Project Proposal for Recreation Central

PROJECT TO BE IMPLEMENTED IN AMBO TOWN,

WEST SHEWA ZONE, OROMIA REGION

PROMOTER’S: - SD MEMORIAL RECREATION CENTER PLC

July, 2021
FINFINE, ETHIOPIA

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 Project Proposal for Recreation Central

Contents
I. Executive Summary……………………………………………………………………….2
1. Introduction………………………………………………………………………………...3
1.1 Background……………………………………………………………………………….3
1.2. Description Of The Project Area………………………………………………………...4
1.3. The Project……………………………………………………………………………….5
2. Market Study…………………………………………………………………………….6
2.1 Supply and Demand Model Of Tourism………………………………………………....7
2.2. Hotel and Tourism Industry Development In Ethiopia……………………………….....9
2.3. Hotel and Tourism Practice....................................................................................................9
3. Organization and Management………………………………………………………...11
3.1 Organizational Structure………………………………………………………………..11
3.2 Management…………………………………………………………………………….11
3.3 Manpower Requirement………………………………………………………………...11
4. Financial Study………………………………………………………………………….12
4.1 Fixed Cost………………………………………………………………………………13
4.2. Working Capital .............................................................................................................15
4.3 Summary of Working Capital…………………………………………………………..17
4.4. Source of Finance……………………………………………………………………....17
4.5. Loan Repayment Schedule……………………………………………………………..17
5. Revenue Projection……………………………………………………….…………..…18
6. Technical Analysis……………………………………………………………………….19
6.1 Income/Loss Statement……………………………………………………………….…19
6.2. Profitability……………………………………………………………………………...20
6.3. Income Statement……………………………………………………………………….20
6.4. Birr Computation………………………………………………………………………..20
6.5. Socio Economic Benefits……………………………………………………………..…20
6.6. Environmental Impact Assessment…………………………………………………..….20
6.7 Future Development……………………………………………………………………...20
6.8 Implementation Schedule………………………………………………………………...21
6.9. Conclusion……………………………………………………………….…………..…..21
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I. Executive Summary
1 Project Name Recreation Central

2 Project Owner SD MEMORIAL RECREATION CENTER PLC

3. Status New

4 History of the This investors are a farmers background but this time upgrading to
owners investor’s

5 Nationality Ethiopian

6 Project location West shoa Zone, Ambo Town

7 Premises 5,000 M2
Required

8 Startup Capital Br. 23,000,000 from this amount 30% (6,900,000) is from the
owner’s equity and 70 % (16,100,000) from bank loan.
9 Employment Total Employment job Opportunity Created 83
Opportunity On Permanent Basic :- 33 employment
On Temporary Basic :- 50 employment

10 For The region/ Provide quality lodge service at fair price, add value to the
country economy, Source of revenue, employment opportunity, save
foreign currency, benefit for the local community, stimulate the
local economy and transfer technology

11 Profitability Based on the 10 years financial projections using the income

statement, cash flow statement and financial internal rate of return
(BIRR) the financial projection is visible which generates profit of
birr 4,900,000 /year when it operates at full capacity

12 Project  Cafeterias
Accommodation  Restaurant
(Element)  Hotel
 Recreation Rooms

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 Bed Room
 Guest House
 Super Market
 Commercials Room and Bank
 Office Rooms
 Raw Material Stores
 Games Rooms
 Well-designed basement Parking lot and Walkway
 Show Room and Green area
 Fuel station and car service

1. Introduction

Ethiopia is truly a land of contrasts and extremes; a land of remote and wild places. Some of the
highest and most stunning places on the African continent are found here, such as in the South
West shewa zone Awash malka kunture homo iraketis and the jaggedly carved Semien
Mountains, one of UNESCO's World Heritage Sites, Sofumar cave and some of the lowest, , such
as the hot but fascinating Danakil Depression, with its sulphur fumaroles and lunar-like landscape.
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Ethiopia is old; old beyond all imaginations. As Abyssinia, its culture and traditions date back
over 3,000 years. And far earlier than that lived "Lucy" or Dinknesh, meaning 'thou art
wonderful', as she is known to the Ethiopians, whose remains were found in a corner of this
country of mystery and contrasts.

Many people visit Ethiopia in general and awash malka kunture cave specifically or hope to do so
one day - because of the remarkable manner in which ancient historical traditions have been
preserved. In no other country is it possible to find you so dramatically transported back in time or
to participate with such freedom in the sacred rituals of an archaic faith.

Tourism in accounted for 5.5% of the country's (GDP) in 2006, having barely increased 2% over
the previous year. The government is proving its commitment and willingness to develop tourism
through a number of initiatives. Tourism is a featured component of Ethiopia which aims to
combat poverty and encourage economic development.

1.1 Background
In order to encourage private investment and to attract capacity, technology and knowhow the
country a comprehensive package of incentive is granted to investor by the investment
proclamation. These include; hundred percent exemptions from payment of import customs duties
levied on imported capital goods such as machinery and equipment’s as well as spare-parts up to
15% value of capital, exemption from income tax payment for initial years of operation,
depending on the type and location of investment to be undertaken, raw materials necessary for
the production of goods destined for export markets are also exempted from the payment of
import taxes; and domestic products destined for export market are exempted from the payment of
export tax, as well.

