Professional Documents
Culture Documents
Abduselam Aliyi Project Proposal
Abduselam Aliyi Project Proposal
JANUARY, 2023
Table of Contents
Basic Information ......................................................................................................................... i
Abstract .......................................................................................................................................... ii
1. EXECUTIVE SUMMARY ............................................................................................... 1
2. INTRODUCTION ................................................................................................................ 4
3. The Project ...................................................................................................................... 8
3.4. Mission and goal ........................................................................................................................ 9
3.3.3 Topography ............................................................................................................................ 11
4. MARKET STUDY ............................................................................................................ 12
4.9 Stakeholder analysis .................................................................................................................. 21
5. TECHNICAL STUDY ..................................................................................................... 22
6. ORGANIZATIONS AND MANAGEMENT................................................................ 30
7. FINANCIAL STUDY ....................................................................................................... 31
8. SENSITIVITY ANALYSIS............................................................................................. 37
9. RISK ANALYSIS ............................................................................................................ 38
10. MONITORING AND EVALUATION............................................................................ 39
11. CONCLUSION AND RECOMMENDATION ............................................................ 39
APPENDIX1:- Machinery and equipment List With Costs ..................................................... 40
APPENDIX 2: - Stakeholder Analysis............................................................................................. 49
APPENDEX 3: - ORGANIZATIONAL STRUCTURE .................................................................. 50
APPENDIX 3:- MANPOWER REQUIREMENT ........................................................................... 51
APPENDIX 4:-IMPLEMENTATION PLAN (GANT CHART) ...................................................... 52
APPENDIX 7:- Table 7.10 Loan Repayment Schedule ....................................................... 53
APPENDIX 8:- Table 7.12 Summary of project Annual production costs ....................... 54
APPENDIX 9:- Projected Profit/loss statement........................................................................ 58
APPENDIX 10:- Projected cash flow ........................................................................................ 59
APPENDIX 11. BALANCE SHEET ......................................................................................... 60
APPENDIX 12:- Viability and other measurement ................................................................. 61
APPENDIX 13:- PROBLEM TREE................................................................................................ 62
APPENDIX14:- OBJECTIVE TREE .............................................................................................. 63
REFERENCES ............................................................................................................................... 64
1
Basic Information
Project Location:
Project capital: The total investment capital of the project is
Muhammed Aman)
project, out of which 125 permanent (100 skilled & 25 unskilled 8th
Land requirement: The total area of 5000 m2 of land is required for the
project
i
Abstract
The project feasibility study proposed on Al-lode international resort investments
has been promoted by Nabil Muhammed in Oromia region, west Arsi zone.
Ethiopia is a fast economic growing country and it is home to the African Union,
the UN Economic Commission for Africa, foreign missions, regional NGO’s and
the UN Conference Centre. Due to its regional political status Ethiopia is often
referred as the political capital of Africa. Al-lode International resort is high
class resort where services like standard bedroom, catering, conference hall, Spa
(Hot Spring), gymnasium, sauna and massage, other sports facilities like tennis
or squash court, min-golf or badminton, bowling, table tennis and children
playground, night club with dancing to live music or discotheque or cabaret etc.
The total investment capital of the project is estimated at birr 73,571,629 of which birr
47,797,310 (65%) is for fixed investment cost of which 65 % of the fixed cost is need foreign
currency while the remaining balance of birr 25,774,318 (35%) will be working capital. The
socio economic benefit of the project is also very high. The promoter, Nabil
Muhammed has a work experience in different business activities. During this
time, the promoter gained a vast knowledge and skill. With this reliable
experience, Nabil Muhammed knows how to manage and lead any organization to
profit and also know how to handle different challenges in the working environment.
The project will provide 125 permanent employs, Generate revenue to government
in the form of taxes. The Project is found to be operationally profitable, viable &
has significant socio-economic benefits. We recommended that according to this
attractive financial and economic benefit of the project all concerned offices &
financial institutions should give their support to facilitate the implementation of this
plan.
ii
1. EXECUTIVE SUMMARY
The demand and supply of hotels and its bed rooms service in Ethiopia
has high gab, the supply in Ethiopia has a quality 120 hotels and a total of
15000 bed rooms currently in the market, giving an average number of 125
rooms per hotel. Branded supply is very low; due to this demand and supply
analysis Nabil Muhammed wants to participate and minimizes the gab of
demand and supply standard hotel in Ethiopia.
