BUSINESS PLAN TO ACQUISITION LEASE FINANCE LOAN

FOR ESTABLISHING BAKERY FACTORY

Project name: BONA MOKONIN BAKERY FACTORY

Promoter: -MR. BONA MOKONIN

Nationality: - Ethiopia Mobile. No. 09

Address: - JIMMA CITY BACHO BORE KEBLE

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 Submitted to: - JIMMA BRANCH ETHIOPIAN DEVELOPMENT BANK
MARCH , 2023
JIMMA TOWN

Table of Contents
1.EXECUTIVE SUMMARY...................................................................................................................4
1.GENERAL BACKGROUND OF THE PROJECT...............................................................................................6
1.1.Background.......................................................................................................................................6
2.1 .APPLICANT NAME............................................................................................................................6
2.2. ADDRESS..........................................................................................................................................7
A. APPLICANT ADDRESS:-....................................................................................................................7
B.PROPOSED PROJECT ADDRESS:-......................................................................................................7
2.3 .APPLICANT MARRIAGE CONDITION................................................................................................7
2.4 .PROJECT TYPE..................................................................................................................................7
2.5. TYPE OF ORGANIZATION.................................................................................................................7
2.6. PROJECT DESCRIPTION AND APPLICATION.....................................................................................7
2.7. Business Objectives for a Bakery.....................................................................................................8
2.7.1 BREAD AND CAKE MAKING PROCESS AND PROCESSED PRODUCTION SUPPLY.......................8
1. Production Process.........................................................................................................................8
2. MANUFACTURING PROCESS OF BAKERY........................................................................................8
2.8. PROJECT PREVIOUS ACTIVITY........................................................................................................10
2.9 APPLICANT LOAN HISTORY AND EXISTING SITUATION..................................................................10
2.10. REQUESTING LOAN OBJECTIVE AND ITS AMOUNT.....................................................................10
3. MARKETING PLAN..................................................................................................................................11
3.1. Market Situation...........................................................................................................................11
3.2. Production Programmed...............................................................................................................11
3.3 Project Capacity and Rationale Project..........................................................................................12
3.4 Project Capital.................................................................................................................................12
3.5 Proposed Product Mix....................................................................................................................13
3.6 Proposed Business Legal Status......................................................................................................13
3.7Financial Summary.......................................................................................................................13
3.6 Strategic Recommendations................................................................................................................14

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 3.6.1 Marketing.................................................................................................................................14
3.6.2 Pricing.......................................................................................................................................14
3.6.3 New Products development....................................................................................................14
V. MATERIALS AND INPUTS.......................................................................................................................16
4.1. RAW MATERIALS.................................................................................................................................16
4.2.UTILITIES.........................................................................................................................................17
VI. TECHNOLOGY AND ENGINEERING........................................................................................................19
6.1 .MACHINERY AND EQUIPMENT......................................................................................................19
VII. HUMAN RESOURCE AND TRAINING REQUIREMENT............................................................................25
A. HUMAN RESOURCE REQUIREMENT.................................................................................................25
VIII. FINANCIAL ANALYSIS...............................................................................................................27
A.TOTAL INITIAL CAPITAL INVESTMENT COST.............................................................27
B.PRODUCTION COST..................................................................................................................27
C. INCOME STATEMENT.............................................................................................................28
7.2. FINANCIAL EVALUATION................................................................................................................33
1. Profitability...................................................................................................................................33
2. Break-even Analysis......................................................................................................................33
3. Pay Back Period.............................................................................................................................33
4. Internal Rate of Return and Net Present Value............................................................................33
5. Economic Benefits.............................................................................................................................33
8. CONCLUSION & RECOMENDATION.......................................................................................................34

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 1.EXECUTIVE SUMMARY
The Business Plan should realistically assess the business’s potential and take account of both
the positive and negative issues that will impact on the business. The primary purpose of a
Business Plan should be to identify the strengths and weaknesses of the business and give a
realistic assessment of the most probable performance of the business over the period for which
the Plan is drawn up.

Project location of BONA MOKONIN Bakery Factory is Located South West Oromia Region
Jimma Town.
This profile envisages the establishment of a plant for the production of Cake and Bread
Production Processing Industry.
The office building facilities will have an area of 600 square meter, consists of Showroom, four
office spaces, Storage and workshop, Garage and Service.
Bakery Factory industry makes significant contributions to the socio-economic development
process of a country. Its importance emanates largely from the direct and indirect impact it has
on all economic activities. It contributes to the national output and stimulates the growth of other
sectors through a complex system of linkages.
It contributes to employment and creates income for the population and has multiplier effects on
the economy. The Bakery Factory industry employs can create employment for 60 persons. i.e.
permanent 57 employee and causal 3 employee .
Bakery Factory Industry Business Operation collect raw materials from local market and from
local rural areas of surrounding district Jimma Zone market of oromiya regional state the
business plan has palmed to as a strong market position and coherent strategy. It has established
clear steps to achieve its objective of competent Bread and cake Product supply provider and
increasing income by 75% in the next five years.