Therefore, considering effective free market economic policy of the existing government and
broad opportunities on tourism industry, enabling policy environment, attractive financial and
economic benefits the project to attract tourists and contribute to the tourism industry especially
using awash malka kunture cave, which is the historical place in Ethiopia it is 28 kilometers far
from addis Ababa long; sources claim it is the longest system of caves in Africa and ranks as the
306th longest in the World.

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The promoter of this project, SD MEMORIAL RECREATION CENTER PLC has intended to
invest on one star lodge project on 5,000 M2 of land to be implemented in Ambo town, Special
zone of Oromia regional state and the promoter has made the necessary preparation hoping that
all the concerned offices & financial institutions should give their support to facilitate the
implementation of this plan.

1.2. Description of the Project Area

1.2.1 Location

The project is to be located in Ambo town, west Zone, Oromia National Regional State. Ambo the
administrative center of Special zone is situated at about 130 kms away from Addis Ababa. The
project site is located at about some kms on the away and it is accessible all year round with all
types of motor vehicles. The area is conducive social and investment situations, ease of future
development and increase number of private investments in the area are some of the reasons
behind selecting the area for the proposed project.

Ambo (Oromo: Amboo) is famed as a spa town.[1] Located in the West Shewa Zone of the
Oromia Region, west of Addis Ababa, this town has a latitude and longitude of 8°59′N 37°51′E and
an elevation of 2101 meters.

Ambo is known for its mineral water, which is bottled outside of town; it is reportedly the most
popular brand in Ethiopia.[2] Nearby attractions include Mount Wenchi to the south with its
crater lake, and the Guder and Huluka Falls. Ambo is also the location of a research station of the
Ethiopian Institute of Agricultural Research; initiated in 1977, this station hosts research in
protecting major crops in Ethiopia.[3] The town's market day is Saturday.

After Lij Iyasu was captured, he was held for a while at Ambo, before being transferred to house
arrest at Fiche. In the early 1730s, Mahtama Selassie Walda Mesqal, who had studied agriculture
in France and Spain, started an agricultural station near the town.[5] By 1933, Ambo had started
to be a recreation place with the construction of some bath cabins with cisterns of concrete, and a
couple of European-type hotels, as well as simple villas for the Emperor and important persons.[6]

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By 1938, the Guida described improvements to Ambo which included a post office, telephone
service, a clinic for outpatients, restaurants, and a hotel under construction. Two Italian forts were
constructed, and in a cave the Italians had erected a monument for casualties of the Pusteria
Division. The approach to Ambo was still over an old bridge, and below it a natural bridge used
by caravans.

At least as early as 1955, there was a 170 kW hydro-electric power station in the town; by 1965
the installed electrical capacity was 210 kVA, with annual production of 132,000 kWh. In 1958
Ambo was one of 27 places in Ethiopia ranked as First Class Township. That same year, the
Ambo Agricultural School and Ambo Forestry School had 150 students. A light earth tremor
was felt in the evening of 23 January 1968; its epicenter was somewhere near Ambo but no
damage occurred.[6]

In the last weeks of the Ethiopian Civil War, military units of the Ethiopian People's
Revolutionary Democratic Front captured Ambo on 25 April 1991 from the disintegrating units
of the Derg.[7] This was part of their strategy to avoid a direct assault on the capital, Addis
Ababa, and instead surround the city and isolate it from the rest of the country.[8]

A prominent Oromo businessman, Daraaraa Kafani, was murdered in front of his home;
eyewitnesses said he was slain by a man wearing a military uniform. His funeral was attended by
thousands of Oromos in Ambo; police arrested more than 37 people, stating that they were
supporters of the Oromo Liberation Front (OLF) on 3 September. In the following February,
70-year-old Oromo elder Dandana Gurmu was arrested on the accusation that he was a supporter
of the OLF.[6]

On 24 April 2003, a Tigrayan student was shot and killed and two others injured in a clash
between Oromo and Tigrayan students at the Ambo Agricultural College. The killing was
believed to be retaliation for the severe beating of an Oromo student in Mek'ele in December
2002. By the year's end, five persons were in police custody awaiting trial

Table 1: Map of Oromia National Regional State west Zone Ambo town

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1.2.2 Physical and Natural Conditions

Oromia Special Zone Surrounding Finfinne is one of the zones of the Oromia Region in
Ethiopia. It was created at 2008 from former Burayu Special Zone and parts of Semien (North)
Shewa, Misraq (East) Shewa, Debub Mirab (Southwest) Shewa and Mirab (West) Shewa
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Zones. This zone is surrounding the capital of Ethiopia, Addis Ababa, which is called Finfinne
in the Oromo language. The main reason for creating this special zone was to ease the co-
operation and development of surrounding areas of Addis Ababa and to control the urban sprawl
of this city on the lands of Oromia. The administrative center of this zone is in Addis Ababa.