In this profile study Al-lode international resort is considered to
following provides:-
10 King size luxury rooms, 30 standard double bed rooms and 50
single standard bed rooms totally 100 standard bed rooms
services
International and national restaurant service
Standard bar and cafeteria
1
Standard massage and sauna bathe service
Physical fitness room
Conference hole and others important needs
out for the following ten years. Based on the 10 years financial
obtained.
the project will generate profit beginning from the first year of
Cash flow statement: The cash flow statement also shows a substantial
amount of cash surplus right from the first year of project operation life.
The cash balance grows from birr 21,685,936 in the first year to
cumulative balance of birr,
2
384,396,352 during the 10th year of operation indicating the capacity
of the project to finance itself and generate cash surplus for further
investments.
FIRR Computation: The computation of the project FIRR shows that the
project will profitably generate reasonable return on investment. Before
tax financial internal rate of return is calculated to be 33.9%. This
indicates the project is financially viable with an internal rate of return
(IRR) of 33.9 % and net present value (NPV) 102.2 million at discount
rate 35 %.
Socio economic benefits: The socio economic benefit of the project is
also very high. The project will provide:- 125 permanent employs,
and economic benefit of the project all concerned offices & financial
of this plan.
3
2. INTRODUCTION
Ethiopia is now becoming more and more investment friendly country. The
Government is creating favorable condition that would highly encourage the
private Sector to be engaged in almost all areas of the economy. The
country with population of come 120 million offers significant domestic
market for locally produced goods and service the country is also a
m e m b e r o f t h e common Market for e a s t e r n and s o u t h e r n Africa
COMESA offering huge benefit of Exporting commodities in preferential
tariff rates to a wider regional market.
Privet investment s h o u l d be encouraged t o increase form year to year
and Investment constraints have to be alleviated in order to pave
development ways so that investment sector happens to be
determinant about factor of economic development of the country like
Ethiopia.
it is usually considered as the engine of the economy .both private
and government Bodies in many ways have commonly agreed this idea
.economic development in Any c a s e needs both efforts o f the privet as
well as the public sector. There are Investments that could not be
undertaken by privet s e c t o r due to its difficult nature I .e high initial
capital and long gestation period.
4
2.2. Hotel and Tourism sector in Ethiopia
The Hotel and recreation service facilities in Ethiopia have been found at a
lower level of development. The number of Hotel service establishments in
the country has remained insignificant to respond to the customer’s
demand. Only few Hotels have the capacity or quality to provide good
accommodation and catering facilities to fulfill tourists need. There are only
few hotels in the capital, Addis Ababa, and other big towns of the region
states that organized on international standard to fulfill the consumer’s
needs.
The government of Ethiopia has devised a long term strategy that gives due
regard to the preservation, development and promotion of the country’s
tourist attraction. This includes plan for expansion of tourist facilities and
the necessary infrastructure.
Indeed in the wider sense the country has a good potential for the
development of high standard hotels, recreation and market center and
there is a growing realization that this sector holds a significant
development perspective, which should be fully exploited in the planned and
controlled manner.
5
In adopting a planned and regulated approach the country is in a position to
expand its hotel and tourism sector in a way that emphasizes environmental
conservation and enhances the quality of the overall tourist experience. This
will contribute substantially towards improving the standard of living and
the quality of life of the population.
The past trend shows that most of the high standard hotels and recreation
centers are concentrated in the capital, Addis Ababa. The number of hotels
and recreation service facilities in other regions of the country has remained
insignificant to respond to the customers demand. Only few hotels and
recreation centers out of Addis Ababa have the capacity to provide
accommodation for mid or high-class guests.
According to the preliminary market research, the demand for hotel service
is very high and yet the supply is limited leaving a huge service gap to the
customer. Unfortunately there is no saturated standard hotel in the area.
