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Wakuma - Getachew Inves Proposal - B.Boshe
Wakuma - Getachew Inves Proposal - B.Boshe
(+251-966-24-42-18)
Consultant: sileshi angerasa econ, business and investment development consultancy service
Address: Mobile: 0911896145/0966109246
Consultant Name & Signature:
Nekemte, Ethiopia
APRIL, 2022
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TABLE OF CONTENTS
EXECUTIVE SUMMARY OF THE PROJECT .............................................................. iv
1. INTRODUCTION ............................................................................................1
2. BACKGROUND ..............................................................................................2
2.1. Stakes in Agricultural Production ........................................................................ 2
2.2. The Agriculture Sector .............................................................................................. 3
2.3. Development and socio-economic objectives .................................................... 4
2.4. Income distribution and poverty ........................................................................... 4
3. NAME OF PROMOTERS, CONTACT PERSON, LEGAL FORM OF BUSINESS .....4
4. NEED (PROBLEM STATEMENT) PROBLEM JUSTIFICATION ...........................4
5. PROJECT GOAL, OBJECTIVES AND RATIONALES .........................................5
6. THE PROJECT AREA DESCRIPTION ..............................................................6
6.1. Physical Features ....................................................................................................... 6
6.2. Economic Base ............................................................................................................ 6
6.3. Population ..................................................................................................................... 7
6.4. Vegetation ..................................................................................................................... 7
6.5. Infrastructure and Institutions.............................................................................. 7
7. THE PROJECT OUT PUTS, ACTIVITIES AND INPUTS .....................................8
7.1. Project Description ..................................................................................................... 8
7.2. Project Objectives ....................................................................................................... 8
7.3. Types Of Technology Use ......................................................................................... 9
7.4. Production Capacity .................................................................................................. 9
7.5. Land Use Plan and Action Plan ............................................................................. 9
8. MARKET PROSPECTS ................................................................................. 10
8.1. Demands and Main Customers ........................................................................... 10
8.2. Competition analysis and Selling Prices ........................................................... 10
8.3. Marketing Strategies ............................................................................................... 10
9. ORGANIZATIONS AND ADMINISTRATION OF THE PROJECT ....................... 11
9.1. Business Form .......................................................................................................... 11
9.2. Organization Structure of the Project ................................................................ 11
9.3. Manpower Requirement with Qualification ..................................................... 11
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10. STAKEHOLDERS AND PARTNERS ............................................................... 12
11. FINANCIAL STUDY ...................................................................................... 12
11.1. Financial Requirements ......................................................................................... 12
11.2. Project Capital Costs ............................................................................................... 12
11.3. Forecasted Production ............................................................................................ 15
11.4. Forecasted Sales Revenues ................................................................................... 16
11.5. Depreciation Calculations ..................................................................................... 16
11.6. Loan Repayment Schedule and Interest Expense ......................................... 16
11.7. Forecasted Income Statement .............................................................................. 16
11.8. Forecasted Cash Flow Statement........................................................................ 16
11.9. Forecasted Balance Sheet...................................................................................... 17
11.10. Overall Financial Assessment ....................................................................... 17
13. PHASE OUT AND SUSTAINABILITY STRATEGY ........................................... 19
14. ACTION PLAN AND BUDGET BREAK DOWN ................................................. 20
15. RISKS AND ASSUMPTIONS.......................................................................... 20
16. ENVIRONMENTAL IMPACT ANALYSIS ......................................................... 21
17. CONCLUSION AND RECOMMENDATION ...................................................... 22
ANNEX .............................................................................................................. 23
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EXECUTIVE SUMMARY OF THE PROJECT
1. Project Name Cereals, Pulses and Oilseed Crop Production Project
2. Project Owner Wakuma Getachew Irena
3. Project Type Agriculture
4. Project Promoter The promoter of the project is the owners themselves (the
investors) and those of who are benefiting from the project.
5. Nationality Ethiopian
6. Project Location Oromia Region, East Wollega Zone, Boneya Boshe Wored
13. Technology to be used The firm will use environment friendly technology which can be
operated by local people.
14. Market Destination i. Different individuals who are living in Oromia region, east
Wollega zone and woredas and towns
ii. Finfinne, Adama and surrounding community
iii. Some of the produce will be planned to be exported
abroad
15. Source of finance Out of Br. 8,215,011.50 as capital requirement, 30% (Br.
2,464,503.45) from own contribution and 70% 5,750,508.05) from
bank@ interest rate of 11.5%
16. Recommendation The project is economically, financially and socially feasible. For
instance, financially, the project’s IRR is 138 % which is greater than
discount rate (11.5%) and NPV is equal to Br.
32,505,196.00
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1. INTRODUCTION
Ethiopia’s Agricultural Sector Policy and Investment Framework (PIF) is a sectoral national policy
applicable for the period of 2010-2020. Its main objective is to sustainably increase rural incomes and
national food security producing more, selling more, nurturing the environment, eliminating hunger
and protecting the vulnerable against shocks. Four main themes, each with its own strategic objective,
are identified within the above overall objective. These are: 1. achieve a sustainable increase in
agricultural productivity and production; 2. accelerate agricultural commercialization and agro
industrial development; 3. reduce degradation and improve productivity of natural resources; and 4.
achieve universal food security and protect vulnerable households from natural disasters. As to the
thematic area of disaster risk management and food security strategic objective 4 aims at reducing the
number of chronically food insecure households, reducing imports of food aid, improving the
effectiveness of targeted social safety net programme for vulnerable groups, reducing the prevalence
of child malnutrition, and improving the effectiveness of the disaster risk management system.