1.2.3 Population

Ambo town is the 2007 national census reported a total population for this woreda of 108,406, of
whom 54,186 were men and 54,220 were women; 865 or 0.8% of its population were urban
dwellers. The majority of the inhabitants said they practised Ethiopian Orthodox Christianity,
with 51.82% of the population reporting they observed this belief, while 32% of the population
practiced traditional religions, and 15.9% were Protestant.

Based on figures published by the Central Statistical Agency in 2005, this woreda has an
estimated total population of 260,193, of whom 131,922 are men and 128,271 are women; 70,675
or 27.16% of its population are urban dwellers, which is greater than the Zone average of 12.3%.
With an estimated area of 1,588.13 square kilometers, Ambo has an estimated population density
of 163.8 people per square kilometer, which is greater than the Zone average of 152.8.[5] The
1994 national census reported a total population for this woreda of 177,465, of whom 87,325 were
men and 90,140 women; 39,535 or 22.28% of its population were urban dwellers at the time. The
two largest ethnic groups reported in Ambo were the Oromo (92.58%), and the Amhara (5.76%);
all other ethnic groups made up 1.16% of the population. Oromiffa was spoken as a first language
by 90.92%, and 8.37% spoke Amharic; the remaining 0.81% spoke all other primary languages
reported. The majority of the inhabitants professed Ethiopian Orthodox Christianity, with
74.16% of the population reporting they practiced that belief, while 18.77% of the population said
they held traditional beliefs, and 6.07% were Protestant.

. 1.2.4 Economic Activities

Like that of other parts of the country the majority of the population of the district resides in rural
areas and gets their livelihood from agriculture. The economy of the people is depending on

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peasant agriculture i.e. crops farming and animal rearing. The town dwellers, however, engaged in
different commercial activities like Foreign and local tourists & visitors

1.3. The Project

1.3.1 Project Description

In view of the country’s development strategy, the project has a paramount importance of
contributing to the giving service of tourism industry and generates foreign currency earnings for
the country. With favorable climate, abundant labor, vast land and water resources, most regions
of the country are suitable for the tourism industry service. bake town is a homeland for different
types of plant species due to wide agro ecological zones that are found in different woredas of the
zone and popular bake cave that attract tourists to visit from abroad and from different parts of
the country.

1.3.2. Objectives

The main objective of the project is aimed at to maximize the return on invested capital in the
form of profit for the promoter. However, its implementation will benefit the employee, the
consumer society and the government at different levels. In this respect the project is aimed to
promote the following objectives:-
 To maximize the return on invested capital through modern Tourism industry service
 To raise the significance and importance of the sector and thereby raising its contribution
to the national economic development,
 By raising the quality and services of tourism industry, in order to generate and save
foreign currency, which is badly needed by the national economy,
 Serve as a demonstration for the surrounding vast tourism industry population with respect
to modern tourism industry technology,
 Effectively use local inputs and strengthening the linkage between tourism industry and
other sectors of the economy,
 To provide gainful employment to a large segment of the population of the project area
and augment earning capacity at the grassroots level,

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 Increase government revenue through the different forms of taxes, which in turn used to
facilitate social and economic development.
 In general, the project is believed to have significant social and economic benefits that
accrue to the society, the region and the country beyond the financial returns to its owner.
1.3.3. Land Use Plan
No Types of Land Use Proposed land size (m2)
1 Main lodge building 2,000
2 Parking, Loading/ unloading area 200
3 Storage for lodge services 100
4 Cozy conference hall 100
5 Generator room 30
6 Incinerator 20
7 Guard/Janitor room 20
8 Green area and recreation area 2,500
9 Residents house 30
  Total 5,000 M2

2. Market Study
The country’s development policy encourages and supports forward and backward linkages
between tourism industry foreign and inland service economy. Thus the government agencies and
embassies have been working hard on opening up markets and facilitate business linkage in the
tourism service of import tourists and sale services In view of this, all the target products and
services are within the import the tourist’s priority of the country and should win the support of
the government. Thus the project will benefit much from such facilitated market linkage.
Tourist destinations include (including), and historic sites, such as the cities of and Developed in
the 1960s, tourism declined greatly during the later 1970s and the 1980s under the. Recovery
began in the 1990s, but growth has been constrained by the lack of suitable hotels and other
infrastructure, despite a boom in construction of small and medium-sized hotels and restaurants,
and by the effects of drought and political instability.

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One encouraging aspect is the growing popularity of with significant potential for growth in
Ethiopia. Travel retail sales are expected to continue to grow, posting an increase of 7% in 2006
and with a forecast 5% increase in 2007. Sales are driven primarily by expanding interest in
ecotourism packages, including and walking safaris that are making up much of the tour operators'
revenues.