Although few less than five star h o t e l s have already working in
6
the area, but still huge gap is there in between demand and supply in the
town. The resort service is widely accepted in Ethiopia, Government
employees, Private employees, Tourists, local customers, and to some extent
even in rich house-holds. So there is good scope for establishing the units for
establishing and maintain Al-lode international resort in Oromia region,
west Arsi zone, Bishan Guracha Town as well as in the country. Due to this, it
has become imperative to build and maintain Al-lode international resort
hotels service for the mankind in prevailing conditions.
2.5. Purpose and Amount of Loan
The source of the project finance is from the promoter’s equity and bank
loan. Out of the total investment capital of birr 73,571,629 birr 25,774,318
(30%) is to be contributed by the promoter (Nabil Muhammed Aman) while the
remaining balance of 47,571,629 (70%) is to be covered by the local bank
7
3. The Project
International standard tourist hotel is high class hotel (from three to five-
star level) where services like bedroom, catering, meeting rooms,
multipurpose assembly hall, swimming pool, Spa (Hot Spring), gymnasium,
sauna and massage, other sports facilities like tennis or squash court, min-
golf or badminton, bowling, table tennis and children playground, night club
with dancing to live music or discotheque or cabaret etc.
9
3.3. Project location and justification
3.3.1. Location
Bishan Guracha Town is found in the Oromia Regional state at the southern edge of west
Arsi Zone. The town is situated at a distance of 266 km and 16 km south from Addis Abeba
and Zonal capital town Shashemene respectively and 4 km away north of Hawassa City.
Astronomically, the town is approximately located between 07008’ North latitude and 380
48’ East longitudes. The town has been developing in to as one of important Oromia urban
centers since the beginning of 1950‘s. As to the history of its existing socio-Economic
development reveals, it has got its birth from the small scaled formal and informal
settlements. The name Bishan Guracha coined from two Afan Oromo words “Bishan” (water)
and “Guracha” (black). The name “Bishan Guracha” has got its name from the color of the
river which flows from the Wondo highlands to Habaas Lake and bounds the town from the
eastern area. Bishan Guracha is one of the second graded towns in the region which has
997.58 hectares. It is bounded by Shashemene woreda, south nation nationalities and peoples
region (SNNPR). Wondo and Shala woreda to the North, South, East and west and west
respectively. Based on the proclamation 65/2003 the Urban local government being
accountable to the region and the town council is latest progressively emerged by the new
reformation system restructuring the town as an independent authority. The town has given
the name Bishan Guracha urban local government by proclamation consisting one kebeles.
The figure below shows map of the Bishan Guracha administrative town.
3.3.2. Climate:
Climate as a wide team encompassing rainfall, wind, sunshine etc has been recorded for about 30
years. Unfortunately Bishan Guracha Town has not a climatic data of 30 years with its all elements.
Thus, we can see the existing year’s rainfall data of the town. Bishan Guracha and its hinterlands
have the same general climatic characteristics with Hawassaa City. Globally, it is part of tropical
climatic region, which is distinguished by its warm temperature, high rainfall and humidity. It also
learnt that the study area receives relief/orographix type of rain fall. The town average rainfall for
years was 1735.8mm. However, this value seems highly exaggerated as the mean.
10
3.3.3 Topography
Bishan Guracha town is situated at the center of the Great East African Rift valley which is widely
associated with “major danger” seismic Zone (NUPI 1994, cited in Alemayehu Addunya, 1995), hot
and humid flat land. Most of the area is characterized by gentle slopes towards Habas Lake, but with
a plateau along the north central part of the study area. The elevation of the studied land generally
drops to the east, south and southwest direction facilitating the discharge of flood that finally ends up
either into Bishan Guracha River or the Habas Lake. The peak altitude is considered to be a little bit
above 1,508 meters and the lowest is measured as 1400 meters above sea level. Except fewer
scattered plateaus to the west central part, the area is categorized as a flatland surface.