Under the thematic area of productivity and production strategic objective 1 entails the following
outcomes: increase the production of food, cash crops and livestock; increase agricultural productivity;
reduce qualitative and quantitative post-harvest losses; scale-up proven best agricultural practices;
increase the use of agricultural inputs and improved agricultural practices; and reduce dependence on
commercial imports of staple food products. Under the thematic area of rural commercialization in
strategic objective 2, the following outcomes are expected: increase in private agribusiness investment;
increase in smallholder household cash incomes; increase in the proportion of agricultural production
marketed (versus subsistence utilization); increase in the diversification into higher value products;
improvement of farmer access to agricultural inputs and productive assets; increase in farmer access to
rural financial services; increase in agricultural export earnings; increase in households’ participation
in farmer organizations; strengthening of farm income growth through improved infrastructure and
market access; and reduction of rural unemployment.
As with the thematic area of natural resource management strategic objective 3 aims at increasing
areas under irrigation; improving water conservation and water use efficiency; reducing arable,
rangeland and forest degradation; maintaining agricultural biodiversity; improving soil health in key
agricultural landscapes; improving security of private sector access to land resources; and
strengthening farmers’ ability to respond to climate change challenges.
In addition, following the issuance of PIF and GTP, 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 crop production project is proposed by visionary emerging domestic investor Wakuma
Getachew. 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 and Industry Bureau
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).
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2. BACKGROUND
Agriculture is the mainstay of the Ethiopian economy, contributing 41.4% of the country’s gross
domestic product (GDP), 83.9% of the total exports, and 80% of all employment in the
country (Matousa, Todob, & Mojoc, 2013). Put in perspective, Ethiopia’s key agricultural sector has
grown at an annual rate of about 10% over the past decade; much faster than population growth. Other
important sectors are service and industrial sectors contributing 43% and 15.6% respectively (The
World Fact book, 2016). On agriculture expenditure related metric, Ethiopia has dedicated an annual
investment of about 14.7% of all government spending to the agriculture sector since 2003. Ethiopia is
among the few African countries that have consistently met both the African Union’s Comprehensive
Africa Agricultural Development Program (CAADP) targets of 10% increase in public investment in
agriculture by the year 2008 and boosting agricultural production growth by 6% at least by 2015.
Although agriculture is one of Ethiopia’s most promising resources, the sector has been slowed down
by periodic drought, high levels of taxation and poor infrastructure that often make it hard and
expensive to get goods to market. Also, overgrazing, deforestation and high population density has led
to massive soil degradation leading to low productivity. The above problems have made it hard for the
country to feed itself; best exemplified by the dramatic 1984-85 famine. Since then, the country has
experienced similar occurrences that expose a sizeable population to humanitarian needs. As things
stand, over 3 million Ethiopians need food and other humanitarian assistance annually (SIDA, 2015).
However, a critical look at the sector shows a high potential for self-sufficiency in grains and also for
the development export especially for livestock, vegetables, fruits and grains. Further, many other
economic activities depend on agriculture. These include processing, marketing and export of
agricultural products among others.
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.
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Agriculture contributes substantially to the overall Ethiopian economy. On a nominal GDP of USD
25.6 billion, 43 percent was driven by the agricultural sector. Crop production accounts for 29
percent, with livestock at 12 percent, followed by the forestry sector with 4 percent. The sector
contributed USD 1.4 billion to export earnings. The sector also drives aggregate employment figures.
Estimates show 83 percent of the population relies on agriculture for their livelihoods (with many
more dependent on agriculture related cottage industries such as textiles: crops and forestry account
for 60 percent of overall export value, livestock for 28 percent, and remaining exports, a combination
nonagricultural industry, primarily extractives and industrial production.
The role of gender in the Ethiopian agricultural system is also critical: in post-harvest activities for
cereals, women contribute as much as 70 percent of on-farm labor; in marketing, particularly in
cereals, participation of women is as high as 60 percent of labor market share. While MoARD
strategies do identify the role of women in the agricultural value chain, the gap is in the
implementation of these strategies. PASDEP II has already identified targets for the participation of
women in cooperatives and unions (>30 percent), as well as the number of women targeted by public
extension in male-headed and female-headed households, 50 percent and 100 percent, respectively.
Given the stakes of women in production systems, specific strategies that target increasing the
opportunity of women to participate in income generation and decision-making, and the
disaggregation of data sets to capture the participation of women are critical.
About a third of rural household’s 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.
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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 current national plan (GTP), 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:
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”.
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Hence, the key constraints to agricultural productivity in Ethiopia include low availability of improved
or hybrid seed, lack of seed multiplication capacity, low profitability and efficiency of fertilizer use
due to the lack of complimentary improved practices and seed, and lack of irrigation and water
constraints. Indeed, at the close of the century of greatest agricultural expansion, the dilemma of the
farmer had become a major problem. Several basic factors were involved-soil exhaustion, the vagaries
of nature, overproduction of staple crops, decline in self-sufficiency, and lack of adequate legislative
protection and aid. Some of the environmental issues that are related to agriculture are climate change,
deforestation, dead zones, genetic engineering, irrigation problems, pollutants, soil degradation, and
waste.
