized opinions of experts in
the field of agronomists. Accordingly, table 17 (annexed) shows the projected output in quintal
from each crop proposed to be cultivated over the first ten years of the project life.
Note that the projections are based on the expert opinions in the field as well as per the
recommendations of east Wollega zone agriculture office. In essence, if the project is to be
implemented and run in accordance with the recommendations of the experts, these projections are
supposed to be achievable. Here, it is expected that as the project operates for more number of
years, there is advantage of getting lessons from the past years and hence the latter years’ output per
year is expected to increase accordingly.
8.3 Forecasted Sales Revenues

Sales revenues are the functions of projected production and projected selling price per unit of each
crop. Taking the projected production of each crop from the table 17, we now proceed to the
projection of selling price of each crop. Accordingly, the selling price of each quintal of the crop is
expected to increase each year by a minimum of 5 percent. Given the trends of the past five years in
Ethiopia in particular and in the world in general, this projection wouldn’t be far from the reality
under the normal macroeconomic condition. Table 18 (annexed) shows the projected selling price
per quintal of each crop over the next ten years. In order to determine the forecasted sales revenues,
we need to multiply the forecasted selling price per unit of each crop by their respective projected
production of each year. Table 19 (annexed) shows this procedure.
8.4 Depreciation calculations

In order to determine the periodical depreciation, we adopted the Ethiopian standard of useful
economic life of fixed assets and hence used depreciation rates for each asset category accordingly.
The detail depreciation schedule is presented by Table 20 (annexed). Depending on the difference
in the useful lives of specific assets, the depreciation charge is estimated to be larger at the
beginning of the project life and smaller at the earlier years since some of the assets are expected to
be fully depreciated within the first five years. Accordingly, the periodical depreciation charge is
estimated to be Birr 763,975.33 for the first five years and will be reduced to Birr 385,307.33 over
the next two years (since the farm machineries are supposed to have useful lives of seven years),
and finally Birr 51,100.00 for the next subsequent years (since the constructed assets are supposed
to have useful lives of more than 25 years).
8.5 Loan Repayment Schedule and Interest Expense

The periodical interest expense is just the functions of amount of the loan outstanding at the
beginning of each period, the interest rate and the time for which the loan remains unchanged.
Accordingly, the bank loan was estimated to be Birr 5,735,629.46, at simple interest rate of 8.5
percent on the unpaid balance of the loan at the beginning of each period. The loan is expected to be
paid with equal installment amount of Birr 573,563 over ten years starting just at the end of the
second year of operation. Table 21 (annexed) shows the periodical loan repayment and interest
expense.
8.6 Forecasted Income Statement

Forecasted income statement shows just the summary reports of all revenues earned and costs
expired (expense incurred) during each period. Accordingly, Table 22 (annexed) shows the
forecasted income statement of the project over the first ten years of the project life. Note that the
farm project will have substantial net income starting from its first year of operation. It is evident
that that this project is financial viable.
8.7 Forecasted Cash Flow Statement

Unlike the forecasted income statement, the forecasted cash flow statement shows the inflows and
outflows of money to and from the project over a given period of time. In this case, all items
(revenues and expense) which don’t affect cash flow are excluded from the statement. In our case,
depreciation expense is the only expense that doesn’t affect cash flow and hence excluded from the
outflows whereas all revenues are supposed to be either fully collected within the year of sales or
the sale be made on cash basis.
The cash flow statement shows the sources and uses of money over a given period of time.
Accordingly, there are three sections of this report: (1) cash flows of operating activities (O); (2),
cash flows of investing activities (I), and (3) cash flows of financing activities (F). Net cash flow of
the project is the sum of net cash flows from these three sections. Table 23 (annexed) shows the
projected cash flow statement over the first ten years of the project. Note also that this cash flow
report shows that the firm’s cumulative cash inflows over the forecast period is very attractive and
deserves financing. This statement also proves that the project is finically viable.
8.8 Forecasted Balance Sheet

Forecasted balance sheet shows the summary report of what the entity owns and what it owes on
the specific date in a time, usually, at the end of the fiscal year. In essence, it reports on total assets,
total liabilities and capital (owner’s equity and creditors’ equity) of the entity on a given date.
Thus, balance sheet contains information regarding the financial viability of the enterprise on a
given date. By comparing change in the elements of the balance sheet over different periods, we can
judge whether or not the enterprise is improving its financial position over the periods.
Accordingly, table 24 (annexed) shows forecasted balance sheet of the enterprise for the first ten
years of the life of the project.
Note that as the projected balance sheet shows that the financial position of the firm remarkably
improves over the period and will be able to full operate by own finance after ten years if the
project is successfully implemented. This also supports that the project has financial viability.
8.9 Overall Financial Assessment

The overall financial performance of the project is appealing as shown by the projected by the
above three financial statements. When evaluated in terms of its profitability, there is steady
increase in after tax net income showing that the project would remarkably contribute towards
wealth maximization of the shareholders. Similarly, the forecasted balance sheet shows
extraordinary attractive financial position of the firm over the same period. In addition, when
viewed in terms of the sources and uses of money (cash flow statements), there is steady increase in
the net cash provided by the project cash receipts after covering the cash payments required to
sustain the project.
Furthermore, the project has the following financial performance measured in different investment
decision criteria. The following table shows the summarized project financial viability test just for
the first ten years of the life of the project. Note that these figures would have been much larger if
we consider the entire life of the project since most of the capital expenditures of the project are
supposed to be committed at the beginning of the years while most net cash inflows are expected
during the later life of the project. However, these figures are still indicators of financial
attractiveness of the project. Detail calculation is presented by table 25 (annexed).
Table 26. Project financial viability test