11
4. MARKET STUDY
During the same period (1991- 2005), on average about 17% of the total
number of tourists that have visited the country were for vacation purpose
while those who visited the country for business account 22% of the total.
Regarding the others, transit accounts for 18%, visiting relative 9%,
conference 11% and those who did not stated their purpose account for
22% of the total.
13
15 Wassamar Hotel 66
16 Washington Hotel 65
27 Kaleb Hotel 64
18 Axum Hotel 56
19 Churchll Hotel 53
20 Aphrodite Hotel 52
21 National Hotel 52
22 Global Hotel 50
23 Bole Ambassador Hotel 48
24 Panorama Hotel 45
25 Tds Hotel 41
26 Adot-Tina Hotel 40
27 Jupiter International Hotel – Bole 40
28 Plaza Hotel 39
29 Nigist Towers Guest House 32
30 Kz Hotel 32
31 Nigist Towers Guest House 32
32 The Residence Hotel 19
3174
Source: - Ethiopian Tourism Communion.
14
Table 4.3. Existing hotel capacities, projected and unsatisfied demand
The feasibility study conducted for this project deals with the demand and
supply analysis for the hotel project to be established in the area by taking
the number of international and national tourist, investors, employers and
government directly related with the level of development of the economy in
general and the tourism sector in particular. It is a function of the number
of both domestic and foreign tourist travelers in the area, travelers for the
commercial or business purposes, travelers for conference and other
assembly purposes, residents in the area (in fact it depends up on the
standard of the hotel and the living status of the residents) etc. Tourist
could come to the country for the purpose of visiting our country areas and
rest on different resort mainly is:-
fast growing regional economic center and the capital of Ethiopia
African Union
UN Economic Commission for Africa
15
foreign missions
regional NGO’s and the UN Conference Centre
Due to its regional political status Addis is often referred as the political
capital of Africa.
Ethiopian Airlines has become a major demand driver, servicing 127
destinations from Bole International Airport.
Economic growth is further increasing demand at +11% per annum
.
Hotel supply and its growth
Promotors with stronger balance sheets, technical support and access to
foreign currency have a higher likelihood of completing their
developments. The result of this is a more measured and appropriate
supply pipeline of new hotels. New supply is increasingly branded with this
growing
16
4.4. Demands Evaluation Mechanism
The following are some of the methods which can be used to evaluate the
demand of the services. By use of Customers feedback follow up form
High GDP growth and increasing corporate entry is driving hotel demand in
the business and conference segment. The aid and diplomatic segments
continue to provide the majority of the market demand in country. Ethiopia
has a strong domestic economy which is driving demand growth in the
mid-market.
Performance
Investment
Bishan Guracha town has received significant investment into the hotel
sector in recent years, with a number of successful local entrepreneurs
investing in hotels. This has largely shaped the type of supply in the market,
with few of these investors having turned to global brands to manage their
properties. The extensive list of branded hotels that has been announced, is
evidence that this trend has changed. The easier access to finance and
technical service expertise associated with having a brand are driving this
change. Assets are tightly held and liquidity is low.
Outlook
Corporate demand growth prospects are positive with strong GDP forecasts
and growing regional demand, complimenting the significant and well
established aid and diplomatic markets that are already present in the city.
Performance will be shaped by the extensive supply pipeline of hotels
across the city during the coming years. Many of these projects have stalled,
17
the expectation of further delays and projects being put on hold, is likely to
offer existing players in the market some respite. On the whole we are
positive about the performance outlook, yet caution against potential
oversupply.
4.5. Pricing
The resort service will also earn revenues from the sale of food and drinks
and other hotel services. The total revenue earned from this service is
estimated at 35 per cent of the revenue obtained from room rents.
4.6.1. Capacity
At the initial stage of the service provision period, the hotel would require
some years to penetrate into the market and capture a significant market
share. Therefore, in the first and second year of service the capacity
utilization rate will be 75% and 90%, respectively. Full service
provision shall be attained in the third year and then after. The proposed
service provision program is shown in Table 4.7.
As discussed earlier the major target groups of hotel sector are tourists who
arrives the country for business, leisure, conference and other purposes.