Ethiopian agriculture has been suffering from various external and internal problems. It has been
stagnant due to poor performance as a result of factors such as low resource utilization; low-tech
farming techniques (e.g., wooden plough by oxen and sickles); over-reliance on fertilizers and
underutilized techniques for soil and water conservation; inappropriate agrarian policy; inappropriate
land tenure policy; ecological degradation of potential arable lands; and increases in the
unemployment rate due to increases in the population
Agriculture progresses technologically as farmers adopt innovations. The extent to which farmers
adopt available innovations and the speed by which they do so determine the impact of innovations in
terms of productivity growth. It is a common phenomenon that farmers like any other kind of
entrepreneurs do not adopt innovations simultaneously as they appear on the market. Diffusion
typically takes a number of years, seldom reaches a level of 100% of the potential adopter’s population
and mostly follows some sort of S-shaped curve in time. Apparently, some farmers choose to be
innovators (first users), while others prefer to be early adopters, late adopters or non-adopters.
Therefore, the project tries to address the aforementioned problems through by accomplishing the
following objectives
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6. THE PROJECT AREA DESCRIPTION
Since the district is situated at an altitude above 1500 - 2500 meters above sea level the district
experienced a tropical and sub-tropical climatic type. As a result this area is experienced mean annual
temperature between 120c and 270c and mean annual rainfall of 580 to 2200mm.
6.1.3. Soils
The dominant soil types are Silt, Clay Loam, Loam, Clay And Sandy which have suitable for
agriculture and good agricultural potentiality from high to low water retaining capacity accounts for
2512.63ha, 3768.745 ha, 1256.315 ha, 13,813.465ha and 3768ha respectively . This implies the PH
value is less than 5.5, which has a good moisture carrying capacity.
6.2. Economic Base
6.2.1. Crop Production
In Boneya Boshe Woreda crop cultivation activity was conducted during meher and belg seasons. In
the woreda, there is no state farm. 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. During last two years the farmers used fertilizers as DAP and Urea,
improved seeds of maize and herbicides distributed for them in order to improve productivity.
Farmers of the district used the two methods of soil fertility. Traditional methods of maintaining soil
fertility used are counter tracing, crop rotation, fallowing the land, manure and terracing whereas
modern methods of maintaining soil fertility in the district are using strip cropping, mulching, crop
rotation, green maturing, terracing and artificial fertilizer. Afforestation, building check dams, contour
ploughing and controlled grazing are among traditional methods of soil conservation and afforestation,
terracing, planting shelter and education are modern methods of soil conservation exist in the district.
Agricultural calendar of the district differ according to the weather condition of the districts’ in the
zone. Land clearing is in the month of May and April, which is the beginning of the raining season.
The raining season starts at the middle of March and it ends at the month of October.
Oxen are the main source of power for peasant farming & farmer with no farm oxen is considered as
poor. A farmer having a pair of ox can feed himself & his family if he/she possesses enough farmland.
Saving capacity depends on what they produce & amount they obtain. To produce large amount of
crop, farmers should possess fertile land, farm oxen, improved seed, fertilizer, credit facility & know
how or technical service regarding recent agricultural technologies. Besides; the farm oxen needs
medical care & uninterrupted follow up not to be attacked by a serious animal diseases.
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6.2.2. Livestock
Like in most peasant smallholder societies in the Oromia region, livestock play a key role in day-to-
day life of the Boneya Boshe woreda society. Livestock play a key role in day-to-day life of the
society, especially in the peasant sector. They provide meat & milk, transport, manure, skin & hide &
furnish regular & easily realizable cash income. But in contrast to the size of the livestock population,
physical & value productivity is low.
In this project area oxen are the main source of power for peasant farming and hence a farmer with no
farm oxen is considered as poor. A farmer having a pair of ox is expected to feed himself and his
families provided that he possesses enough farmland. Saving capacity of the society is again the
function of their production capacity, which in turn, is the functions of oxen and farm sizes, both of
which are declining from time to time in this area. Besides, the farm oxen need medical care and
treatment, the cost and availability of which is again the major challenges for the smallholder farmers.
As a result, the average number of farm oxen per household has been decreasing from time to time
thereby leaving the smallholder farmers at very precarious situation.
6.2.5. Industry
Industry is a group of productive enterprises or organizations that produce or supply goods, services,
or sources of income. There are no medium and large-scale industries found in the district and there is
a data problem on small scale manufacturing industries.
6.3. Population
The 1999 population and housing census result are the bases for the population projection all over the
country. Based on this census result, the population of Boneya Boshe district is projected to be 52160
with 5.65 percent urban population in 2002. From the total population in the district 94.44 percent is
the rural populations, which directly sustain his life and the neighboring urban dwellers by the
agricultural and similar activities. The crude population density of the district in the same year was
about 2-3 person’s per. Km2.
6.4. Vegetation
There was a delineated natural forest area called Konchi (120ha) with different tree species and it’s
protected by project called Wellega Forest Agency. In additions, there were different small patches of
forests in the district located in peasant associations such as Caffe konchi, koye Konchi, Boneya
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sokso, and Qare Konchi. Previously the district posses’ dense forests and savanna grasses and on the
highlands there were remnants or big mother trees which show the presence of forests in the past
which is now denuded and left the area barren without any regret.