Criteria Results
Present Value of Costs PVC 203,443,816
Present Value of Benefits PVB 479,462,584
Net Present Values NPV 276,018,768
Benefit Cost Ratios BCR 2.36
Net Benefit Cost Ratio NBCR 1.36
Internal Rate of Returns IRR 52%
Net Present Value (NPV):- is the sum of present values of all the cash flow both positive and
negative that are expected to occur over the life of the project. The formal selection criterion for the
NPV measure of project worth is to accept all independent projects with a positive NPV when
discounted at the opportunity cost of capital. In this project case, given the project has positive
value of Birr 276,018,768.21; it means that the project would contribute Birr 276,018,768.21
towards the wealth maximization of the owner’s wealth and hence it is viable.
Benefit Cost Ratio (BCR):- The benefit-cost ratio is defined as the ratio of the discounted values of
benefits to the discounted value of costs. A ratio of at least one is required for acceptability and the
ratio of one indicates that the NPV of zero at a particular discount rate. In our case BCR of Birr
2.36 shows, for every one Birr invested in this project, the return would be 2.36 Birr, which is
highly remarkable figure.
Net Benefit Cost Ratio (NBCR):- this ratio is defined as the ratio of net present value to the present
value of cost. A ratio greater than zero (0) is needed for the project to be financially acceptable; in
our case the ratio of 1.36 is in excess of the hurdle rate required to make the project financially
viable (the project is magnificent in terms of this criteria also).
Internal Rate of Return (IRR):- is the maximum interest that a project could pay for the resources
used if the project is to recover its investment and operating costs and still break even. It measures
opportunity cost of capital tied up in the investment. In this project case, IRR is 52 percent which is
recommendable with the minimum cost of capital of 8.5 per cent. Hence, we can safely conclude
that the IRR of the project is extraordinary high and hence indicates project viability.
It should be recalled that the various investment decision criterion we have considered above
involve predicting values for each of the various elements entering into the definition of volume of
output sold, selling price, required investment, labor costs per unit; maintenance costs of machines,
profit, and so forth. However, as these values are based on certain assumptions, they may change in
unfavorable direction thereby making projects less attractive than when it was planned. Thus,
switching value measures the value an element of a project would have to reach as a result of a
change in an unfavorable direction before that project no longer meets the minimum level of
acceptability as indicated by one of the measures of project worth. In this case we ask, by how
much an element would have to change in an unfavorable direction before the project would no
longer meet the minimum level of acceptability as indicated by one of the measures of project
worth. In other words, in sensitivity analysis, we ask how sensitive is the project’s estimated
financial and economic benefits to increase in costs, fall in price and extension of implementation
periods?
In our case, since BCR is 2.36, it means that cost can rise by 36 percent at which the BCR will
become exactly 2.0 and hence the decision will be indifference. However, any rise in cost beyond
36 percent keeping sales revenues constant will lead the BCR to be below 2.0 and hence the
decision will be to reject the project on this ground. But, it is unlikely to expect such increase in
operating costs keeping selling prices of these products constant. Thus, the 83 percent margin of
safety is large enough to guarantee for the stability of the above decision criteria.
Similarly, revenues can keep dropping up to = = 1-0.42372 =0.576
which is roughly equals to 57 percent, keeping the cost elements constant. Any drop in sales by
more than 57 percent may lead the project to rejection region. However, given the past few year
trends, the price of these items have been increasing at increasing rate and hence expected to
increase over the next many years partly due to increasing demand to these outputs and partly due
to increasing general trend in commodity prices. Overall, when evaluated both in terms of cost and
revenue, the project has sufficient margin of safety to guarantee the stability of the determined
investment decision criteria above. Thus, it is can be safely concluded that the project is financially
viable.
9 Environmental Impact Analysis

Consistent with the government’s high priority of encouraging private investment in the agriculture
sector, this project aims at agricultural production with due care to reduce degradation and improve
productivity of natural resources. Given the fact that these projects intend to utilize the irrigation,
certainly these relief the existing degradation pressure on rural farm land imposed by the traditional
farming system.
As the project aims at production of vegetables and fruits with irrigation system, it is consistent
with the objective of green development. More importantly, the projects aim at reversing the
environmental degradation trends widely observable in the area by breaking the nexus between
poverty and degradations. In essence, the projects aim at solving the key problem area by breaking
the nexus between rural poverty, natural resource management and climate change mainly by
creating alternative and more lucrative income source for the local resource poor smallholder
farmers, who, otherwise should depend on the natural resource bases and hence causes the
degradations. The project promoters believe:
 environment and natural resource degradation is often a direct cause of rural poverty;
 rural poverty often exacerbates environment and natural resource degradation; and
 Climate change increases the vulnerability of rural people and the ecosystems they depend
on for their livelihoods.
Thus, opening alternative source of income by creating job opportunities within the project can
relieve the current pressure on the rural land in the project area. Besides, the project promoter is
fully aware of the Oromia Rural Land use and Administration Proclamation No. 130/ 2007, which
force any investor to cover at least 2 percent of the allotted land area by indigenous trees.
10 Conclusion and Recommendation

Overall, the projects have the following merits which would justify the need for giving priority in
its finance:
 The strategic objectives of the projects are highly consistent with the national development
objective which calls to “sustainably increase rural incomes and national food security,

which embodies the concepts of producing more, selling more, nurturing the environment,
eliminating hunger and protecting the vulnerable against shocks.
 These projects are expected to create job opportunities for local employees at their nearby
village and hence alleviate the pushing factor for migrations.
 The projects aim at utilizing locally available technologies so as to encourage the backward
and forward linkage of the project and hence contribute towards the realization of
Agricultural Development Led Industrialization (ADLI) strategy of the country.
 Finally, the projects will largely contribute towards the national economic development by
contributing to National GDP. GDP contribution originating from the agriculture sector has
more power of poverty reduction than other sectors (a one percent GDP growth rate
originating in agriculture sector has more potential for poverty reduction than two percent
GDP growth rate originating from the service sector).
Recommendation: - considering the viability of the project, as aforementioned, the project is
recommended for implementation.