Providing quality services and consistently improving with the changing
situations should be the promoters’ objective. Hence, according to the
feasibility study, the promoter has the following marketing strategies:
19
Emphasizing the access of the proposed hotel to support client’s
attractions, as well as the services and amenities available,
Special effort will be made to emphasize the price-value relationship of
the service available,
Actively marketing the hotel prior to the completion and opening,
An aggressive local marketing effort and promotion of the hotel market
to enable the hotel to capture a more than proportionate share of
support within the market,
Working with local people to establish a competitive amenity package
responsive to specific requirements.
20
4.9 Stakeholder analysis
The stakeholder analysis can be used to understand the stakeholder environment and
determine the key stakeholders which will help us to priorities management resources. For
each project, there are many interested "customers" or investors whose interest in the project
might change depending on each project phase. The project execution is affected by these
potential stakeholders and determining their stakeholder impact and how much they want to
be involved will help with minimizing potential risks of sabotage and having better outcomes.
That is a short explanation of the importance of stakeholder analysis. Further, it consists of
three steps: identifying stakeholders, prioritizing stakeholders and finally, understanding
them.
According to the qualitative results, the themes that emerge associated with hotel
owners/managers include economic concerns, top management commitment, and operational
challenges to environmental practices. Environmental policies, regulations, and support are
identified as the themes associated with government agencies. Moreover, the knowledge,
consultancy, and professional assistance provided by academics and non-governmental
organizations facilitate the acceptability and implementation of hotel environmental initiatives.
The research implications highlight the need for communication and collaboration among
stakeholders.
21
5. TECHNICAL STUDY
The project owner interest, as regards to how the overall building design
looks like and the level of service to be rendered by the envisaged project, is
dependent on the area at which the buildings to be placed. The owner has
already decided to commit himself to construct a resort hotel having the
full knowledge what is required by the national and international standard
of Hotels in Ethiopia. The standard by the way its exhaustiveness as well as
being explicitly specific on the level of the service expected under the
selected category, determines also the physical and financial requirement of
the project. Hence, in effect the contents of project components to be
described below are the derivatives of the requirements mentioned above.
5.2. Core facilities
The envisaged resort hotel should have sufficient and comfortable space to
accommodate the core services as per the requirements of the resort hotel.
Actually this has been considered seriously at the design stage of the
building along with the allocation of appropriate area and placement of each
components with the building accordingly. On the other hand, it is also
important to figure out the layout of each component not only from the
perspective of having compliance for the standard but for the benefit
exploring possibilities of bringing complementary services under the same
location and allow maximum convenience in the work processes.
The size (area) of each service, which will be explained below, determine the
holding capacity of guests as it determines the level and quality of service.
Other than the critical factors mentioned above the market aspect i.e.
customers need and resource availability are considered in which case they
are the determinants to give the final set up of the facilities.
22
(a) Bed rooms
A total of 80 classes are allotted for room services with options to avail two
different types of
Accommodations. In the interest
of following the trend in the
industry single and double
bedrooms. Actually the
standard requires allowing
maximum 30% from the total
while the rest can remain with
big double bed rooms or any
Other smaller rooms. On the bases of the above considerations under this
component, the hotel will have 50 single, 20 double and 10 suit king bed
rooms
(b) Bars
Standard Five star hotels must have at least one bars with a superior
comfort and service quality. The furniture and equipment’s, as being the
basic sources of customer’s attractions, need to be fashionable of higher
quality commensurate with the expectation of guests who happen to
prefer this class. Therefore, the envisaged hotel, having the requirements
considered too, will have one main bar at the ground floor adjoining the
reception area. Another bar preferably with smaller space but furnished with
cozy furniture will be placed at top floor of the building. This is just to add
another attractive look for the hotel as it will be placed at a strategic location
for customer to have a panoramic view of the area. The minimum carrying
capacity of the bars is estimated 200 persons per day.
23
(c) Main restaurant
Technically a resort hotel to be classified under Five stars of as such this one
must have at least two dining places having the size proportional to the
guests who have checked in as normally customers do not prefer to worry
about going out once they have settled. The area determination has to take into
account this. Hence, the hotel must provide the maximum range of varieties
at all times.