2.1 Supply and Demand Model of Tourism

There are relatively few theoretical studies of tourism economics and no unifying conceptual
framework. Some early perspectives are reflected in Quandt (1970) and Gray (1970). Sinclair and
Stabler (1997), and Mak (2004) provide more recent textbook overviews of tourism theory. In
addition, a few researchers have begun to develop optimization-based models of some aspects of
the tourism industry (Copeland (1989, 1 990); Morely (1992); and Taylor (1995)). While
theoretical work is relatively spa rse, there exists a well-defined empirical literature, primarily
focused on estimating the de mand for tourism services. This literature informs the specification
of our Hawaii Tourism Mode l (HTM)
2.1.1 Tourism Demand
Empirical models of tourism demand borrow heavily from consumer theory (Varian, 1992) which
predicts that the optimal consumption level depends on the consumer’s income, the price of the
good in quest ion, the prices of related goods (substitutes and complements), and other demand
shifters. Formally, the Marshalling demand for tourism product can be expressed as,
Proxies for the demand determinants vary considerably. Typical income measures include gross
domestic product, gross national product, national disposable income, personal income and
consumption expenditure, measured in either real, nominal l, aggregate, or per capita form,
depending on data availability and the nature of tourism demand being modeled. Several types of
prices appear in the demand specification. The first is the own price of tourism products, usually
approximated by the consumer price index in the destination market.

Second are measures of substitute prices. Because domestic travel may substitute for foreign
travel, aggregate prices in the country of origin are often included. At the same time, competition
among different overseas destinations may call for the inclusion of variables that represent the

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cost of substitute destinations. Exchange rate adjusted relative prices (real exchange rates) are
commonly used as proxies for both effects. Finally, transportation costs are sometimes included as
a separate factor in determining travel.

Many studies augment income and price variables with deterministic effect including time trends
to capture evolving consumer tastes; a constant term to account for “utility image” that does not
vary greatly with time; and dummies to account for various once-off events such as the Olympic
Games, large-scale fairs, foreign currency/travel restrictions and oil crises; seasonality; or changes
in data collection methods. These types of events, if otherwise neglected, might lead to bias in the
estimated parameters (Ana stasopoulos, 1984; Crouch et al., 1992; Kliman, 1981; Mak et al.,
1977).For our Hawaii tourism model (HTM), we use the number of visitor arrivals as the
dependent variable because high frequency expenditure data is not available for a sufficiently long
continuous time span. We seek to identify demand relationship for each of the two primary
Hawaii tourism markets, U.S. mainland and Japanese visitors. Tourists from these two markets
consistently account for over 85% of all visitors. To keep the model size manageable, we are
forced to choose only the principle determinants of tourism demand while leaving out influences
that are deemed less central to our analysis. In addition, some conceptually relevant factors are
excluded because of difficulty finding appropriate proxies.

The model includes five demand determinants: U.S. real personal income (yrus), U.S. consumer
price index (cpius), Japanese real personal income (yrjp), Japanese exchange rate adjustedCPI
(cpiEjp) and Hawaii average daily hotel room price). The variables used throughout the text are
described in Table 1. All series are season ally adjusted at quarterly frequency and expressed as
natural logarithms with the except ion of the occupancy rate expressed as a percentage

2.1.2. Tourism Supply

Both theoretical and empirical research on the supply of tourism services is scant (Crouch,
1994b). In much of the empirical tourism literature, supply is assumed to be perfectly elastic, and
parameters of demand relationships are estimated by Ordinary Least Squares (OLS). However, the
infinite elasticity assumption is a convenient simplification rather than a tested hypothesis. Fujii et

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al. (1985) estimate the supply elasticity of Hawaii lodging services to be close to two, and it is not
uncommon to observe sizable fluctuations in hotel room prices.
The treatment of supply relationships is therefore indispensable in deriving unbiased demand it is
rather difficult to give a precise definition of tourism supply considering the variety of products
tourists consume. In this paper, we focus on the supply of accommodations, in part because
lodging services represent the single largest component of visitor expenditures in Hawaii and
because it is possible to obtain reliable data on hotel room prices. Visitor accommodations are
non-storable in nature. A hotel room not rented on a given day is lost forever as a potential source
of revenue. As Fujii et al. (1985) have argued, this, together with heavy operating costs, results in
a strong incentive for pro fit maximizing suppliers to maintain high occupancy rates. In the short
run, this leads hoteliers to price discriminate and offer off-peak discounts to fill rooms. Over
longer horizons, capacity is adjusted through expansion and contraction of room inventory
2.2. Hotel and Tourism Industry Development in Ethiopia

The Hotel, Restaurant & Tourism Management program prepares students for employment in the
hospitality industry. Graduates are qualified for a variety of careers in the hospitality industry such
as front desk managers, hotel sales workers, food and beverage managers, and tour guides.

2.2.1. Upgrade and Modernization of Major Airports’ Infrastructure

Ethiopia is investing in the modernization and expansion of major airports in the country in a bid
to satisfy international standards, as well as provide world-class services for business and leisure
travellers. The largest project of all is at the Addis Ababa Bole International Airport, where the
runway is being expanded to handle larger aircraft. In addition, self-service check-in kiosks were
recently introduced to help simplify the check-in process for passengers and, thus, help ease
congestion during peak hours. Once upgrade work at Addis Ababa Bole International Airport is
completed in late 2020, the airport will boost the travel experience for customers as well as
strengthen Addis Ababa as a leading hub in Africa.

2.2.2. Promising future due to increasing demand for exotic destinations

There is a growing trend towards more exotic destinations, as many tourists are becoming more
adventurous and are looking for more off-beat and far-flung destinations. Ethiopia is considered

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an exotic holiday destination due to its magnificent scenery and cultural heritage, which will
continue to make the nation a beautiful and exotic destination for tourists. The country will benefit
in terms of increased arrivals over the forecast period as the increased demand for exotic travel
destinations.