Annex
Table. 7 Labor requirement per Hectares of each crop
Project life in years
Crop and Operation 1 2 3 4 5 6 7 8 9 10 to 25
Orange Land clearing & preparation 8 8 8 8 8 8 8 8 8 8
Planting 9 9 9 9 9 9 9 9 9 9
Weeding (2X) 10 10 10 10 10 10 10 10 10 10
Chemical application (2X) 5 5 5 5 5 5 5 5 5 5
Harvesting 15 15 15 15 15 15 15 15 15 15
Total 47 47 47 47 47 47 47 47 47 47
Banana Land clearing & preparation 8 8 8 8 8 8 8 8 8 8
Planting 9 9 9 9 9 9 9 9 9 9
Weeding (2X) 10 10 10 10 10 10 10 10 10 10
Harvesting (2X) 15 15 15 15 15 15 15 15 15 15
Total 47 47 47 47 47 47 47 47 47 47
Papaya Land clearing & preparation 8 8 8 8 8 8 8 8 8 8
Planting 9 9 9 9 9 9 9 9 9 9
Weeding (2X) 10 10 10 10 10 10 10 10 10 10
Harvesting (2X) 15 15 15 15 15 15 15 15 15 15
Total 47 47 47 47 47 47 47 47 47 47

Avocado Land clearing & preparation 8 8 8 8 8 8 8 8 8 8
Planting 9 9 9 9 9 9 9 9 9 9
Weeding (2X) 10 10 10 10 10 10 10 10 10 10
Harvesting (2X) 15 15 15 15 15 15 15 15 15 15
Total 47 47 47 47 47 47 47 47 47 47
Pepper Land clearing & preparation 10 10 10 10 10 10 10 10 10 10
Planting 10 10 10 10 10 10 10 10 10 10
Weeding (2X) 15 15 15 15 15 15 15 15 15 15
Harvesting (2X) 25 25 25 25 25 25 25 25 25 25
Total 68 68 68 68 68 68 68 68 68 68
Tomato Land clearing & preparation 20 20 20 20 20 20 20 20 20 20
Planting 10 10 10 10 10 10 10 10 10 10
Weeding (2X) 24 24 24 24 24 24 24 24 24 24
Harvesting (2X) 26 26 26 26 26 26 26 26 26 26
Total 88 88 88 88 88 88 88 88 88 88
Onion Land clearing & preparation 10 10 10 10 10 10 10 10 10 10
Planting 10 10 10 10 10 10 10 10 10 10
Weeding (2X) 15 15 15 15 15 15 15 15 15 15

Harvesting (2X) 25 25 25 25 25 25 25 25 25 25
Total 68 68 68 68 68 68 68 68 68 68
Garlic Land clearing & preparation 20 15 15 15 15 15 15 15 15 15
Planting 6 6 6 10 6 6 6 6 6 6
Weeding (2X) 24 24 24 24 24 24 24 24 24 24
Harvesting 20 20 20 20 20 20 20 20 20 20
Total 74 69 69 73 69 69 69 69 69 69
Note that the labor requirement is determined by assuming twice production per year for vegetables with irrigation
Labor requirement is expressed in terms of work-day, which is to mean the time devoted by one person during one day (usually eight hours).
Table 8. Estimated yearly repair and maintenance expenses Repair and maintenance
Items costs Rate Value
1 Residential houses construction (for workers) 250,000.00 0.02 5,000.00
2 Office & cafeteria construction 150,000.00 0.02 3,000.00
3 Water Pump, 600,000.00 0.02 12,000.00
4 Generator 94,000.00 0.02 1,880.00
5 Store and bathing room 950,000.00 0.02 19,000.00
6 New John Deere 6100D Mfwd Tractor (Mexico Origin) 930,229 0.02 18,604.57
7 Mounted Four Disc Plough (Make: Nardi, Model: QD 70/E) 160,000 0.02 3,200.00
8 Mounted Tandem Disc Harrow (Make: Nardi, Model: 28 HOP 56) 185,725 0.02 3,714.50
9 Nardi Mounted Ridge (Model: PT70/5A45R) 103,500 0.02 2,070.00
10 Toyota Land Cruiser 960,000 0.02 19,200.00
11 Trailer 312,548 0.02 6,250.96
12 ISUZU FSR (Japan Origin) 6 cylinder 24 valve 7790cc SOHC 1,450,000 0.02 29,000.00
13 Chemical Sprayer 4,800.00 0.02 96
14 Sickles 3,600.00 0.02 72
15 Axes 3,000.00 0.02 60
16 Rake 1,800.00 0.02 36
17 Water can 3,600.00 0.02 72
18 Tape meter (100 m) 450.00 0.02 9
19 Wheel borrow 3,500.00 0.02 70
20 Shovel 540.00 0.02 10.8
21 Weighing scale 60,000.00 0.02 1200
22 Thresher 90,000.00 0.02 1800
23 Saw 600.00 0.02 12
24 Cutlass or Machete 120,000.00 0.02 2400
25 Spade hoe 9,000.00 0.02 180
26 Local hand hoe 1,400.00 0.02 28
27 Spade 2,940.00 0.02 58.8
28 Digging fork 20,000.00 0.02 400
29 Trovel 2,000.00 0.02 40
30 Penknife 1,960.00 0.02 39.2
31 Pruning knife 1,600.00 0.02 32
32 Budding knife 1,800.00 0.02 36
33 Secateurs 40,000.00 0.02 800
34 Desktop Computer 13,450.00 0.02 269
35 Printers 8,300.00 0.02 166
36 Shelf 7,600.00 0.02 152
37 Managerial Chairs 13,000.00 0.02 260
38 Secretarial Chairs 2,000.00 0.02 40
39 Guest Chairs 12,000.00 0.02 240
40 Guest tables 1,200.00 0.02 24
41 Computer tables 2,200.00 0.02 44
42 Conference Chairs 9,000.00 0.02 180
43 Conference Tables 2,000.00 0.02 40
Total Repair and Maintenance costs 131,786.83
Table 9. Total Labor requirement and cost of the project