The hotel will have the capacity entertaining 200 guests and allow
maximum efficiency in the service by having the restaurant located nearer to
the main kitchen.
24
Business center (mini market shop)
A resort hotel needs to have also a business center with the service that would
the customers need. For such a service, the envisaged project will allocate a
relatively bigger area preferably separate rooms at the ground floor. Rooms
are allocated to secretarial service, executive rooms for business meeting and
shopping corners. The secretarial service will be furnished with all the
machines and equipment to handle any business enquiry that may be raised
by hotel guests. The shopping corner also accommodates mini boutique,
cosmetics and d/t type of shop
(e) Supports
Kitchen
Two kitchens, with the processes of multiple varieties of food preparation
and a proportional capacity to handle the maximum guests to be served in
the main restaurant as well as in banquet hall, is the critical requirement
for the proposed hotel. It should be large enough also to accommodate the
working areas of cold and hot meals on the one hand and pastries and
bakery on the other.
25
Power House
For the service of the hotel to continue uninterrupted, a power house is
already planned to be placed in the underground or back to the building.
Hence, the power house will be supplied with a generator planned to be
fixed for emergency service.
Store
Alike the capacity projection made on the kitchen, the envisaged project
requires a store as big as the varieties of items that are needed to be kept as
stock. The store will need to have a systematic management for stocks
properly placed and identified at the time of delivery and inventory. Hence, it
is the required procedure to organize the stock items in separate sections so
that the proper handling of stocks shall be maintained. In view of this, the
hotel requires a number of stores with sections for food items, beverage,
glass wares, silver wares, soft furnishings, cleaning and sanitary materials,
stationery materials all placed according to their physical appearances. The
store will be placed in locations nearer to kitchen or leisure service.
Car Parking
The hotel must provide the service of car parking with 24 hours protection
at least for those customers who have checked in. Again, it should be large
enough to accommodate as many vehicles as the hotel is going to entertain a
large crowd. In view of this, a parking space for about 150 vehicles is
planned to be allocated with the standard width and height of the drive in
routes.
5.2.2. Utilities
Annual requirement of electricity, water and fuel is estimated at 2,367,000
birr from which, 500,000 kwh, 300,000 m3 and 2000 liters, a r e
electricity, water and fuel respectively. The total costs of utilities are,
therefore, about Birr 2,367,000 per annum.
Table 5.2 utilities
Descriptio Qty. Cost
n unit cost per
Electricity, kWh ye
50000 1.25 625000
Water, 0 4.5 135000
m3 30000 16 0
LPG, lt 0 32000
18
Diesel, 2000 360000
lt 20000 236700
0
28
433,917 government has following significances the remaining amount paid
within 40 years.
The project will seriously involve itself protecting conserving and developing
the natural and flora of the project area in line with the millennium
development goal. To this to will play a vital role in participating the varies
organization and the community around the project area to from an
environmental commute in charge of all environmental issues to be handled
in accordance to varies environmental and water policies of 97/99.
The owner of the project believes to undertake several environmental issues
for the conservation development and creation of sustainable environmental
around the project area.