Currently the district is endowed with natural forests found under the rescuer condition, which needs
close control in order to save for future ecological balance for the surrounding. These types of natural
vegetations covers an approximate area coverage with high forest, woodland, riverine, shrub and Bush
land and Savanna Grass Land are also accounts for 30 ha, 88 ha, 69ha, 20ha and 155ha respectively
located in different peasant associations. The home of different wild animals including very attractive
seasonal birds, which are not found in areas where there is no forest. 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 dwellers is obtained from
these forests, in which the major area in the district where fuel wood possibly comes at large to the
town is expected from these forests. Recently the natural vegetation pointed above occupies less than
the previously registered size or some of the forests might not be available as registered. The reason
could be due to the absence of knowhow for what purpose the forest uses or it may be due to the
absence of alternative choices of (income, farm plot, domestic energy supply etc). The major types of
wild animals found in the district are Hyena, pig, Monkey, Ape, Fox, and Tiger. There is no reserved
land for wild life conservation.
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v. 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).
vi. Thus, this project will reduce the prevailing environmental degrading practices widely
exercised by the local low-income societies, which include, coal making and selling, use of
animal dung for light and heat, timber production, collecting of fire-woods for commercial
purposes, all of which are commonly exercised by the local community.
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8. MARKET PROSPECTS
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9. ORGANIZATIONS AND ADMINISTRATION OF THE PROJECT
Note that this organizational structure depicts the overall flows of accountability and reporting
structure of the project staffs.
Note that the employees’ salary is expected to increase by a minimum of five per cent each year.
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10. STAKEHOLDERS AND PARTNERS
The key stakeholders are the shareholders, the surrounding woreda communities, Zonal, Woreda, and
Kebele level administration Offices, the Investment Commission, Agriculture offices, and Land
Administration and Environment, Forest and Climate change Bureaus at regional, woreda, and Kebele
levels. The private sectors, research, academia, and civil society constitute another category of
stakeholders who will engage in delivering specific services and benefitting directly or indirectly from
the project.
11. FINANCIAL STUDY
In this section, both the cash outflow requirements and the projected inflows are projected and
analyzed.
11.1. Financial Requirements
The yearly financial requirements of the project are classified as capital costs, operating costs and
working capital requirements as follows.
11.2. Project Capital Costs
The project capital costs include such costs as construction costs, expenditures on office equipment’s,
investment in farm equipment’s, 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 Store, residential
houses with guard room, offices, toilet, and guardian houses, parking areas, cafeteria etc. The
following table shows just the summaries of the construction items and their respective costs.
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 forested based on the current market price without
the need to collect proforma invoices.
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Table 5. Farm tools with their respective per unit cost and quantities needed
S.N0 Items Quantity Units cost Total cost
1 Chemical Sprayer 30 450 13,500
2 Sickles 80 60 4,800
3 Axes 17 100 1,700
4 Tape meter (100 m) 4 450 1,800
5 Wheel borrow 5 3,500 17,500
6 Shovel 8 180 1,440
7 Weighing scale 3 25,000 75,000
8 Thresher 1 40,000 40,000
9 Saw 5 60 300
10 Cutlass or Machete 1 40,000 40,000
11 Spade hoe 5 900 4,500
12 Local hand hoe 12 70 840
13 Spade 10 98 980
14 Digging fork 15 400 6,000
15 Trovel 4 500 2,000
= Estimated cost of farm tools (in Birr) 210,360
Office Equipment’s: - the following table shows the prices of office equipment’s at the time of
preparing this project proposal.
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depreciation costs; utilities expenses such as water bills, electricity bills and telephone charges;
employee’s 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 100 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 120.00 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 (annexed) shows the detailed
calculations of these cost items, the summary of which is Birr 837,953.00 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 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 97,868.00
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
201,250.00 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 expenses are estimated to be Birr 364,576.00 for the first year and expected
to increase at least by 5 percent per year. This is presented by table 14 (annexed).
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11.2.2.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 80
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 80 percent of the
increase in the operating cost requirement of the second year Birr 205,077.00 (2,667,755- 2,462,679)
which is (Birr 205,077*0.8= 164,061). It is estimated that the remaining 20 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.
Note that the projections are based on the expert opinions in the field as well as per the
recommendations of East Wallaga zone agriculture office, and experienced investors & seed
multipliers enterprises. 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
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that as the project operates for a greater 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.
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.
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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 32,434,147; it means that the project would contribute 32,434,147.00 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 1.61
shows, for every one Birr invested in this project, the return would be 1.61 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 0.61 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 135 percent which is
extraordinarily large compared with the minimum cost of capital of 11.5 per cent. Hence, we can
safely conclude that the IRR of the project is extraordinarily 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 1.80, it means that cost can rise by 80 percent at which the BCR will become
exactly 1.0 and hence the decision will be indifference. However, any rise in cost beyond 80 percent
keeping sales revenues constant will lead the BCR to be below 1.0 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 38 percent margin of safety is large enough to
guarantee for the stability of the above decision criteria. Similarly, revenues can keep dropping
up to = = 1-0.621= 0.379 which is roughly equals to 38 percent, keeping
the cost elements constant. Any drop in sales by more than 38 percent may lead the project to rejection
region. However, given the past few year trends, the price of these items has 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
18 | P a g e
stability of the determined investment decision criteria above. Thus, it is can be safely concluded that
the project is financially viable.
To ensure the sustainability of the project sustainability will be integrated in the projects right from the
beginning, Key stakeholders will be involved: Another major step to ensure sustainability is the
involvement and participation of key stakeholders in program development. In general, the exit
strategy of the investment project will be based on the lease agreement of the project.
