Group Exercise 1

 Core Problems:
a. Immediate damage of local roads than federal
b. Poor Urban Housing Service
c. Poor Rural Education
d. Lack of Sufficient Clear Water in Rural Areas
e. Frequent car Accident in Urban Areas
f. Inefficient Rural/Urban Land Use System

Instruction:
 Prepare Problem and Objective Trees
 Select One alternative solution

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 Group Exercise 2
 Prepare Logical Framework for Projects Identified in Exercise 1?

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 Exercise 1
Project life = 6 years
Initial investment = 168 million
Total Net Profit for Six years = 240 million
 Calculate the ROI?
 Which project is better as compared to the previous exercise?

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 Exercise 2

Year Project 1 Project 2

1 4,000 10,000
2 12,000 10,000
3 15,000 10,000
4 12,000 10,000
5 7,000 10,000
Initial investment 40,000 40,000

 Which Project can be selected based on Payback Period?

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 Exercise 3

Year Project “A” Project “B”

1 40,000 25,000

2 30,000 25,000

3 25,000 25,000

4 20,000 25,000

5 10,000 25,000

Initial Investment 80,000 80,000

Discount Rate 10% 10%

 Calculate the NPV and which project is Preferable and Why?

 Calculate the Payback Period and make a decision?

Is the decision similar with NPV result?

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 Exercise 4

Year Project “A” Project “B”

1 30,000 25,000

2 40,000 40,000

3 45,000 40,000

4 50,000 50,000

Initial Investment 110,000 100,000

Cost of Capital 12% 12%

 Find BCR and NBCR of the Two Projects?

 Decision?

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 Exercise 5

Year Cash flow

1 30,000
2 30,000
3 40,000
4 45,000
Initial investment 100,000
Discount rate 12%

 Find IRR based on Trial and Error Method?

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 Exercise 6

Year Cash flow

1 5,000
2 6,000
3 8,000
4 7,000
5 6,000
Initial investment 10,000
Discount rate 10%

 Calculate the payback period of the project?

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 Exercise 7

PV of $1 at PV of Cash Cumulative
Project Year Cash flow
10% Inflow Cash Savings

0 -10,000 1.00 -10,000 -10,000

1 5,000 0.909 4,545 -5,455
2 6,000 0.826 4,956 -499
3 8,000 0.751 6,008 5,509
4 7,000 0.683 4,781 10,290
5 6,000 0.621 3,726 14,016

Payback Pd = 2 Years + (499/6008)

= 2 Years + 0.083 Year = 2.083 Years or 2 years and one month

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 Exercise 8
 Assume the Price of Imported Harvester is $45,000.
The Import duty is 10% of the Imported Price and Birr 5000 is
Transportation Cost for moving the harvester to the project site.
The Exchange Rate as of June 18, 2023 is $1=54.26 Birr

 What is the Financial Price of the Harvester in Ethiopian Birr?

 What is the Economic Value of the Harvester in Ethiopian Birr?

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 Exercise 9

Year 0 1st 2nd 3rd 4th

Annual Sales Unit

Investment
Working Capital
Sales Revenue (@ Birr 30/unit)
Operating Costs (@ Birr 16/unit)
Overhead Costs
Loan Principal
Depreciation
Loan Interest
Tax
Annual Cash Flow Balance

Assume Discount Rate is 10%

Required:
 Adjust the Cash flow based on CF and do Economic Analysis and
Check whether the project is viable in terms of NPV, CBR and IRR?

Items Conversion factor (CF)

Investment Costs 0.909
Sales Price 0.667
Operating Price 0.50
Overhead Costs 0.25
Working Capital 0.20 1st year and 0.80 2nd year
Discount Rate 0.834

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