Project owner will be asked Lease machines finance Loan services delivery with Birr.
5,439,178.40 by purchasing machineries for his Bakery factory in order to start Business
Operation soon.

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 The purpose of a requesting loan will be utilizing for purchasing of Machineries and Generator
to Bread and cake Product Manufacturing Factory with total project cost or birr
5,298,973.00million; from this total project cost 20% or birr 1,059,794.6million equity of
covered by project owner and 80% or birr 4,239,178.4with long term bank loan from Jimma
district Ethiopian Development Bank as the following:-
Items Total Project Equity 20% Birr Bank Lease finance
Investment Cost Birr Loan 80% Birr
Machineries 4,648,973.00 929,794.6 3,719,178.4
Generator 650,000.00 130,000 520,000.00
Total 5,298,973.00 1,059,794.60 4,239,178.40

The Hora Bakery Factory Industry business venture entails a total investment of about Birr
5,298,973.00million. The project is financed through 80% debt and 20% equity.
This profile envisages the BUSINESS OPERATION of a Bakery Factory for the production of
CAKE AND BREAD with a capacity of 31,160 tons per annum. The present demand for the
proposed product is estimated at 194,658 tons per annum. The demand is expected to reach at
529,397 tones by the year 2024.

Despite the advent of fully automatic and semi-automatic bread as well as Cake making plants, a
sizeable number of people still prefer fresh bread and other products from bakery. With growing
population and preference for fresh and ready-to-eat convenient food items, demand for bakery
products is steadily increasing. The project is financially viable with an internal rate of return
(IRR) of 18% and a net present value (NPV) of Birr 10.31 million, discounted at 8.5%.

The proposed Bakery Factory Processing Business Operation owner has set targets that he is
committed about achieving next year the business will achieve sales of ETB 33,601,680.00 sales
Will grow by 10% each year to reach the figure of Ethiopia ETB 57,611,600 are the end of the
period by the final year of this plan the business will be achieving a net profit ETB 11,630.087.
This will represent a good return and provide sufficient returned earning for future development
plan.

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 Generally, the project is technically feasible, financially and commercially viable as well as
socially and economically acceptable. Hence the project is worth implementing.

1.GENERAL BACKGROUND OF THE PROJECT

1.1.BACKGROUND
BONA MOKONIN BAKERY processing industry is formed as a Sole proprietorship which is
an appropriate legal structure for this type of business and will its objective.
The management team will review this structure as business develops. BONA MOKONIN
Bakery Factory Business Operation is well placed to Export Best Quality of Bread and Cake to
Foreign Market and supplying to local market. The management teams have the experience and
competencies to deliver the target have set themselves. BONA MOKONIN BAKERY, Owner,
has knowledge and experience of financial part, One Professional person has developed expertise
in maintenance.
TWO, Supporter, is goal driven and brings and knowledge of cleaning and parts of service.
The management teams are committed to growing the business by providing excellent customer
services and build a strong credible brand. This will be demonstrated their trust worthy relations
with customers and other stake holders. The management teams take their responsibility
seriously and are committed to an ethical approach to business.
In summery BONA MOKONIN Bakery Factory Business Operation have the appropriate legal
form, resources, values, and management team to succeed. The combined effect of these faster
provides a strong foundation to achieve a robust and profitable business.
Size of capital investment and its sources of financing, output, and generation of value added,
production technologies, employment pattern, turnover and the contribution of different product
line of industries in all groups of industries.
The promoter is very ambitious and committed to realize the project. Hence, He expects to get
the necessary support from the JIMMA Branch Development Bank to make the project to be
operational.

Besides, the government polices and incentives for the private sector investment are very
promising that motivates the promoter to engaged in establishing Bakery Factory Plant.

2.1 .APPLICANT NAME

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 i NAME:- BONA MOKONIN Bakery Cake And Bread Production Factory
Contact Name Of BONA MOKONIN Bakery Cake And Bread Production FACTORY:-

MR. BONA MOKONIN

2.2. ADDRESS

A. APPLICANT ADDRESS :-
Address:-Country Ethiopia

Region: - Oromiya CITY: - JIMMA CITY

Bacho Bore Keble

BACHO BORE KEBLE : - CENTER OF TOWN -Production Processing Area Is Center of Town And Bred
and Cake Production Sell Center Establishing by Four Direction and, Distribution bread Production to Rural and
Surrounding District Area By Four Direction.