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14. ACTION PLAN AND BUDGET BREAK DOWN
Action plans help know what needs to be done to complete a task, project, initiative or strategy. An
action plan generally includes steps, milestones, and measures of progress, as well as responsibilities,
specific assignments, and a time line. Action plans are an important part of strategic planning. The
following table indicates activities to be undertaken in the first year of the project. While the budget
needed is indicated on section 8.1.4 above
Table: Operational Plan of the Project
S/N Cropping Activities Work schedule (%) Year: 2022/23
2022/23
APR MAY JUN JUL AUG SEP OCT NOV DEC JAN FEB MAR
11 Harvesting ** ** **
12 Marketing ** **
Successful commercial investment in agriculture is dependent upon access to clear and uncontested
land rights. In environments where land rights are undocumented or poorly protected, medium to large
20 | P a g e
commercial investments in agriculture could lead to displacement, loss of livelihoods and more limited
access to land for the local population, in particular indigenous and nomadic communities.
These negative outcomes not only undermine the Ethiopian Government’s development and poverty
reduction objectives among the populations it aims to serve but also significantly increase reputational
risk for the Ethiopian Government, its development partners and the private sector. Conflicts over land
rights can also significantly augment the financial risks for companies investing in commercial
agriculture due to delays or disruptions in operations.
1. Production risks stem from the uncertain natural growth processes of crops and livestock, with
typical sources of these risks related to weather and climate (temperature and precipitation) and
pests and diseases. Other yield-limiting or yield-reducing factors are also production risks such as
excessive heavy metals in soils or soil salinity.
2. Market risks largely focus on uncertainty with prices, costs, and market access. Sources of
volatility in agricultural commodity prices include weather shocks and their effects on yields,
Other sources of market risk include international trade, liberalization, and protectionism as they
can increase or decrease market access across multiple spatial scales. Farmers’ decision making
evolves in a context in which multiple risks occur simultaneously, such as weather variability and
price spikes or reduced market access.
3. Institutional risks relate to unpredictable changes in the policies and regulations that effect
agriculture, with these changes generated by formal or informal institutions. Government, a formal
institution, may create risks through unpredictable changes in policies and regulations, factors over
which farmers have limited control. Sources of institutional risk can also derive from informal
institutions such as unpredictable changes in the actions of informal trading partners, rural
producer organizations, or changes in social norms that all affect agriculture.
4. Personal risks are specific to an individual and relate to problems with human health or personal
relationships that affect the farm. Some sources of personal risk include injuries from farm
machinery, the death or illness of family members from diseases, negative human health effects
from pesticide use, and disease transmission between livestock and humans.
5. Financial risk refers to the risks associated with how the farm is financed and is defined as the
additional variability of the promoter’s operating cash flow due to the fixed financial obligations
inherent in the use of credit. Some sources of financial risk include changes in interest rates or
credit availability, or changes in credit conditions.
Key invested Project implementation assumptions are that the country’s economy maintains its
stability and that consistency is established between the stated government policies and agricultural
reforms supporting private sector development, and the agriculture sector vis-à-vis the actual
implementation of investment policies and reforms.
21 | P a g e
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 are 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 promoters are 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.
22 | P a g e
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
Maize (Seed) Land preparation 7 7 7 7 7 7 7 7 7 7
Planting 5 5 5 5 5 5 5 5 5 5
Weeding (2X) 7 7 7 7 7 7 7 7 7 7
Chemical application (2X) 5 5 5 5 5 5 5 5 5 5
Harvesting 5 5 5 5 5 5 5 5 5 5
Threshing 5 5 5 5 5 5 5 5 5 5
Total 34 34 34 34 34 34 34 34 34 34
Soya Beans
Land preparation 4 4 4 4 4 4 4 4 4 4
Planting 5 5 5 5 5 5 5 5 5 5
Weeding (2X) 4 4 4 4 4 4 4 4 4 4
Chemical application (4X) 3 3 3 3 3 3 3 3 3 3
Harvesting (2X) 7 7 7 7 7 7 7 7 7 7
threshing 5 5 5 5 5 5 5 5 5 5
Total 28 28 28 28 28 28 28 28 28 28
Groundnuts
Land preparation 4 4 4 4 4 4 4 4 4 4
Planting 5 5 5 5 5 5 5 5 5 5
Weeding (2X) 5 5 5 5 5 5 5 5 5 5
Chemical application (2X) 3 3 3 3 3 3 3 3 3 3
Harvesting 8 8 8 8 8 8 8 8 8 8
threshing 5 5 5 5 5 5 5 5 5 5
Labor per season 30 30 30 30 30 30 30 30 30 30
Sesame
Land preparation 5 5 5 5 5 5 5 5 5 5
Planting 8 8 8 8 8 8 8 8 8 8
Weeding (2X) 6 6 6 6 6 6 6 6 6 6
Harvesting (2X) 7 7 7 7 7 7 7 7 7 7
threshing 6 6 6 6 6 6 6 6 6 6
Total 32 32 32 32 32 32 32 32 32 32
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).