Years 1 2 3 4 5 6 7 8 9 10
Oranges Labor per Ha (table 7) 47 47 47 47 47 47 47 47 47 47
Land area (table 1) 5 5 5 5 5 5 5 5 5 5
Sub-total labor required 235 235 235 235 235 235 235 235 235 235
Bananas Labor per Ha (table 7) 68 68 68 68 68 68 68 68 68 68
Land area (table 1)* 5 5 5 5 5 5 5 5 5 5
Papaya Labor per Ha (table 7) 47 47 47 47 47 47 47 47 47 47
Land area (table 1) 5 5 5 5 5 5 5 5 5 5
Avocado Labor per Ha (table 7) 47 47 47 47 47 47 47 47 47 47
Land area (table 1) 5 5 5 5 5 5 5 5 5 5
Pepper Labor per Ha (table 7) 68 68 68 68 68 68 68 68 68 68
Land area (table 1) 5 5 5 5 5 5 5 5 5 5
Tomatoes Labor per Ha (table 7) 88 88 88 88 88 88 88 88 88 88
Land area (table 1) 10 10 10 10 10 10 10 10 10 10
Onions Labor per Ha (table 7) 68 68 68 68 68 68 68 68 68 68
Land area (table 1) 9 9 9 9 9 9 9 9 9 9
Garlic Labor per Ha (table 7) 74 69 69 73 69 69 69 69 69 69
Land area (table 1) 4 4 4 4 4 4 4 4 4 4
Total Labor required per ha 3,173 3,153 3,153 3,169 3,153 3,153 3,153 3,153 3,153 3,153
Table 10. Summaries of labor cost (wage expense)

Years 1 2 3 4 5 6 7 8 9 10
Total Annual Labor 3,173
Table Table
13. repair and 12:
3,153 summaries
3,153
maintenance of supplies
3,169
expense costs
per 3,153
year per year
3,153 3,153 3,153 3,153 3,153
Labor cost per work-day (Birr) 1 2 53 3 3 55 4 4 58 5 5 61 6 64 7 67 870 9 10
Supplies costs
1 250 6 7 8 9 74 10 78
201,640 211,722 222,308 233,424 245,095 257,349 270,217 283,728 297,914 312,810
Projected
Repair &wage Cost per year0 158,650
131,787 165,533
138,376173,809 183,426
145,295 191,625
152,560 201,206
160,188 168,197211,266 221,829 232,921
176,607 185,437 244,567
194,709
maintenance
Table 14. Miscellaneous and utilities expense per year