Mob. No. 09

B.PROPOSED PROJECT ADDRESS :-

Address:-Country Ethiopia

Region: - Oromiya ZONE: - JIMMA CITY

BACHO BORE KEBLE

Mob. No. 09

2.3 .APPLICANT MARRIAGE CONDITION .

He was married

2.4 .PROJECT TYPE

Project Type: - BONA MOKONIN BAKERY CAKE AND BREAD PRODUCTION MACHINE

This profile envisages the business operation of a medium level plant for the production of Bread
and Cake with a capacity of 31,160 tons per annum.

Despite the advent of fully automatic and semi-automatic bread as well as Cake making plants
will be established.

2.5. TYPE OF ORGANIZATION

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 This Organization i.e. BONA MOKONIN BAKERY CAKE AND BREAD PRODUCTION
FACTORY is a private trade organization newly established.

2.6 . PROJECT DESCRIPTION AND APPLICATION

BREADS: - Popular types of loaf bread include white, whole wheat, whole grain, pumpernickel
and rye, potato, sourdough, and artisan..

CAKES: - The cake category includes any full-sized, multiple-serving cakes. Ingredients
include flour, butter or other shortening, eggs, and sugar and/or other sweetener.
However, keeping in view the market demand and characteristics “All-purpose flour” is
recommended to be the final product of the proposed prefeasibility.

All-Purpose Flour is white flour, milled from hard wheat or a blend of hard and soft wheat. It
gives the best results for many kinds of products, including some yeast breads, quick breads,
cakes, cookies, pastries and noodles etc. All-purpose flour is usually enriched having protein
varies from 8 to 11 percent.

The main feature of the project would include hygienically produced bread and cake processed

according to international quality and standards.

2.7 . BUSINESS OBJECTIVES FOR A BAKERY

Bakeries sell perishable comfort food -- sweet and tempting offerings that appeal to a broad
target market. Bakery products are also extremely perishable; many customers have grown to
expect bakery businesses to offer product that is baked fresh daily, making it challenging to
meet demand without wasting inventory. Business objectives for a bakery should include
building a broad and committed customer base and developing a business model that brings in
enough income to cover your expenses despite a potentially high level of waste.

2.7.1 BREAD AND CAKE MAKING PROCESS AND PROCESSED

PRODUCTION SUPPLY

1. PRODUCTION PROCESS
The proposed project will be using foreign machinery or 2nd hand imported machinery available
locally. Local machinery and installations are quite competitive in price in comparison to the

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 foreign equipment and installations. Additionally, it is linked with the viability of the project as
the foreign new machinery and installation would not be feasible due to the high costs involved.

2. MANUFACTURING PROCESS OF BAKERY

a) Bread:- Sifting of flour Preparation of suspension Preparation of dough by kneading
all the ingredients Fermentation of dough Baking Cooling and packing

The Process Flow Chart is as under:

Flour Sifting

Dough Preparation

Fermentation

Baking

Cooling and Packing

b) Cake - cake is mixing of ingredients except flour in required proportion in paste
form. Preparation of dough by mixing with flour. Placing dough in biscuit molding
and cutting machine Baking Cooling & packing

The major raw material required is flour. Ideally, the unit can enter into a long term supply
arrangement with an established flour mill to ensure adequate and timely supply. Other items
like yeast, sugar, ghee, milk powder, salt, edible color and flavors shall be available from nearby
trading centers. Since their requirement will not be substantial, supplies can be easily tied up.

The long-term goal of the project is become the best choice in JIMMA CITY and its surrounding
areas as well as foreigner by creating a differentiated experience capitalizing on personal service.
The proposed project will have a total area of 600m2, designed to reader a modern BAKERY
CAKE AND BREAD PRODUCTION FACTORY business, which will in turn plays significant
role towards solving shortage of CAKE AND BREAD PRODUCTION in Genet town.

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 The historical nature of the town as business unique location in one of the most attractive parts of
the occurrence of the town along the along the Ethiopian South West laid a fertile ground for
future promising growth of the town.

2.8. PROJECT PREVIOUS ACTIVITY

The project is a newly plan to establishing.

2.9 APPLICANT LOAN HISTORY AND EXISTING SITUATION

Mr. BONA MOKONIN Owner of BONA MOKONIN Bakery Cake and Bread Production
Factory involved on different business activities, and has well experienced and profitable. Within
his trade activities he didn’t take any bank loan from any bank. All in his entire financial source
at previous time from his account deposited. Therefore, the existing situation of project owner is
free from any debit.