23 | P a g e
Table 8. Estimated yearly repair and maintenance expenses Repair and maintenance
Items costs Rate
1 Store and bathing room 210,000.00 0.02 4,200.00
2 New John Deere 6100D Mfwd Tractor (Mexico Origin) 1,000,577 0.02 20,011.54
3 Mounted Four Disc Plough (Make: Nardi, Model: QD 70/E) 325,000 0.02 6,500.00
4 Mounted Tandem Disc Harrow (Make: Nardi, Model: 28 HOP 56) 571,450 0.02 11,429.00
5 Brand New Toyota Hilux Double cab 1,100,000 0.02 22,000.00
6 Trailer 1,420,000 0.02 28,400.00
7 Chemical Sprayer 13,500.00 0.02 270.00
8 Sickles 4,800.00 0.02 96.00
9 Axes 1,700.00 0.02 34.00
10 Tape meter (100 m) 1,800.00 0.02 36.00
11 Wheel borrow 17,500.00 0.02 350.00
12 Shovel 1,440.00 0.02 28.80
13 Weighing scale 75,000.00 0.02 1,500.00
14 Thresher 40,000.00 0.02 800.00
15 Saw 300.00 0.02 6.00
16 Cutlass or Machete 40,000.00 0.02 800.00
17 Spade hoe 4,500.00 0.02 90.00
18 Local hand hoe 840.00 0.02 16.80
19 Spade 980.00 0.02 19.60
20 Digging fork 6,000.00 0.02 120.00
21 Trovel 2,000.00 0.02 40.00
22 Laptop Computer 15,500.00 0.02 310.00
23 Printers 7,600.00 0.02 152.00
24 Shelf 5,000.00 0.02 100.00
25 Managerial Chairs 16,400.00 0.02 328.00
26 Guest Chairs 1,500.00 0.02 30.00
27 Computer tables 10,000.00 0.02 200.00
Total Repair and Maintenance costs 97,867.74
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Table 9. Total Labor requirement and cost of the project
Years 1 2 3 4 5 6 7 8 9 10
Maize Labor per Ha (table 7) 34 34 34 34 34 34 34 34 34 34
Land area (table 1) 62.5 62.5 62.5 62.5 62.5 62.5 62.5 62.5 62.5 62.5
Sub-total labor required 2125 2125 2125 2125 2125 2125 2125 2125 2125 2125
Soybean Labor per Ha (table 7) 28 28 28 28 28 28 28 28 28 28
Land area (table 1)* 10 10 10 10 10 10 10 10 10 10
Sub-total labor required 280 280 280 280 280 280 280 280 280 280
Groundnuts Labor per Ha (table 7) 30 30 30 30 30 30 30 30 30 30
Land area (table 1) 10 10 10 10 10 10 10 10 10 10
Sub-total labor required 300 300 300 300 300 300 300 300 300 300
Sesame Labor per Ha (table 7) 32 32 32 32 32 32 32 32 32 32
Land area (table 1)* 15 15 15 15 15 15 15 15 15 15
Sub-total labor required 480 480 480 480 480 480 480 480 480 480
Total Labor required per ha 3185 3,185 3,185 3,185 3,185 3,185 3,185 3,185 3,185 3185
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Table 14. Miscellaneous and utilities expense per year
years 1 2 3 4 5 6 7 8 9 10
Utilities Expense 201,250 211,313 221,878 232,972 244,621 256,852 269,694 283,179 297,338 312,205
Other Operating expense 364,576 382,805 401,945 422,042 443,144 465,302 488,567 512,995 538,645 565,577
Table 17. Forecasted production of each crop over the first 10 years
Crops 1 2 3 4 5 6 7 8 9 10
Maize Land area in Ha 62.5 62.5 62.5 62.5 62.5 62.5 62.5 62.5 62.5 62.5
Output per Ha (quint) 60 60 60 60 60 60 60 60 60 60
Total Output (quint) 3,750 3,750 3,750 3,750 3,750 3,750 3,750 3,750 3,750 3,750
Soybean Land area in Ha 10 10 10 10 10 10 10 10 10 10
Output per Ha (quint) 30 30 30 30 30 30 30 30 30 30
Total Output (quint) 300 300 300 300 300 300 300 300 300 300
Groundnuts Land area in Ha 10 10 10 10 10 10 10 10 10 10
Output per Ha (quint) 25 25 25 25 25 25 25 25 25 25
Total Output (quint) 250 250 250 250 250 250 250 250 250 250
Sesame Land area in Ha 15 15 15 15 15 15 15 15 15 15
Output per Ha (quint) 15 15 15 15 15 15 15 15 15 15
Total Output (quint) 225 225 225 225 225 225 225 225 225 225
4,525 4,525 4,525 4,525 4,525 4,525 4,525 4,525 4,525 4,525
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Table 18. Projected selling price of (at the farm gate price in Birr per quintal)
Crops 1 2 3 4 5 6 7 8 9 10
Maize 1500 1,575.00 1,653.75 1,736.44 1,823.26 1,914.42 2,010.14 2,110.65 2,216.18 2,326.99
Soya beans 2100 2205 2315.25 2431.01 2552.56 2680.19 2814.20 2954.91 3102.66 3257.79
Groundnuts 1800 1890.00 1984.50 2083.73 2187.91 2297.31 2412.17 2532.78 2659.42 2792.39
Sesame 3000 3150.00 3307.50 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
Maize seed Price (Birr) 1500 1575 1653.75 1736.4375 1,823.26 1,914.42 2,010.14 2,110.65 2,216.18 2,326.99
Production (quint) 3,750 3,750 3,750 3,750 3,750 3,750 3,750 3,750 3,750 3,750
Sales (Birr) 5,625,000 5,906,250 6,201,563 6,511,641 6,837,223 7,179,084 7,538,038 7,914,940 8,310,687 8,726,221