2.3. Hotel and Tourism Practice

2.3.1. Participation in international tourism-and-trade fairs boosts arrivals

Ethiopia continued to record positive growth in tourist arrivals over the review period. The
country achieved larger tourist numbers in 2012 than in 2011 thanks to increased participation in
international travel and tourism exhibitions. Showcasing the nation’s tourism products globally
has enabled Ethiopia to promote its natural, cultural and historical attractions to the rest of the
world. This has helped the country to attract more international tourists and also generated more
travel and tourism revenue. Some of the notable international tourism and trade fairs Ethiopia has
participated in recent years include the ITB, International Tourismus-Börse Berlin, and the World
Travel Market in London, the Moscow International Tourism Fair and the Shanghai 2010 Expo.

2.3.2 Government embarks on measures to preserve tourist sites

Ethiopia has rich tourism assets. With its diverse tourist attractions, which include cultural,
historical and archaeological attractions, as well as a great variety of flora and fauna, the
government of Ethiopia has initiated a number of measures to preserve and develop tourist sites
throughout the country. Tourist infrastructures in various national parks have been upgraded,
while renovation work on roads linking the parks with major roads and lodges is being carried out.
Other measures include the protection of animals from illegal hunting in sanctuaries and parks, as
well as the conservation of heritage sites, nine of which are included on the UNESCO World
Heritage List. Through these activities, Ethiopia has seen an increase in the number of tourists
visiting its many attractions.

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2.3.4. Ethiopian Airlines a major driving force for travel and tourism growth

Ethiopian Airlines remains a key driving force for the sustainable development of travel and
tourism in Ethiopia. The national carrier continues to engage in several tourism activities to help
solve the problem of destination accessibility, which is a vital concern in emerging tourist
destinations. Apart from introducing new flights to major cities around the world, Africa’s most
profitable carrier also helps make it possible for Ethiopian tour operators to participate in different
international travel expos, to promote the attractions of the nation. It recently launched a
programmed to encourage tourism by partnering with journalists and tour operators to help
promote tourist attractions in Ethiopia. The airline also signed a Memorandum of Understanding
with a number of African countries, which resulted in a dynamic increase in tourist flows to and
from the region, as a result of promotion and advertising agreements.

3. Organization and Management

3.1 Organizational Structure

The project will have three main units, namely, production & technical unit, marketing unit and
administration and finance units under the office of the project manager. The main responsibility
of production and technical unit is for operational and technical aspects of production and
maintenance.

The marketing unit is responsible for procurement of inputs and sales activities. The admin and
finance unit is responsible for controlling and guiding personnel and for controlling and
maintaining all financial accounts.

The organization structure presented below is envisaged to have taken the activities of proposed
project, and the manpower requirement is determined based on this structure.

Project Owner
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G/Manager

Receptions

Service and technical Finance &

unit Marketing Administration Unit
Unit

3.2 Management

As to the management of the project is concerned the owner will be responsible for the overall
project planning, co-ordination and implementation. After project implementation the promoter
serves as a top management body and frequently visits and supervises the tourism industry (lodge)
site. SD MEMORIAL RECREATION CENTER PLC is a business man who has a long year
experience in managing business activities. Therefore, the extensive experience he has enables
him to organize and properly manage the envisaged tourism industry service development project.

3.3 Manpower Requirement

For smooth and efficient operation of the farm it has been anticipated that each units will have
adequate number of qualified and experienced manpower. The manpower component of the farm
will include Site-Project Manager, finance unit managers, Tour service experts, driver, waiters,
cookers, cleaners, guards and other admin stuffs. Tourism industry (lodge) and production is
manpower intensive and requires trained technical manpower for an effective production and
management.

The owner will hire qualified and experienced business management whose main responsibility is
to coordinate the overall activity of the project. The tourism industry (lodge) manager is
accountable for the owner. Likewise, each main unit will have their own managers that are

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accountable for the lodge manager. For the day-to-day activities the project will hire professional
and non professional employees.

The distinct units have their own operational teams under them. To fill in all these work units with
the required manpower the project needs 83 workers (33 on permanent and 50 on temporary
basis). For smooth operation of the project, employees will be given on job training, clear duties
and responsibilities under the direct supervision of their respective units. Detail is shown is
financial part of the document.