2.10. REQUESTING LOAN OBJECTIVE AND ITS AMOUNT

The main objective of requesting lease finance loan is to purchasing machinery and equipment’s,
and generators which are utilized for BONA MOKONIN BAKERY CAKE AND BREAD
PRODUCTION FACTORY

The amount of loan Requesting by project owner is from total investment cost birr
5,298,973.00million; from this total project cost 20% or birr 1,059,794.6 million equity of
covered by project owner and 80% or birr 4,239,178.4 according regulation of Ethiopian
development bank of Jimma branch.

Therefore, the amount of Loan Requesting by project owner is 4,239,178.4 with service charge
11.5% rate.

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 3. MARKETING PLAN
3.1. Market Situation
The proposed project is capable of manufacturing complete range of bakery and other allied
products to meet the demand of domestic market. The Unit will work on 8 hours shift for 300
days. Based on market study, the market share of the envisaged plant for bread bakery for the
year 2024 will be about 28044 tone bread, and the market share of cake for the same year will be
3116 tone.
=One tone=1000kg=1kg=1000grm =the average piece of Bread supply to the market 120gram
and Cake 60grm
=sell price of 120gram and Cake 60grm will be 20birr and 15birr respectively.
Considering the market potential, and the gradual expansion of production capacity, the
envisaged plant in the first year will have an annual capacity of 21,033tone BREAD and 2,337
tone of CAKE. The plant will operate single shift of 8 hours a day, and for 300 days a year.
The demand for bread and cake is met through both local production and imports.

The proposed project presents an investment opportunity in setting up a Bakery &

Confectionery Major products in this case would be cakes, and bread and general items.

In order to attract a cross section of population, a combination of 4 outlets, two in a town area
and two in a rural area, is used in this study along with 27% sales to other bakeries at trade
discount of 15 %.

This combination can however, vary according to the final site selection and amount of
investment being incurred by individual investor. Although for this particular project study only
Bakery & Confectionery items along with general items are included, however, bread production
unit covering bread, bun, and rusk and allied items is not incorporated in this study. The reason
being that bread production unit in itself is a complete unit and requires heavy investment.

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 Almost all the Bakers & Confectioners purchase bread items from specialized bread-
manufacturing units.

3.2. PRODUCTION PROGRAMMED

The envisaged plant will require few years to penetrate into the market of the bakery sector. For
this reason, it is assumed that the plant will start production at 75% and 85% of its rated capacity
in the first and second year of production, respectively.
Starting from the third year, full capacity production 3,11 tons (3,110,000 Loaves of Bread and
Cake)from this mount 90% (280 tone)or 2,799,000 Loaves of Bread and 10% (31 tone) or
311,000 Loaves of cake production respectively shall be attained. The proposed production
programmed is indicated in Table 3.4

Table 3.4 .PRODUCTION PROGRAMME

Year Capacity Utilization (%) Production (TONE) 210330

BREAD(280 tone) CAKE(31 tone)
1 75 210 23
2 85 238.4 26
3-5 100 280 31

3.3 PROJECT CAPACITY AND RATIONALE PROJECT

The proposed bakery outlet will be working from 6.00-am morning to 12.00 midnight. These
outlets determine the factory timing for production. It is proposed that 2 shifts are necessary for
production. The interesting fact is that these two shifts include only 3 or 4 pure working hours.
Main plant & machinery includes oven in which different items are baked with different
temperatures and different baking timings. Industrial ovens are easily available in market.

3.4 PROJECT CAPITAL

Total cost of the project worked out is in the table below:

Table 3-1 Project Costs

Capital Investment cost birr. 4,239,178.4

Working Capital Requirement birr. 1,059,794.6

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 Total Investment birr. 5,298,973.00

The proposed pre-feasibility is based on the assumption of 80% debt. However this
composition of debt can be changed as per the requirement of the investor.

Table 3-2 Project Financing

Debt 80% Birr. 4,239,178.4

Total Project capital Investment cost Birr 5,298,973.00

Table 3-3 Viability

IRR 16%

NPV 20%

Pay Back Period (years.) 5

3.5 PROPOSED PRODUCT MIX

This pre-feasibility is developed for a project based on a production plant along with 2
outlets and outside sales with a mix of city areas. Selection and number of outlets would
totally depend upon the mix of target population. In this project it is assumed that 30% sales
will be consisting of general items but this combination would be different in different
outlets and according to consumer behaviors.