Soyabean Price (Birr) 2,100 2,205 2,315 2,431 2,553 2,680 2,814 2,955 3,103 3,258
Production (quint) 300 300 300 300 300 300 300 300 300 300
Sales (Birr) 630,000 661,500 694,575 729,304 765,769 804,057 844,260 886,473 930,797 977,337
Groundnuts Price (Birr) 1,800.00 1,890.00 1,984.50 2,083.73 2,187.91 2,297.31 2,412.17 2,532.78 2,659.42 2,792.39
Production (quint) 250 250 250 250 250 250 250 250 250 250
Sales (Birr) 450,000 472,500 496,125 520,931 546,978 574,327 603,043 633,195 664,855 698,098
Sesame Price (Birr) 3,000 3,150 3,308 3,473 3,647 3,829 4,020 4,221 4,432 4,654
Production (quint) 225 225 225 225 225 225 225 225 225 225
Sales (Birr) 675,000 708,750 744,188 781,397 820,467 861,490 904,565 949,793 997,282 1,047,147
Total Sales revenues 7,380,000 7,749,000 8,136,450 8,543,273 8,970,436 9,418,958 9,889,906 10,384,401 10,903,621 11,448,802
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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 5,750,508 5,175,457 4,600,406 4,025,356 3,450,305 2,875,254 2,300,203 1,725,152 1,150,102 575,051
Periodical loan repayments 575,051 575,051 575,051 575,051 575,051 575,051 575,051 575,051 575,051 575,051
Outstanding Loan at the end 5,175,457 4,600,406 4,025,356 3,450,305 2,875,254 2,300,203 1,725,152 1,150,102 575,051 0
Periodical interest expense 488,793 439,914 391,035 342,155 293,276 244,397 195,517 146,638 97,759 48,879
Total periodical payment 1,063,844 1,014,965 966,085 917,206 868,327 819,447 770,568 721,689 672,809 623,930
Depreciation Expense 486,668 486,668 486,668 486,668 486,668 433,396 433,396 5,250 5,250 5,250
Interest Expense 488,793 439,914 391,035 342,155 293,276 244,397 195,517 146,638 97,759 48,879
Total Operating Expense 3,438,140 3,594,337 3,678,846 3,770,024 3,868,204 3,920,466 4,033,720 3,726,935 3,856,808 3,988,231
Income Before Income Tax 3,941,860 4,154,663 4,457,604 4,773,249 5,102,232 5,498,492 5,856,186 6,657,466 7,046,813 7,460,571
Income Tax (30%) 1,182,558 1,246,399 1,337,281 1,431,975 1,530,670 1,649,548 1,756,856 1,997,240 2,114,044 2,238,171
Net Income 2,759,302 2,908,264 3,120,323 3,341,274 3,571,562 3,848,944 4,099,330 4,660,226 4,932,769 5,222,400
Retained Earnings 2,759,302 5,667,566 8,787,889 12,129,163 15,700,725 19,549,670 23,649,000 28,309,226 33,241,995 38,464,395
28 | P a g e
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 7,380,000 7,749,000 8,136,450 8,543,273 8,970,436 9,418,958 9,889,906 10,384,401 10,903,621 11,448,802
Cash Outflows:
Salaries payment 740,400 777,420 816,291 857,106 899,961 944,959 992,207 1,041,817 1,093,908 1,148,603
Wages payment 318,500 318,500 334,425 351,146 368,704 387,139 406,496 426,820 448,161 463,182
Repair & maintenance - 97,867.74 102,761.13 107,899.18 113,294.14 118,958.85 124,906.79 131,152.13 137,709.74 144,595.23
Utilities Expense 201,250 211,313 221,878 232,972 244,621 256,852 269,694 283,179 297,338 312,205
Supplies Expense 837,953 879,850 923,843 970,035 1,018,537 1,069,463 1,122,936 1,179,083 1,238,037 1,299,939
Miscellaneous Expense 364,576 382,805 401,945 422,042 443,144 465,302 488,567 512,995 538,645 565,577
Interest payment 488,793 439,914 391,035 342,155 293,276 244,397 195,517 146,638 97,759 48,879
Income Tax (30%) 1,182,558 1,246,399 1,337,281 1,431,975 1,530,670 1,649,548 1,756,856 1,997,240 2,114,044 2,238,171
Working capital 123,046 80,033 84,034 88,236 92,648 97,280 102,144 107,251 108,182 0
Total cash outflows 4,257,076 4,434,100 4,613,493 4,803,566 5,004,853 5,233,897 5,459,324 5,826,176 6,073,784 6,221,153
Net cash provided by operation 3,122,924 3,314,900 3,522,957 3,739,707 3,965,583 4,185,060 4,430,582 4,558,225 4,829,838 5,227,650
2. Cash flows of investing activities:
Cash inflows:
Cash Outflows:
Project construction costs 862,000
Projected farm machine cost 4,417,027
Projected farm tools cost 210,360
Projected office equipments 139,900
Total cash outflows 5,629,287
Net cash used by investing -5,629,287
3. Cash flows of Financing:
cash inflows:
Owners' equity 2,464,503
Bank loans 5,750,508
Total cash inflows 8,215,011
Cash outflows:
Repayments of loans 575,051 575,051 575,051 575,051 575,051 575,051 575,051 575,051 575,051 575,051
Net cash flows by financing 7,639,961 -575,051 -575,051 -575,051 -575,051 -575,051 -575,051 -575,051 -575,051 -575,051