4. Financial Study
The main components of the project activities consist of land development, constriction of lodge,
bar and restaurant, Internet café, workers residents, stores, offices and equipments, procurement of
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vehicles etc. All these activities constitute fixed investment. Other components including
Generator, water pump and others, labour and material inputs, utilities and other costs of recurrent
activities constitute production cost of the project.
The total investment capital of the project is estimated at birr 23,000,000 of which birr
13,300,000.00 is for fixed investment items, while the remaining balance of birr 7,400,000.00
will be initial working capital, and contingency (lump sum) 10 % 2,300,000.00 The detail of
investment capital of the project and the others is owner equity 6,900,000.00 (30%) and bank
loan 16,100,000.00 (70%) given below:
Table 2: Summary of Total Project Capital
No Description Total Cost (Birr)

1 Fixed investment cost  

1.1 Building & construction 8,000,000.00
1.2 Machinery and equipment 2,600,000.00
1.3 Vehicles 1,700,000.00
1.4 Office furniture & equipment 1,000,000.00
  Total fixed costs 13,300,000.00
2 Annual working capital  
2.1 Raw material cost 3,300,000
2.2 Salary
2,595,200
2.3 Other operating expense 1,500,000
2.4 Pre-operating Expense 504,800
Total Operating Expense 7,400,000
Contingency 2,300,000
Total project capital 23,000,000.00

4.1 Fixed Cost

4.1.1 Building and Land Development

This include land clearing and leveling, access and internal roads and other constructions and the
total cost is about birr 8,000,000.00
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No Particulars Unit Size Unit cost Estimated total

required (Br.) cost (Br.)
1
Main lodge building M2
2,000 1,443 3,886,000
2
Parking, Loading/ unloading area M2
200 1,000 1,200,000
3
Storage for lodge services M2
100 1,000 100,000
4 Cozy conference hall
M2
100 1,000 100,000
5
Generator room M2
30 1,000 30,000
6
Incinerator M2
20 1,200 24,000
7
Guard/Janitor room M2
20 1,000 20,000
8
Green area and recreation area M2
1,500 1,000 2,500,000
9
Residents house M2
30 1,000 30,000
10
Fence M2
1 15,000 15,000
11
Deep well drilling L/S
1 25,000 25,000
12
Intra -road construction km
1 40,000 40,000
13
Power/water installation L/S
1 30,000 30,000
Total
    8,000,000

4.1.2 Machinery, Vehicles and Office Equipment and Furniture

The types of machinery and equipment, vehicles and office equipment required by the
envisaged tourism industry (recreation) service are listed in the following table that shows
total cost of about birr 3,195,000.00
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Unit cost Total cost

No Particulars Unit Qty (Br.) (Br.)
I Equipment and Machines        
1 Boiler Pcs 1 110,000.00 110,000.00
2 Assorted Kitchen utensils and -    
equipment 1,100,000.00
3 Beds and bed clothes Psc 10 10,000.00 100,000.00
4 Bar and restaurant furniture - 1 50,000.00 50,000.00
5 Bed room chairs (2 in each) Pcs 1 70,000.00 70,000.00
6 Bed room tables “ 10 40,000.00 400,000.00
7 Lobby equipment “     110,000.00
8 Bathing room, Jacuzzi and psc    
swimming pool equipment 100,000.00
9 Sauna, steam bathing and massage      
equipment, 120,000.00
10 First aid equipment       75,000.00
11 Generator (>200hp) " 1 75,000.00 75,000.00
12 Water pump(>120hp) " 1 50,000.00 50,000.00
13 Laundry machine set 1 90,000.00 90,000.00
14 Beauty salon equipment " 2 75,000.00 150,000.00
15 Mini Refrigerator " 5 3,000.00 15,000.00
16 Communication apparatus " 10 500 5,000.00
  Sub. Total “     2,600,000.00

II Vehicles and related machines        

1 Pick up pcs 1 1,200,000.00 1,200,000.00
2 Service midi bus for guests " 1 500,000.00 500,000.00
  Sub Total       1,700,000.00
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III Computers and Office furniture “ -  

1 Managerial chair with Tables 7,000 8
4,000
2 Secretarial chairs with table 3,500
8,400
3 Office chair with tables 15,000 6
4,800
4 Computer with its printer 5,000 14
4,000
5 Shelf 1,500 2
4,000
6 Telephone machine set 2,000 1
0,800
7 Filing Cabinets
9,600
8 Assembly chair and table 13
2,000
9 Decoration (Carpet & Curtain) 12
0,000
10 Other miscellaneous off 7
Equipment’s 2,000
11 Reserved
330,400
Total
1,000,000.00
  Grand Total       5,300,000.00

4.2. Working Capital

Working Capital of the project includes direct production and overhead costs. The major cost item
under this category includes cost of material and labour inputs, fuel and lubricants, repair and

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maintenance, employee salary and benefits, insurance, office supplies and other miscellaneous
expenses with the total cost of about birr 7,400,000.00

4.2.1 Raw Material Cost

No Descriptions Unit Qty Unit Total Cost
cost(Br.) (Br.)
1 Alcoholic beverages (whisky, brandy, jin and Lit
1,8
other drinks) 1,500.00
50 2,775,000.00
2 None alcoholic beverages(Water, soft drinks, “
1,8
juices etc 20
50 16,000.00
3 Ingredients for Hot beverages(milk, coffee, tea Cups
1,8
etc 12
50 48,000.00
4 Ingredients for Foods(cultural, fast and Dish
1,8
assorted) 60
50 300,000.00
5 Sanitary materials(soaps, shampoos, Ls
conditioners etc)    
200,000.00
Total
3,300,000.00