years 1 2 3 4 5 6 7 8 9 10
Utilities Expense 250,000 262,500 275,625 289,406 303,877 319,070 335,024 351,775 369,364 387,832
Other Operating expense 290,437 304,959 320,207 336,217 353,028 370,679 389,213 408,674 429,107 450,563
Table 17. Forecasted production of each crop over the first 10 years
Table 15. Operating and working capital costs needed
Crops 1 2 3 4 5 6 7 8 9 10
Years 1 2 3 4 5 6 7 8 9 10
Oranges Land area in Ha 5 5 5 5 5 5 5 5 5 5
Employee salaries 580,800 609,840 640,332 672,349 705,966 741,264 778,328 817,244 858,106 901,011
Output per Ha (quint) 0 0 0 25 120 130 130 130 130 130
Labor cost (table 10) 158,650 165,533 173,809 183,426 191,625 201,206 211,266 221,829 232,921 244,567
Total Output (quint) 0 0 0 125 600 650 650 650 650 650
Repair & maint. (table 13) 0.0 131786.8 138376.2 145295.0 152559.7 160187.7 168197.1 176607.0 185437.3 194709.2
Bananas Land area in Ha 5 5 5 5 5 5 5 5 5 5
Utilities costs (table 14) 250,000 262,500 275,625 289,406 303,877 319,070 335,024 351,775 369,364 387,832
Supplies cost (table 12) 201,640 211,722 222,308 233,424 245,095 257,349 270,217 283,728 297,914 312,810
Miscellaneous cost (table 290,437 304,959 320,207 336,217 353,028 370,679 389,213 408,674 429,107 450,563
Papaya Land area in Ha 5 5 5 5 5 5 5 5 5 5
14)
Total OperatingOutput per Ha (quint)
1,481,527 0
1,686,340 01,770,657 1501,860,116200 1,952,149
250 2,049,757
250 250
2,152,245 250
2,259,857 250
2,372,850 250
2,491,492
Total Output
Increase in Operating costs (quint) 0 0204,813 0 84,317 750 89,459
1000 1250
92,033 1250
97,607 1250
102,488 1250
107,612 1250
112,993 1250
118,642
Avocado Land
Working capital area in Ha 122,888
needed 5 50,590 5 53,675 5 55,220 5 58,5645 5
61,493 5
64,567 5
67,796 5
71,185 5 0
Pepper Land area in Ha 5 5 5 5 5 5 5 5 5 5
Table 18. Projected selling price of (at the farm gate price in Birr per quintal)
Crops Total Output
1 (quint)2 753 80 4 85 5 85 90
6 95 7 100 8 105 110
9 11510
Tomatoes
Oranges Land area
800in Ha 840 10
882 10
926.10 10 972.41 10 10
1021.03 10
1072.08 10
1125.68 10 10
1181.96 10
1241.06
Bananas Output 700 735
per Ha (quint) 771.75
150 810.34
200 200850.85 200 893.40200 938.07
200 984.97 200 1034.22
200 200 1085.93
200
Papaya Total Output
600 (quint)
630 661.5
1,500 694.58 2,000
2,000 729.30 2,000 765.77
2,000 804.06
2,000 844.26 2,000
2,000 886.47
2,000 930.80
2,000
Avocado
Onions 600
Land area in Ha 630 661.5
9 694.58
9 9 729.30 9 765.779 804.06
9 9844.26 9 886.47
9 930.80
9
Output per Ha (quint)
@ Biru Gidi 200 250 crops production
vegetable & Fruit 300 investment
350 proposal 350 350 350 28 350 350 350
Total Output (quint) 1,800 2,250 2,700 3,150 3,150 3,150 3,150 3,150 3,150 3,150
Garlic Land area in Ha 4 4 4 4 4 4 4 4 4 4
Pepper 2800 2940 3087 3241.35 3403.42 3573.59 3752.27 3939.88 4136.88 4343.72
Tomatoes 300 315 330.75 347.29 364.65 382.88 402.03 422.13 443.24 465.40
Onion 600 630 661.5 694.58 729.30 765.77 804.06 844.26 886.47 930.80
Garlic 3000 3150 3307.5 3472.88 3646.52 3828.84 4020.29 4221.30 4432.37 4653.98
Table 19 Projected annual Sales revenues from each Crop (at the farm gate price in Birr)
Crops 1 2 3 4 5 6 7 8 9 10
Oranges Price (Birr) 800 840 882 926 972 1021 1072 1126 1182 1241
Production (quint) 0 0 0 125 600 650 650 650 650 650
Sales (Birr) 0 0 0 115763 583443 663666 696850 731692 768277 806691
Bananas Price (Birr) 700 735 772 810 851 893 938 985 1034 1086
Sales (Birr) 35000 183750 578813 607753 638141 670048 703550 738728 775664 814447
Papaya Price (Birr) 600 630 662 695 729 766 804 844 886 931
Sales (Birr) 0 0 496125 694575 911630 957211 1005072 1055325 1108092 1163496
Avocado Price (Birr) 600 630 662 695 729 766 804 844 886 931
Sales (Birr) 0 0 82688 260466 273489 287163 301522 316598 332427 349049
Pepper Price (Birr) 2800 2940 3087 3241 3403 3574 3752 3940 4137 4344

Sales (Birr) 210000 235200 262395 275515 306308 339491 375227 413688 455056 499528
Tomatoes Price (Birr) 300 315 331 347 365 383 402 422 443 465
Sales (Birr) 450000 630000 661500 694575 729304 765769 804057 844260 886473 930797
Onion Price (Birr) 600 630 662 695 729 766 804 844 886 931
Sales (Birr) 1080000 1417500 1786050 2187911 2297307 2412172 2532781 2659420 2792391 2932010
Garlic Price (Birr) 3000 3150 3308 3473 3647 3829 4020 4221 4432 4654
Sales (Birr) 1200000 1890000 2116800 2361555 2479633 2603614 2733795 2870485 3014009 3164710
Total Sales revenues 2975000 4356450 5984370 7198112 8219253 8699135 9152853 9630195 10132389 10660728
Table 20. Estimation of annual depreciation expenses Economic Life Depreciation rate Depreciation expenses
Items costs
Residential houses construction (for workers) 250,000.00 40 0.025 6250.00
Office & cafeteria construction 150,000.00 40 0.025 3750.00
Water Pump 600,000.00 40 0.025 15000.00
Generator 94,000.00 40 0.025 2,350.00 51,100.00
Store and bathing room 950,000.00 40 0.025 23,750.00
New John Deere 6100D Mfwd Tractor (Mexico Origin) 930,229 7 0.142857 132,889.67 385,307.33
Mounted Four Disc Plough (Make: Nardi, Model: QD 70/E) 160,000 7 0.142857 22,857.12
Mounted Tandem Disc Harrow (Make: Nardi, Model: 28 HOP 56) 185,725 7 0.142857 26,532.12 334,207.33
Nardi Mounted Ridge (Model: PT70/5A45R) 103,500 7 0.142857 14,785.70
Toyota Land Cruiser 960,000 7 0.142857 137,142.72
Trailer 312,548 7 0.142857 44,649.67
ISUZU FSR (Japan Origin) 6 cylinder 24 valve 7790cc SOHC 1,450,000 5 0.2 290000
Chemical Sprayer 4,800.00 5 0.2 960
Sickles 3,600.00 5 0.2 720
Axes 3,000.00 5 0.2 600
Rake 1,800.00 5 0.2 360
Water can 3,600.00 5 0.2 720
Tape meter (100 m) 450.00 5 0.2 90
Wheel borrow 3,500.00 5 0.2 700
Shovel 540.00 5 0.2 108
Weighing scale 60,000.00 5 0.2 12000
Thresher 90,000.00 5 0.2 18000 356,518.00
Saw 600.00 5 0.2 120
Cutlass or Machete 120,000.00 5 0.2 24000
Spade hoe 9,000.00 5 0.2 1800
Local hand hoe 1,400.00 5 0.2 280
Spade 2,940.00 5 0.2 588
Digging fork 20,000.00 5 0.2 4000 378,668.00
Trovel 2,000.00 5 0.2 400
Penknife 1,960.00 5 0.2 392
Pruning knife 1,600.00 5 0.2 320
Budding knife 1,800.00 5 0.2 360
Secateurs 40,000.00 5 0.2 8000
Desktop Computer 13,450.00 5 0.2 2690
Printers 8,300.00 5 0.2 1660
Shelf 7,600.00 5 0.2 1520
Managerial Chairs 13,000.00 5 0.2 2600
Secretarial Chairs 2,000.00 5 0.2 400 22,150.00
Guest Chairs 12,000.00 5 0.2 2400
Guest tables 1,200.00 5 0.2 240
Computer tables 2,200.00 5 0.2 440
Conference Chairs 9,000.00 5 0.2 1800
Conference Tables 2,000.00 5 0.2 400
Total yearly depreciation 763,975.33
Table 21. Projected periodical loan repayment and interest expense