Total N et cash flows 4,915,497 2,739,849 2,947,906 3,164,656 3,390,532 3,610,010 3,855,531 3,983,174 4,254,787 4,652,599
Cumulative cash flows 4,915,497 7,655,345 10,603,251 13,767,907 17,158,439 20,768,449 24,623,980 28,607,154 32,861,941 37,514,540
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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) 4,915,497 7,655,345 10,603,251 13,767,907 17,158,439 20,768,449 24,623,980 28,607,154 32,861,941 37,514,540
working capital (cumulated) 123,046 203,079 287,113 375,349 467,997 565,277 667,421 774,673 882,854 882,854
Total current assets 5,038,543 7,858,424 10,890,364 14,143,256 17,626,436 21,333,726 25,291,401 29,381,827 33,744,795 38,397,394
Fixed asset
Project construction costs 862,000 862,000 862,000 862,000 862,000 862,000 862,000 862,000 862,000 862,000
Projected accu. depren -5,250 -10,500 -15,750 -21,000 -26,250 -31,500 -36,750 -42,000 -47,250 -52,500
Projected farm machine cost 4,417,027 4,417,027 4,417,027 4,417,027 4,417,027 4,417,027 4,417,027 4,417,027 4,417,027 4,417,027
Projected accu. depren -428,146 -856,293 -1,284,439 -1,712,585 -2,140,731 -2,568,878 -2,997,024 -3,425,170 -3,853,317 -3,853,317
projected farm tools cost 210,360 210,360 210,360 210,360 210,360 210,360 210,360 210,360 210,360 210,360
Projected accu. depren -42,072 -84,144 -126,216 -168,288 -210,360 -252,432 -294,504 -336,576 -378,648 -420,720
projected office equipment’s 139,900 139,900 139,900 139,900 139,900 139,900 139,900 139,900 139,900 139,900
Projected accu. depren -11,200 -22,400 -33,600 -44,800 -56,000 -67,200 -78,400 -89,600 -100,800 -112,000
Total fixed assets 5,142,619 4,655,950 4,169,282 3,682,614 3,195,946 2,709,277 2,222,609 1,735,941 1,249,272 1,190,750
Total assets 10,181,161 12,514,374 15,059,647 17,825,870 20,822,381 24,043,003 27,514,010 31,117,767 34,994,067 39,588,144
Liability
Bank Loan 5,175,457 4,600,406 4,025,356 3,450,305 2,875,254 2,300,203 1,725,152 1,150,102 575,051 0
Capital
Owners' equity 2,464,503 2,464,503 2,464,503 2,464,503 2,464,503 2,464,503 2,464,503 2,464,503 2,464,503 2,464,503
Retained earning 2,759,302 5,667,566 8,787,889 12,129,163 15,700,725 19,549,670 23,649,000 28,309,226 33,241,995 38,464,395
Total capital 5,223,805 8,132,069 11,252,392 14,593,667 18,165,229 22,014,173 26,113,503 30,773,729 35,706,499 40,928,898
Total Liability + Capital 10,399,263 12,732,476 15,277,748 18,043,971 21,040,483 24,314,376 27,838,656 31,923,831 36,281,549 40,928,898
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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 7,380,000 7,749,000 8,136,450 8,543,273 8,970,436 9,418,958 9,889,906 10,384,401 10,903,621 11,448,802
Cash Outflows:
Salaries payment 740,400 777,420 816,291 857,106 899,961 944,959 992,207 1,041,817 1,093,908 1,148,603
Wages payment 318,500 318,500 334,425 351,146 368,704 387,139 406,496 426,820 448,161 463,182
Repair & maintenance - 97,868 102,761 107,899 113,294 118,959 124,907 131,152 137,710 144,595
Utilities Expense 201,250 211,313 221,878 232,972 244,621 256,852 269,694 283,179 297,338 312,205
Supplies Expense 837,953 879,850 923,843 970,035 1,018,537 1,069,463 1,122,936 1,179,083 1,238,037 1,299,939
Miscellaneous Expense 364,576 382,805 401,945 422,042 443,144 465,302 488,567 512,995 538,645 565,577
Interest payment 488,793 439,914 391,035 342,155 293,276 244,397 195,517 146,638 97,759 48,879
Income Tax (30%) 1,182,558 1,246,399 1,337,281 1,431,975 1,530,670 1,649,548 1,756,856 1,997,240 2,114,044 2,238,171
Working capital 123,046 80,033 84,034 88,236 92,648 97,280 102,144 107,251 108,182 -
Capital cost 5,629,287
Total cash outflows 9,886,363 4,434,100 4,613,493 4,803,566 5,004,853 5,233,897 5,459,324 5,826,176 6,073,784 6,221,153
Net cash provided by operation (2,506,363) 3,314,900 3,522,957 3,739,707 3,965,583 4,185,060 4,430,582 4,558,225 4,829,838 5,227,650
PVC 9,111,855 4,086,729 4,252,067 4,427,250 4,612,768 4,823,869 5,031,635 5,369,748 5,597,957 5,733,781
PVB 6,801,843 7,141,935 7,499,032 7,873,984 8,267,683 8,681,067 9,115,121 9,570,877 10,049,420 10,551,891
NPV (2,310,012) 3,055,207 3,246,965 3,446,734 3,654,915 3,857,199 4,083,486 4,201,129 4,451,463 4,818,110
PVC 53,047,658.43
PVB 85,552,854.30
NPV 32,505,195.87
BCR 1.61
NBCR 0.61
IRR 138%
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