4.2.2 Salary Cost

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No Description of Required Level of Unit Req. Mont. Annual

manpower qualification education No sal(Br.) Salar.(Birr)
1 General Manager Management BA & above No 1 4,000.00 48,000.00
Hotel
2
Hotel manager management BA. “ 1 3,500.00 42,000.00
Hotel
3
Receptionist management Dip. “ 1 2,000.00 24,000.00
Admin.& Finance
4
head Management BA   1 3,000.00 36,000.00
Human resource Personnel
5
officer management Dip. :” 1 2,000.00 24,000.00
6 Accountant Accounting Dip. “ 1 2,500.00 30,000.00
7 Marketing manager Hotel Mngt BA “ 1 3,000.00 36,000.00
8 Cashier Accounting Dip. “ 1 1,500.00 18,000.00
9 Bar operators Catering Level III “ 5 1,200.00 72,000.00
10 Maintenance workers TVET Level III “ 3 1,500.00 54,000.00
11 Security workers Literate 8th “ 3 800 28,800.00
Logistic and
12
Procurement workers TVET Dip. “ 2 1,500.00 36,000.00
13 Store keeper TVET Level I “ 2 800.00 19,200.00
14 Cleaner Literate 4th “ 6 600.00 21,600.00
15 Driver Literate 8thand> “ 2 1,500.00 36,000.00
16 Health Professional Nursing/ HO Dip/Bsc “ 1 4,000.00 48,000.00
Laundry and salon
17
worker Literate 4th and > “ 1 1,800.00 21,600.00
18 Janitor Literate 10th 50 174,600 1,500,000
  Total       83   2,095,200

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4.2.3 Other Operating expense

Raw material purchase for Lodge service
No Description Costs per month Annual

1 Raw materials including, bread oil, meat ,egg, 275,000 3,300,000.00

vegetables fruit, soft drink,sugar,milk tea, coffee
and others

4.3 Summary of Working Capital

Years of Operations
Cost Component 1 2 3
Input expenses 2,380,000.00 2,499,000.00 2,623,950.00
Salary 972,000.00 1,020,600.00 1,071,630.00
Perdium(10% of Salary) 405,000.00 425,250.00 446,512.50
Property insurance (2% of FC) 369,250.00 387,712.50 407,098.13
Repair and maintenance (2% of FC) 369,250.00 387,712.50 407,098.13
Utilities 40,000.00 80,000.00 100,000.00
Stationery and postage 2,500.00 5,000.00 7,500.00
Audit and license 7,500.00 1,600.00 15,000.00
Uniform working clothes 15,000.00 20,000.00 30,000.00
Expenses on fuel and lubricant 30,000.00 50,000.00 100,000.00
Pension pay 97,225.00 150,000.00 150,000.00
Miscellaneous 1,600.00 500,000.00 800,000.00
Total 4,697,725.00 5,535,275.00 6,158,788.75

Note: Production costs are assumed to increase by 5% annually after the 2nd year.

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4.4. Source of Finance

S.N Description Rate(%) Total Capital(Birr)

1 Owner Equity 30% 6,900,000.00

2 Bank Loan 70% 16,100,000.00

  Total   23,000,000.00

4.5. Loan Repayment Schedule

Principal Total Annual

Year Interest (10%) Remaining Balance
Payment Payment
0 0 0 0 16,100,000
1 1,610,000 1,610,000 3,220,000 14,490,000

2 1,610,000 1,449,000 3,059,000 12,880,000

3 1,610,000 1,288,000 2,898,000 11,270,000

4 1,610,000 1,127,000 2,737,000 9,660,000

5 1,610,000 966,000 2,576,000 8,050,000

6 1,610,000 805,000 2,415,000 6,440,000

7 1,610,000 644,000 2,254,000 4,830,000

8 1,610,000 483,000 2,093,000 3,220,000

9 1,610,000 322,000 1,932,000 1,610,000

10 1,610,000 161,000 1,771,000 0

Revenue from sales (Br.)

Year
Selling
1 Year 2 Year 3-10 Year 1 Year 2 Year 3-10
price/U
S.N Description 50% 75% 100% 50% 75% 100% Total
nit
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 Project Proposal for Recreation Central

Selling
Revenue
Accommodations Price/uni
1 service             t(birr)
1. Deluxe/Suit/ rooms
(No) 10 12 15 1500 2,100,000.00 5,400,000.00 1,575.00 7,087,500.00
2.     Standard
rooms(No) 10 15 20 1,000 3,000,000.00 2,100,000.00 1,050.00 6,300,000.00
3.    Economic
  rooms(No) 15 20 25 500 2,250,000.00 3,000,000.00 105 3,937,500.00
17,325,000.0
  Sub total 35 47 60   9,750,000.00 12,900,000.00 - 0
2 Hotel services             - -
1. Alcoholic beverages
(lit/year) 600 800 1,000 2,000 1,200,000.00 1,600,000.00 2,100.00 2,100,000.00
2.  None alcoholic
beverages (lit/year) 8000 1,600 1200 50 400,000.00 500,000.00 10.5 63,000.00
3.  Hot
  beverages(lit/year) 10000 15,000 20.000 15 150,000.00 225,000.00 15.75 315,000.00
  4. Foods (Dish) 10000 15,000 20,000 80 800,000.00 1,200,000.00 84 1,680,000.00
  Sub Total         2,550,000.00 3,105,000.00 - 4,158,000.00
3 Other services             - -
1. Meeting services 6 9 12 3000 18,000.00 27,000.00
(occasion) 3,150.00 37,800.00
2. Weeding 12 18 20 2500 30,000.00 45,000.00
services(occasion) 2,625.00 63,000.00
Sub Total         48,000.00 72,000.00 - 100,800.00
21,583,800.0
  Total         12,348,000.00 16,497,000.00 - 0
5. Revenue Projection
Note:-300/year working days are predicted and unit selling price increase by 5% after 2 years