3.6 PROPOSED BUSINESS LEGAL STATUS

A bakery business can be started as a sole private business and even it can be registered
under private business law with Securities and Exchange Commission of Ethiopia. Although
selection totally depends upon the choice of the entrepreneur but this feasibility is based on a
private business.

3.7FINANCIAL SUMMARY
The financial cost of the project can be summarized as under:

Table 3-4 Financial Summaries

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 Debt Equity Split 20%

Projected Life 10 years

Repayment of short term loan 5 years

Grace period for short term loan 1 year

Mark up rate for short term loan 20%

3.6 STRATEGIC RECOMMENDATIONS

3.6.1 MARKETING
Marketing and branding of Bakery & Confectionery will play a key role in the mobilization
of targeted number of customers. Major marketing options include, site advertisement, cable
ads and handbills among other traditional marketing channels. Before launch of the project,
it is recommended that a research for understanding the dynamics of the targeted market
should also be carried out, to design the products as well as the promotional strategy. The
basic principle of marketing is to sell the right product, at the right price and promote it in
the right place to the right people.

3.6.2 PRICING
The following factors determine the price of the product:

 Positioning of the product

 Cost of developing and manufacturing the product.

 Cost of competitive products.

 Condition of the economy.

3.6.3 NEW PRODUCTS DEVELOPMENT

Food manufacturers develop new products to maintain and improve their market position.
New products can include:

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  New varieties and flavors - these are called “line extensions” where different varieties or
flavors of the same product are produced.

 Quality improvement of an existing product, either functional or nutritional.

 Copying a competitor's product.

 Developing a new, innovative product resulting from new ingredients, new packaging.

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 V. MATERIALS AND INPUTS
4.1. RAW MATERIALS
As the proposed bakery is going to offer a variety of products, a number of ingredients will be
used for factory bakery items. Types of ingredients for basic items utilized are listed below:

Table 4-3 Plain Cakes=Birr 625,000.00

Ingredients Unit Cost (birr./kg.) Plan of Plain Plan of Plain Cakes

measurements Cakes Ingredients Ingredients total cost in
needs for birr
proposed project
in kg

Butter kg 170 613 104166.70

Sugar kg 34 3064 104166.70

Maida kg 15 6944 104166.70

Baking powder kg 52 2003 104166.70

Eggs pc 2 52083 104166.70

Flavour ltrs 405 257 104166.70

TOTAL 625,000.00

Table 4-6 Bread

Ingredients Unit measurements Cost (birr./kg.) Plan of Plain Cakes Plan of Plain Cakes Ingredients
Ingredients needs for total cost in birr
proposed project in kg

Maida kg 14 255 3571.00

Oil LT 90 3333 300,000.00

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Yeast kg 250 14.30 3571.00

Sugar kg 19 15790 300,000.00

Salt KG 8 446.38 3571.00

Chicken KG 120 30 3571.00

Onion KG 11 325 3571.00

Masala KG 40 89 3571.00

Cheese KG 155 23 3571.00

Mayonnaise & KG 93 – 53 38-67 3571.00

Ketchup

Mix Vegetable KG 25 143 3571.00

TOTAL 625,000.00

Due to a large range of products offered on the proposed bakery, it is not possible to list down the costing
of each and every item. An approximate percentage is used for different items which are as under:

Table 5-7 Raw Material Pricing and OUT PUT PRICE

Raw materials pricing sales Price of out put

Purchase price of General Items 85% of sales price 15% of purchase price

4.2.UTILITIES
The major utilities required by the plant are electricity, water and lubricants. The estimated
annual requirement at full production capacity of the plant and the corresponding cost are given
in Table 4.2.

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 The total annual cost of utilities is estimated as Birr 638,600.

Table 4.2 ANNUAL UTILITIES REQUIREMENT& ESTIMATED COST

Sr. No. Description Unit of Qty. Unit Cost('000Birr)

Measure price
(Birr)

1. Electricity kWh 750,000 0.4736 355,200

2. Water m3 5,000 5.5 27,500

3. Oil and lubricants Kg 150 56.00 8,400

Total 391,100

Electricity requirement shall be 20 HP whereas per day water requirement would be 500 liters
for Bakery.

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 VI. TECHNOLOGY AND ENGINEERING
6.1 .MACHINERY AND EQUIPMENT
1. In the Short Term Plan (At Moment) Machinery and Equipment Needs For the Production of BONA
MOKONIN BAKERY CAKE AND BREAD PRODUCTION FACTORY Processing Industry.

Machinery and equipment required by the envisaged plant with in short term plan is given in Table 6.2.