29
6. ORGANIZATIONS AND MANAGEMENT
6.2. Management
30
It’s clearly shown the organizational structure, the integrated projected
center has CEO three Departments under the general manager, Addition
and the internal Auditing and inspection. The departments are the
production Department, the marketing department and the general service
department under each department there are different section which are
undertaking different activities
7. FINANCIAL STUDY
The cost of the project is classified as fixed incitement cost and initial
working capital. With regards to fixed investment cost of the project, the
land lease, building and civil works cost, machinery and equipment cost
office furniture costs and fuel costs will be required. As to working and
operating cost a brief illustration will be given as to utilities, salary expense,
maintenance cost and depreciation cost and the other related costs
31
Table 7.1 land development
Description Qty Unit Price Total Price (Br)
S/N (Br)
1 Land clearing and leveling 974 m2 2,500 1,000,000
2 Land lease (5%) 433,917
3 Canal work 1 600000 600,000
4 Water reservoirs 2 250,000 500,000
Total - - 2,533,917
32
Table 7.5 Summary of Fixed asset
Direct cost
Table 7.6.Raw materials
33
Administration cost
34
7.9. Project capital and source of income
7.2.2. Financing
The project will collect its revenue from the customer service. The selling of food
and beverage and rented rooms has estimated based on the current market price
and hotel standard of similar service provision in town. The annual service
program is formulated based on proposed plant capacity considered the following
table
35
Table 7.13 Description of revenue projection
It is a method of calculating the expected net gain or loss from project by discounting
rate of all expected future cash inflow and outflows to the present point in time In
the above table shoes that NPV at 30% and 35 % discount rate is 128.8 million and
102.2 million respectively, this figure is positive value or NPV>0 it is indicate that
accepted the project until 30 % and 35 % of discount rate
Break-even Analysis
The break-even analysis establishes a relationship between operation costs and revenues. It
indicates the level at which costs and revenue are in equilibrium. To this end, the break-even
point of the project including cost of finance when it starts to operate at full capacity ( year 4) is
estimated by using income statement projection.
The payback period is the amount of time required for a firm to recover its initial
investment in a project, as calculate from cash inflow
The investment cost and income statement projection are used to project the pay-
back period
= 73,587,629
13,582,495 + 4,779,731
4=5Years
The payback period =4 is less than the maximum acceptable payback period (10)
therefore accept the project.
IRR
The internal rate of the project is the rate of discount that radios the present value
of the investigated project to zero. In calculating the IRR, the discount rate can be
adjusted until the NPV becomes Zero or at least as to zero.
Hence, the IRR of this project is calculated as follows After tax
IRR = 35 + 5 (102.2/128.8)
=33.9%
IRR=33.9% of the project returns its initial investment cost within its life
8. SENSITIVITY ANALYSIS
The major risk of this project shall be high market price fluctuation and turnover the
skilled and trained man power. These risks can be mitigated. The high staff
turnover may be lessened by creating conductive working atmosphere and providing
some benefits. For this project, 25% benefit is proposed for the permanent employees
Characteristic (Personal) Risk: This is the most important risk, which should be
seriously considered? As to this company, the promoter have sufficient years of
work experience in both government and private organization (leading private
business by engaging themselves), so personal risk is minimum under this context
Business Risk: The fate of the business is generally found to be dependable. The
demand- supply analysis exhibits the need of the service of the business organization.
According to the overall demand the effect of competitors in the sector would not be
an immediate alarming threat at least for the coming few years. In additional to this
Long year experience of the owner in the field will help to react against any adverse
situation in the business. However, the reaction of competitors should be attended. In
additional to an advanced promotional work and sustainable goodwill development by
creating new and best quality products with good service deliveries
Collateral Risk: Since the owners of the project are engaged on different related
business, there is no any risk related to collateral. In this regard, the proposed
building and other proposed equipment and the business as a whole are
dependable securities. The experience and skill of the owner as well as the manager
and the other expertise add confidence to the lenders. Therefore, there is no risk
regarding collateral in general.
Construction Risk: Construction risk is one of the most important areas of risk
that need great consideration during project implementation. In the case of 5 star
international hotel services, the construction work of the proposed building will be
made by phase with self-response supervision. Hence, there is no as such serious
risk related to construction work.
38
All the identified risks, which are related to the universally accepted lending policy,
are to the acceptable level that keeps the lender’s interest in safe position.
Furthermore, the quality of the assets of the company is dependable and the
projected finical reports show that the company will have a capacity to pay the
principal and interest without any problem with in short period of time.
Monitoring and Evaluation (M&E) has long been recognized as a vital aspect of
development projects generally and of industrial and services projects in
particular. The monitoring of project performance consists of the tracking of
human, physical and financial resources and the recording of how they are
converted into outputs (project goods and services), and in turn, outcomes and
impacts.