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 Project Proposal for Recreation Central

6. Technical Analysis
6.1 Income/Loss statement

Particulars Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10
Gross revenue

12,348,000.00 16,497,000.00 21,583,800.00 21,583,800.00 21,583,800.00 21,583,800.00 21,583,800.00 21,583,800.00 21,583,800.00 21,583,800.00

Less operating
costs
4,697,725.00 5,535,275.00 6,158,788.75 6,158,788.75 6,158,788.75 6,158,788.75 6,158,788.75 6,158,788.75 6,158,788.75 6,158,788.75
Operating
profit
7,650,275.00 10,961,725.00 15,425,011.25 15,425,011.25 15,425,011.25 15,425,011.25 15,425,011.25 15,425,011.25 15,425,011.25 15,425,011.25
Less
depreciation
1,418,750.00 1,418,750.00 1,418,750.00 1,418,750.00 1,418,750.00 1,418,750.00 1,418,750.00 1,418,750.00 1,418,750.00 1,418,750.00
Less bank
interest
1,670,215.75 1,503,194.18 1,336,172.60 1,169,151.03 1,002,129.45 835,107.88 668,086.30 501,064.73 334,043.15 167,021.58
Profit before
tax
4,561,309.25 8,039,780.82 12,670,088.65 12,837,110.22 13,004,131.80 13,171,153.37 13,338,174.95 13,505,196.10 13,672,218.10 13,839,239.67
Less profit tax
(30%)
1,368,392.78 2,411,934.25 3,801,026.60 3,851,133.07 3,901,239.54 3,951,346.01 4,001,410.49 4,051,558.96 4,101,665.43 4,151,771.90
Net Profit

3,192,916.48 5,627,846.57 8,869,062.06 8,985,977.15 9,102,892.26 9,219,807.36 9,336,722.47 9,453,637.56 9,570,510.67 9,687,467.77

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6.2. Profitability
The financial analysis of the envisaged project was carried out for the following ten years.
Based on the 10 years financial projections using the income statement, cash flow statement
and financial internal rate of return (FIRR) and the following results are obtained.

6.3. Income statement

According to the projected income statement the project will generate profit beginning from
the first year of operation. Based on the 10 years financial projections the project average
annual net profit after payment of bank interest, depreciation and tax amounts to birr
4,900,000 when it starts at full capacity after the 3rd year.

6.4. FIRR Computation

The computation of the project BIRR shows that the project will profitably generate
reasonable return on investment. Before tax financial internal rate of return is calculated to be
54.3%. This indicates the project is profitable and its implementation entails no financial
risks.
6.5. Socio Economic Benefits
The socio economic benefit of the project is also very high. The project will provide job
opportunity for 83 employees (33 permanent and 50 temporary), it produce Administrative
staff, waiters cookers and health officer and supply the market at competitive price, generate
foreign currency by promoting modern tourism industry ,generate revenue for the
government in form of taxes, facilitate the transfer of modern tourism industry

6.6. Environmental Impact Assessment

Currently the issue of environment and development has got a due emphasis and the
government has enshrined environmental policy within the constitution. In line with this
environmental policy, the envisaged project deemed to mitigate the different impacts that
may be caused by actions of the project. For additional impact prediction separate EIA is
produced and ratified by Oromia Rural Land and Environmental Protection Berau and
submitted to Oromia Investment Commission.

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6.7. Future development

Every business undertaking be it large or small should have future development plan. It is a
plain fact that business activities are undertook in a dynamic business nature and different
environment. Therefore, the promoter will have an expansion plan depending on the
condition of the business character.

6.8. Implementation Schedule

Description 2021
Q1 Q2 Q3 Q4
Building and Construction        
Procurement of Machineries and Construction        
Construction of lodge        
Operation of the lodge        

6.9. Conclusion
The Project is found to be operationally profitable & has significant socio-economic benefits.
According to the projected income statement, the envisaged project starts earning profit from the
first year of its service. The income statement and other profitability indicators show that the
project is viable. The project is believed to have significant social and economic benefits that
accrue to the society beyond those financial returns to its owner. The most remarkable social
benefits can be expressed in terms of job creation that leads to reduction in the level of
unemployment.

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The project directly employs 83 persons (33 permanent and 50 on temporary basis) get
employment opportunity. Any service and production process using relatively modern tourism
technology helps to advance technical awareness and skill development. The project contributes
to the overall tourism industry of the region and the country at large.

Therefore, considering the attractive financial and economic benefits the project is to
produce, the promoter has made the necessary preparation hoping that all the concerned
offices & financial institutions should give their support to facilitate the implementation of
this plan

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Project Proposal for Recreation Central

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