The total machineries and equipment processing 4,100 tones of pure food complex annually to produce
3116 tons of flour, bread and cake are estimated at Birr 4,239,178.4.

Table 6.2 MACHINERY AND EQUIPMENT REQUIREMENT & COST

Sr. No. type Qty. Description Cost US $ Cost Birr

(No.)

1 CAKE MAKING 1 CE Layer Cake Machine, $5,000 260000

MACHINE Italian Bakery Machine

2 Machinery for bread 1 Automatic Italian bread $35,000 1820000

making tunnel oven bakery
machine

3 OFFICE Full set Equipped with Standard $1754 91208

FURNITURE furniture

4 LAND SCALE 1 New modern $1000 52000

5 NPR-ISUZU Which 1 2017 ISUZU NPR, This $19,997.5 569.928.75

has A mini VAN brand new 2017 Isuzu NPR
has 12000 GVWR and
comes equipped with a 16 ft.
Morgan dry van body..

6 GENERATOR $9,500 494,000,000

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 7 TOTAL $72,252 3,757,104.00

6.3. Working Capital Requirement

It is estimated that the total working capital required in the first year at 60% capacity utilization
shall be birr. 1,059,794.6 million Comprising of bank loan of birr. 1.42 birr and margin of
birr.0.62 laces as shown below:

Particulars Period Margin Total Bank Promoters

Stock of Raw ½ Month 30% 0.24 0.17 0.07

Materials

Receivables ½ Month 25% 1.65 1.25 0.40

Working
1 Month 100% 0.15 -- 0.15
Expenses

Total 2.04 1.42 0.62

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22
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24
 VII. HUMAN RESOURCE AND TRAINING REQUIREMENT
A. HUMAN RESOURCE REQUIREMENT
The Bread and cake PROCESSING production plant requires both production and
administrative manpower. The total manpower required is 60persons. From these 57 employees
permanent and 3 employees are daily laborer. A detail of manpower requirement and estimated
annual salary expenditure including fringe benefits is given on Table 7.1.

Table 7.1 MANPOWER REQUIREMENT AND ANNUAL SALARY EXPENDITURE

Sr.No. Description Req. No. Salary (Birr)

Monthly Annual

1 General Manager 1 2500 30000

2 Executive secretary 1 900 10800

3 Quality control head 1 1500 18000

4 Chemist 2 1200 28800

5 Production & technical head 1 2000 24000

6 Commercial head 1 1800 21600

7 Finance & administration head 1 1800 21600

8 Personnel 1 1100 12300

9 Store keeper 1 850 20400

10 Purchaser 1 800 9600

11 Salesperson 1 800 9600

12 Accountant 1 850 10200

13 Cashier 1 800 9600

14 Clerk 1 700 11400

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 15 Production shift leader 3 950 34200

16 Operator 10 800 96000

17 Labourer 3 400 57600

18 Janitors 3 700 25200

19 Mechanic 3 950 34200

20 Electrician 3 950 34200

21 Grease & oil man 1 400 4800

22 Driver 2 550 13200

23 Guard 4 500 24000

Sub-total 60 - 561,300

Employees benefit (25% BS) - 140,325

Grand Total 60 - 701,625

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 VIII. FINANCIAL ANALYSIS

The financial analysis of the Bread and Cake project is based on the data
presented in the previous chapters and the following assumptions:-

Business starting period 1month

Source of finance % 100 loan

Tax holidays 5 years

Bank service fee 20%

Discount cash flow 8.5%

Accounts receivable 30 days

Raw material local 30 days

Work in progress 5 days

Finished products 30 days

Cash in hand 5 days

Accounts payable 30 days

A.TOTAL INITIAL CAPITAL INVESTMENT COST

The total Capital investment cost of the project including working capital is
estimated at Birr. birr. 5,298,973.00 million which 80 per cent will be
Requesting bank LEASE FINNCE loan with interest 11.5% . The major
breakdown of the total initial investment cost is shown in Table 8.1.

B.PRODUCTION COST
The annual production cost at full operation capacity is estimated at Birr birr.
1,059,794.6 million (see Table 7.2). The material and utility cost accounts for

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 95.83 per cent, while repair and maintenance take 0.12 per cent of the
production cost.

Table 7.2 ANNUAL PRODUCTION COST AT FULL CAPACITY

Items Cost birr. %

Raw Material and Inputs 1012103.843 95.50

Utilities 8000 0.32

Maintenance and repair 3000 0.12

Labour direct 5750 0.23

Factory overheads 3000 0.12

Administration Costs 8750 0.35

Total Operating Costs 1024291.480 96.65

Depreciation 21,089.9 1.99

Cost of Finance 14413.21 1.36

Total Production Cost 1,059,794.6 100

C. INCOME STATEMENT
Projected Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7
Revenue and
Expenditure
REVENUE

Total Sales 12,812,4 14,093,640 15,503,004 17,053,304 18758634. 20634498. 20,371,048.