Years 1 2 3 4 5 6 7 8 9 10
Principal loan outstanding at beginning 5,735,629.46 5,162,067 4,588,504 4,014,941 3,441,378 2,867,815 2,294,252 1,720,689 1,147,126 573,563
Periodical loan repayments 573,563 573,563 573,563 573,563 573,563 573,563 573,563 573,563 573,563 573,563
Outstanding Loan at the end 5,162,067 4,588,504 4,014,941 3,441,378 2,867,815 2,294,252 1,720,689 1,147,126 573,563 0
Periodical interest expense 487,529 438,776 390,023 341,270 292,517 243,764 195,011 146,259 97,506 48,753
Total periodical payment 1,061,091 1,012,339 963,586 914,833 866,080 817,327 768,574 719,821 671,069 622,316
Table 22 Projected Annual Income Statement (all in Birr)

Years 1 2 3 4 5 6 7 8 9 10
Total Revenues 2,975,000 4,356,450 5,984,370 7,198,112 8,219,253 8,699,135 9,152,853 9,630,195 10,132,389 10,660,728
Operating Expenses:
Salaries Expense 580,800.00 609,840.00 640,332.00 672,348.60 705,966.03 741,264.33 778,327.55 817,243.93 858,106.12 901,011.43
Wages Expense 158,650.00 165,532.50 173,809.13 183,425.68 191,624.56 201,205.79 211,266.08 221,829.38 232,920.85 244,566.89
Repair & maintenance - 131,786.8 138,376.2 145,295.0 152,559.7 160,187.7 168,197.1 176,607.0 185,437.3 194,709.2
Utilities Expense 250,000.00 262,500.00 275,625.00 289,406.25 303,876.56 319,070.39 335,023.91 351,775.11 369,363.86 387,832.05
Supplies Expense 201,640.00 211,722.00 222,308.10 233,423.51 245,094.68 257,349.41 270,216.88 283,727.73 297,914.12 312,809.82
Miscellaneous Expense 290,436.83 304,958.67 320,206.61 336,216.94 353,027.79 370,679.17 389,213.13 408,673.79 429,107.48 450,562.85
Depreciation Expense 808,625.00 808,625.00 808,625.00 808,625.00 808,625.00 385,307.33 385,307.33 51,100.00 51,100.00 51,100.00
Interest Expense 487,528.50 438,775.65 390,022.80 341,269.95 292,517.10 243,764.25 195,011.40 146,258.55 97,505.70 48,752.85
Total Operating Expense 2,777,680.34 2,933,740.66 2,969,304.81 3,010,010.91 3,053,291.45 2,678,828.40 2,732,563.39 2,457,215.44 2,521,455.44 2,591,345.07
Income Before Income Tax 197,319.66 1,422,709.34 3,015,065.19 4,188,101.34 5,165,961.81 6,020,306.73 6,420,289.84 7,172,979.85 7,610,934.00 8,069,382.43
Income Tax (30%) 59,195.90 426,812.80 904,519.56 1,256,430.40 1,549,788.54 1,806,092.02 1,926,086.95 2,151,893.95 2,283,280.20 2,420,814.73
Net Income 138,123.77 995,896.54 2,110,545.63 2,931,670.94 3,616,173.27 4,214,214.71 4,494,202.88 5,021,085.89 5,327,653.80 5,648,567.70
Retained Earnings 138,123.77 1,134,020.30 3,244,565.94 6,176,236.88 9,792,410.14 14,006,624.85 18,500,827.74 23,521,913.63 28,849,567.43 34,498,135.13
Table 23. Projected Annual cash Flow Statement (all in Birr)
Years 1 2 3 4 5 6 7 8 9 10
1. Cash flows of Operating activities:
Cash Inflows:
Collections from Sales 2,975,000 4,356,450 5,984,370 7,198,112 8,219,253 8,699,135 9,152,853 9,630,195 10,132,389 10,660,728
Cash Outflows:
Salaries payment 580,800 609,840 640,332 672,349 705,966 741,264 778,328 817,244 858,106 901,011
Wages payment 158,650 165,533 173,809 183,426 191,625 201,206 211,266 221,829 232,921 244,567
Repair & maintenance - 131,787 138,376 145,295 152,560 160,188 168,197 176,607 185,437 194,709
Supplies Expense 201,640 211,722 222,308 233,424 245,095 257,349 270,217 283,728 297,914 312,810
Miscellaneous Expense 290,437 304,959 320,207 336,217 353,028 370,679 389,213 408,674 429,107 450,563
Interest payment 487,529 438,776 390,023 341,270 292,517 243,764 195,011 146,259 97,506 48,753
Income Tax (30%) 59,196 426,813 904,520 1,256,430 1,549,789 1,806,092 1,926,087 2,151,894 2,283,280 2,420,815
Working capital 122,888 50,590 53,675 55,220 58,564 61,493 64,567 67,796 71,185 0
Total cash outflows 2,151,139 2,602,519 3,118,875 3,513,036 3,853,019 4,161,106 4,337,910 4,625,805 4,824,821 4,961,060
Net cash provided by operation 823,861 1,753,931 2,865,495 3,685,076 4,366,234 4,538,029 4,814,943 5,004,390 5,307,568 5,699,668
2. Cash flows of investing activities:
Cash inflows:
Cash Outflows:
Project construction costs 2,044,000
Projected farm machine cost 4,102,002
Projected farm tools cost 372,590
Projected office equipments 70,750
Total cash outflows 6,589,342
Net cash used by investing -6,589,342
3. Cash flows of Financing:
cash inflows:
Owners' equity 2,458,126.91
Bank loans 5,735,629.46
Total cash inflows 8,193,756.38
Cash outflows:
Repayments of loans 573,563 573,563 573,563 573,563 573,563 573,563 573,563 573,563 573,563 573,563
Net cash flows by financing 7,620,193 -573,563 -573,563 -573,563 -573,563 -573,563 -573,563 -573,563 -573,563 -573,563
Total Net cash flows 516,873 1,180,368 2,291,932 3,111,513 3,792,671 3,964,466 4,241,380 4,430,827 4,734,005 5,126,105
Cumulative cash flows 516,873 1,697,241 3,989,174 7,100,687 10,893,358 14,857,824 19,099,204 23,530,031 28,264,037 33,390,141
Table 24 Projected Balance sheet of the project (in Birr)