Revenue 00.00 .4 84 32 488

VAT 15% 1,921,86 2114046 2325450.6 2557995.6 2813795.2 3,273.458 3,600.804

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 0 6 3
Total 10890540 11979594 13,936.586 15,330.24 16,863.26 18,549.59 20,404.556
Growth 5 9 7
income
EXPENDIT
URE
Table 7.3.
Total PEROJECTED
4,603,35
Operation and
INCOME STATEMENT
4,603,35 4,603,35 4,603,3 (in 000
4,603,3 Birr)
4,603,3 4,603,35
production 1.49 1.49 1.49 51.49 51.49 51.49 1.49
cost Expense
Bank Loan 500,000.0 500,000. 500,000.00 500,000.0 500,000.0 500,000.0 500,000.00
with interest 0 00
FREE 0 0 0
Payments
Profit before 1,783,11 1961429. 5,860.726 7,254.38 8,787.41 10,473.7 12,328.69
7.84 58 5 0 37 6
Tax

Tax (30%) 534,935 1,378.129 1,758.218 2,176.31 2,636.22 3,142.12 3,698.609

.352 5 3 1
Net profit 670682.4 737750.73 811525.73 892678.2 981946.0 1080140. 11,630.08
88 8 8 38 62 6 7

Table 7.3. PEROJECTED INCOME STATEMENT (in 000 Birr)

TABLE 7.3.1 CASH FLOW STATEMENT (IN 000 BIRR)
OF CAKE AND BREAD PRODUCTION MACHINE
Year Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7

Cash
Received
Net 10890540 11979594 13,936.5 15,330.24 16,863.26 18,549.597 20,404.55
86 5 9 6
sale
Total 10890540 11979594 13,936.5 15,330.24 16,863.26 18,549.597 20,404.55
Cash in 86 5 9 6
flow
Expendit
ures
Total 9,107,4 9,107,4 9,107,4 9,107,4 9,107,4 9,107,42 9,107,4
Operation
and 22.16 22.16 22.16 22.16 22.16 2.16 22.16
productio
n cost
Expense
Bank 577,50 577,50 577,50 577,50 577,50 577,500 577,50
Loan
with 0.00 0.00 0.00 0.00 0.00 .00 0.00

29
 interest
Payment
s

Total 8,075.86 8,075.86 8,075.8 8,075.86 8,075.86 8,075.86 8,075.86

6
payme
nt
Net Cash 3441.98 4593.764 5860.726 7254.385 8787.409 10473.737 12328.696
Flow
Cumul 23,035.68 25,339.25 27,873.1 30,660.49 33,726.54 37,099.19 40,809.11
7
ative
cash
flow

BONA MOKONIN BEKARY FACTORY

Income Statement
For the One Month Ending SEPTEMBER 07, 2022

Current Month
This Year
Revenues
7,604,933.
BREAD SALES INCOME 47
1,000,000.
CAKE SALES INCOME 00
4,000,000.
BUSICUIT SALES INCOME 00

REJECTED OUT PUT -

SOFIT BREAD
12,604,933.
Total Revenues 47

Cost of Sales

BEGNING INVENTORY 2011 -

ADD PURCHASE FOR THE YEAR
2012 6,934,378.00

BREAD AVAILABLE FOR SALE 6,934,378.00

LESS ENDING INVENTORY -

6,934,378.
COST OF GOODS SOLD 00
WAGE EXPENSE 701,625

30
 PACKING MATERIALS EXPENSE -

COMISSION EXPENSE -
40,486.
ECX EXPENSE 74

-
7,676,489.
Total Cost of Sales 74

4,928,443.
Gross Profit 73

Expenses

SALARY EXPENSE -
82,425.
TRANSPORT EXPENSE 00
10,230.
LOADING & UNLOADING 00

MANUCIPALITY TAX EXPENSE -

MEZO PLUMP EXPENSE -

MAINTENANCE EXPENSE -

MANUCIPALITY EXPENSE -

MEZO SERVICE EXPENSE -

SPORT CONT EXPENSE -

INTEREST EXPENSE -

OTHER EXPENSE -
92,655.
Total Expenses 00
4,835,788.
Net Income 73
1,674,526.
INCOME TAX 06