Years 1 2 3 4 5 6 7 8 9 10
Assets
Current asset
Cash (cumulated) 516,873 1,697,241 3,989,174 7,100,687 10,893,358 14,857,824 19,099,204 23,530,031 28,264,037 33,390,141
working capital (cumulated) 122,888 173,478 227,153 282,374 340,938 402,431 466,998 534,794 605,979 605,979
Total current assets 639,761 1,870,720 4,216,327 7,383,060 11,234,296 15,260,255 19,566,202 24,064,825 28,870,016 33,996,120
Fixed asset
Project construction costs 2,044,000 16,333,461 16,333,461 16,333,461 16,333,461 16,333,461 16,333,461 16,333,461 16,333,461 16,333,461
Projected accu. depren (408,337) (816,673) (1,225,010) (1,633,346) (2,041,683) (2,450,019) (2,858,356) (3,266,692) (3,675,029) (4,083,365)
Projected farm machine cost 6,009,003 6,009,003 6,009,003 6,009,003 6,009,003 6,009,003 6,009,003 6,009,003 6,009,003 6,009,003
Projected accu. depren (588,415) (1,176,831) (1,765,246) (2,353,661) (2,942,076) (3,530,492) (4,118,907) (4,118,907) (4,118,907) (4,118,907)
projected farm tools cost 372,590 372,590 372,590 372,590 372,590 372,590 372,590 372,590 372,590 372,590
Projected accu. depren (326,558) (653,116) (979,674) (1,306,232) (1,632,790) (1,632,790) (1,632,790) (1,632,790) (1,632,790) (1,632,790)
projected office equipments 254,350 254,350 254,350 254,350 254,350 254,350 254,350 254,350 254,350 254,350
Projected accu. depren (50,870) (101,740) (152,610) (203,480) (254,350) (254,350) (254,350) (254,350) (254,350) (254,350)
Total fixed assets 7,305,763 20,221,044 18,846,864 17,472,685 16,098,505 15,101,753 14,105,001 13,696,665 13,288,328 12,879,992
Total assets 7,945,524 22,091,764 23,063,191 24,855,745 27,332,801 30,362,008 33,671,203 37,761,490 42,158,344 46,876,112
Liability
Bank Loan 5,162,067 4,588,504 4,014,941 3,441,378 2,867,815 2,294,252 1,720,689 1,147,126 573,563 -

Capital
Owners' equity 2,458,127 11,356,151 11,356,151 11,356,151 11,356,151 11,356,151 11,356,151 11,356,151 11,356,151 11,356,151
Retained earning 138,124 1,134,020 3,244,566 6,176,237 9,792,410 14,006,625 18,500,828 23,521,914 28,849,567 34,498,135
Total capital 2,596,251 12,490,171 14,600,717 17,532,388 21,148,561 25,362,776 29,856,979 34,878,065 40,205,718 45,854,286
Total Liability + Capital 7,758,317 17,078,675 18,615,658 20,973,766 24,016,376 27,657,028 31,577,668 36,025,191 40,779,281 45,854,286