NET INCOME AFTER TAX 3,161,262.67

WHT 2% 152,098.67

NET TAX PAYABLE/REFUNF/ 1,522,427.39

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 BONA MOKONIN BEKARY FACTORY
Balance Sheet
SEPTEMBER 07, 2021

ASSETS

Current Assets
CASH ON HAND
CASH OPN HAND 5000,000.00
WITHHOLDING TAX 2 % 267,329.18
VAT TAX TAX 15% 10,638.49

277,96
Total Current Assets 7.67

Property and Equipment 4,000,000.00

Total Property and Equipment -

Other Assets 4,000,000.00

Total Other Assets -

277,96
Total Assets 7.67

LIABILITIES AND CAPITAL

Current Liabilities
PROFIT TAX PAYABLE 1,674,526.06
1,674,52
Total Current Liabilities 6.06

Long-Term Liabilities

Total Long-Term Liabilities -

1,674,52
Total Liabilities 6.06

Capital

32
 OWNERS REJISTERED
CAPITAL 200,000.00
RETAINED EARNING (4,757,821.06)
Net Income 3,161,262.67

(1,396,558
Total Capital .39)

277,96
Total Liabilities & Capital 7.67

7.2. FINANCIAL EVALUATION

1. PROFITABILITY
According to the projected income statement, the project will start generating profit in the first year of
operation. Important ratios such as profit to total sales, net profit to equity (Return on equity) and net
profit plus interest on total investment (return on total investment) show an increasing trend during the
life-time of the project. The income statement and the other indicators of profitability show that the
project is viable.

2. BREAK-EVEN ANALYSIS
The break-even point of the project including cost of finance when it starts to operate at full capacity
(year 3) is estimated by using income statement projection.

BE = Fixed Cost = 30% Sales – Variable Cost

3. PAY BACK PERIOD

The investment cost and income statement projection are used to project the pay-back period. The
project’s initial investment will be fully recovered within 5 years.

4. INTERNAL RATE OF RETURN AND NET PRESENT VALUE

Based on the cash flow statement, the calculated IRR of the project is 18 % and the net present value at
8.5% discount rate is Birr 30.31 million.

5. ECONOMIC BENEFITS

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 The project can create employment for 60 persons. In addition to supply of the domestic needs, the
project will generate Birr 8.38 million in terms of tax revenue. The establishment of such factory will
have a foreign exchange saving effect to the country by substituting the current imports.

8. CONCLUSION & RECOMENDATION

Project owner establishing BONA MOKONIN Factory Cake and Bread Production Fctory plant
soon. There are numerous indicators for the success and effectiveness of Proposed project which
include the following:

1 Products range selection and introduction of sitting areas, Quality and Innovation in
products ,Selection of location, Pricing strategy, Understanding of target customers, alternative
availability (product differentiation), Launching time, Hygienic conditions and The project owners are
well experience in the business activity and participate on different investment activity play great role in
the implementation of a project.

The existing promising investment opportunities, the demands of BONA MOKONIN

BEKARY FACTORY CAKE AND BREAD PRODUCTION FACTORY needs along with

34
 relatively sound investment support made by the government in such kinds of feasible projects,
compelled the project promoter to initiate the a proposed oriented business project to be
established. Despite the promising business opportunities of the town, the trend on such kinds of
investment found to minimal. Since there is no such kind of modern manufacturing business
stations in the town to accommodate the existing demand of these PRODUCTION in the town
and the surrounding areas. The mismatch between the demand for and supply of such kind of:
CAKE AND BREAD PRODUCTION PROCESSING PLANT in easily observed in the town.

Therefore, the existing shortage or absence in the supply of these : CAKE AND BREAD
PRODUCTION PROCESSING PLANT production, along with its commercial and
administrative access, better location and infrastructure access, escalating trend of urbanization
and business activities, thus it is with such reason that this project is identified and proposed and
assumed to be more profitable.

In general, the country’s decentralized state based economy, privatized and free market
economy; good governance creates a favorable environment for the development of investment
for private investors. Considering the positive socio-economic and environmental benefits to
accrue as a result of the development, and Project study having found no major impacts to arise
from the development, it is our recommendation that the project be allowed to proceed on the
understanding that based on project owner application to get lease machines finance service
from JIMMA BRANCH DEVELOPMENT BANK is more profit since the proposed project is
feasible.
To sum up, the DEVELOPMENT BANK clearly it need understand the establishing of the
proposed development goes a best alternative way in solving part of the huge problem of
affordable output to commercial and households of the city, the region and at national level as
well as at international market. As a result we recommended that giving LOAN to project owner
is feasible in order to get more profit since the proposed project is feasible.

35