Table 25. Projected Annual cash Flow Statement from Operations(all in Birr)
years 1 2 3 4 5 6 7 8 9 10
Cash flows of Operating activities:

Cash Inflows:
Cash collections from revenues 2,975,000 4,356,450 5,984,370 7,198,112 8,219,253 8,699,135 9,152,853 9,630,195 10,132,389 10,660,728
Cash Outflows:
Salaries payment 580,800 609,840 640,332 672,349 705,966 741,264 778,328 817,244 858,106 901,011
Wages payment 158,650 165,533 173,809 183,426 191,625 201,206 211,266 221,829 232,921 244,567
Repair & maintenance - 131,787 138,376 145,295 152,560 160,188 168,197 176,607 185,437 194,709
Supplies Expense 201,640 211,722 222,308 233,424 245,095 257,349 270,217 283,728 297,914 312,810
Miscellaneous Expense 290,437 304,959 320,207 336,217 353,028 370,679 389,213 408,674 429,107 450,563
Interest payment 487,529 438,776 390,023 341,270 292,517 243,764 195,011 146,259 97,506 48,753
Income Tax (30%) 59,196 426,813 904,520 1,256,430 1,549,789 1,806,092 1,926,087 2,151,894 2,283,280 2,420,815
Working capital 122,888 50,590 53,675 55,220 58,564 61,493 64,567 67,796 71,185 -
Capital cost 6,589,342
Total cash outflows 8,740,481 2,602,519 3,118,875 3,513,036 3,853,019 4,161,106 4,337,910 4,625,805 4,824,821 4,961,060
Net cash provided by operation (5,765,481) 1,753,931 2,865,495 3,685,076 4,366,234 4,538,029 4,814,943 5,004,390 5,307,568 5,699,668
PVC 8,055,743 2,210,723 25,375,991 25,935,115 25,571,624 24,837,640 24,040,073 23,381,420 22,523,778 21,487,985
PVB 2,741,935 45,949,903 52,503,093 56,216,292 56,713,164 55,615,059 54,436,987 53,306,853 51,744,405 50,234,892
NPV (5,313,807) 43,739,180 27,127,102 30,281,177 31,141,540 30,777,419 30,396,914 29,925,433 29,220,627 28,746,907
PVC 203,420,092
PVB 479,462,584
NPV 276,042,492
BCR 2.36
NBCR 1.36
IRR 52%

Vegetable F Production: Biru Gidi Irrigated

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BIRU GIDI IRRIGATED VEGETABLES AND

PROJECT PROMOTER: MR. BIRU GIDI LEMESSA

CONSULTANT: hamen consultancy service plc

@ Biru Gidi vegetable & Fruit crops production investment proposal 4

2.3 Development and socio-economic objectives

Thematic Area Strategic Objectives (SOs)

Productivity and To achieve a sustainable increase in agricultural

Natural Resources Management To reduce degradation and improve productivity of

2.4 Income distribution and poverty

3 Project Objectives and Rationales

4 The project Area

4.1 Physical Features

4.1.1 Location and Accessibility

4.2 Economic Base

4.2.3 Land Use Pattern

4.2.4 Input Supply and Product Markets

4.3 Infrastructure and Institutions

@ Biru Gidi vegetable & Fruit crops production investment proposal 9

5.1 Project Description

5.2 Project Objectives

5.3 Types of Ttechnology Use

5.4 Production Capacity

5.5Land Use Plan and Action Plan

6.1 Demands and Main Customers

6.2 Competition analysis and Selling Prices

@ Biru Gidi vegetable & Fruit crops production investment proposal 11

7 Organizations and Management

7.1 Business Form

7.2 Organization Structure of the Project

Tractor Accountant Secretary Project Others

7.3 Manpower Requirement with Qualification

8.1 Financial Requirements

8.1.1 Project Capital Costs

Table 3. Summaries of the project construction costs (in Birr)

8.1.3 Project Working Capital

8.1.4 Total Financial requirements

8.2 Forecasted Production

8.3 Forecasted Sales Revenues

8.4 Depreciation calculations

8.5 Loan Repayment Schedule and Interest Expense

8.6 Forecasted Income Statement

8.7 Forecasted Cash Flow Statement

8.8 Forecasted Balance Sheet

8.9 Overall Financial Assessment

Table 26. Project financial viability test

Similarly, revenues can keep dropping up to = = 1-0.42372 =0.576

9 Environmental Impact Analysis

10 Conclusion and Recommendation

@ Biru Gidi vegetable & Fruit crops production investment proposal 21

@ Biru Gidi vegetable & Fruit crops production investment proposal 22

Orange Land clearing & preparation 8 8 8 8 8 8 8 8 8 8

Chemical application (2X) 5 5 5 5 5 5 5 5 5 5

Banana Land clearing & preparation 8 8 8 8 8 8 8 8 8 8

Chemical application (4X) 5 5 5 5 5 5 5 5 5 5

Papaya Land clearing & preparation 8 8 8 8 8 8 8 8 8 8

Chemical application (4X) 5 5 5 5 5 5 5 5 5 5

@ Biru Gidi vegetable & Fruit crops production investment proposal 23

Chemical application (4X) 5 5 5 5 5 5 5 5 5 5

Pepper Land clearing & preparation 10 10 10 10 10 10 10 10 10 10

Chemical application (4X) 8 8 8 8 8 8 8 8 8 8

Tomato Land clearing & preparation 20 20 20 20 20 20 20 20 20 20

Chemical application (4X) 8 8 8 8 8 8 8 8 8 8