39
APPENDIX1:- Machinery and equipment List With Costs
40
10 Cupboard built in 20 5,000 100,000
11 Head lump 20 1,000 20,000
12 Writing table with chair 20 2,500 50,000
13 Chest drawer 20 1,500 30,000
14 Spring mattress 40 5,000 200,000
Bed made wood 80 20,000 1,600,000
15 Bed sheets 80 500 40,000
16 Bed cover 80 800 64,000
18 Pillow 80 250 20,000
Total 3,019,000
41
Furniture and equipment's required for office, reception, leisure and others
43
10 Coffee roaster 2 7,500 15,000
11 Ice maker 2 5,000 10,000
12 Draft beer machine 1 15,000 15,000
13 water glass 200 12 2,400
14 draft glass 200 60 12,000
15 service tree 50 30 1,500
16 30-34 sauce pot 10 20 200
17 Sauce-medium 40 30 1,200
18 Soup pot 40 50 2,000
19 Medium 4 45 180
20 Large – round hot pot 10 80 800
21 Medium – round hot pot 10 57 570
22 Small – round hot pot 10 30 300
23 High rim flat 10 70 700
24 Flat rim round 12 50 600
25 Normal alloy 20 45 900
26 Non stick normal 20 20 400
Total 485,750
Page 44
Kitchen materials
S/n Description Quantity Unit price Total (birr)
1 Stove 5 45,000.00 225,000.00
2 Toaster 5 15,000.00 75,000.00
3 Oven 5 40,000.00 200,000.00
4 Aluminum tables 8 4,000.00 32,000.00
5 Grill (electrical) 5 15,000.00 75,000.00
6 Washer sink 5 5,000.00 25,000.00
7 Refrigerator 5 20,000.00 100,000.00
8 Clip fryer 5 5,000.00 25,000.00
9 Pastries formwork 5 5,000.00 25,000.00
10 Petra 10 2,500.00 25,000.00
11 Cupboard 3 7,500.00 22,500.00
12 Shelf 3 5,000.00 15,000.00
13 Grill bench top 5 11,887.00 59,435.00
14 Deep friend double 6 4,218.00 25,308.00
15 Micro wave grill 5 3,250.00 16,250.00
16 Mincer meat 5 12,999.60 64,998.00
17 Brad oven 5 47,999.85 239,999.25
18 Pizza claye oven 5 29,841.00 149,205.00
19 mixer 15 KG capacity 5 37,999.45 189,997.25
20 Range commercial 5 38,745.00 193,725.00
21 Range linear 3 14,995.00 44,985.00
22 Fruit blender 3 3,585.00 10,755.00
23 Potato chopper 3 41,999.30 125,997.90
24 Onion peeler /chopper 3 15,780.00 47,340.00
25 Blender small 3 3,185.00 9,555.00
26 Deep refrigerator 6 9,450.00 56,700.00
27 refrigerator 10 9,960.00 99,600.00
28 Digital scale (35k.g) 3 1,800.00 5,400.00
29 Waiting scale (220 K.g) 3 4,700.00 14,100.00
30 Kitchen hood 5 29,745.00 148,725.00
31 Kitchen cabin with double Sink 5 31,488.00 157,440.00
32 Kitchen cabin 5 27,488.00 137,440.00
33 Kitchen top -stainless steel 8 8,195.00 65,560.00
34 Kitchen top -stainless steel -large 8 13,195.00 105,560.00
35 Chaffing dish -silver 25 9,499.00 237,475.00
36 Spaghetti plate 50 712.2 35,610.00
37 Dinner plate 50 720 36,000.00
Page 45
38 Dessert plate 50 720 36,000.00
39 Table fork 10 163.8 1,638.00
40 Table knife 10 136.8 1,368.00
41 Chopper knife 10 62.1 621.00
42 Table spoon 15 163.8 2,457.00
43 Kitchen Pan 10 499 4,990.00
44 Food Box 220 1,100.00
45 soup bowl 336 1,008.00
46 Cook pot large 10 693.2 6,932.00
47 Cook pot big 38 10 3,054.00 30,540.00
48 Cook pot medium 20 581.4 11,628.00
49 Cook pot small 20 469.6 9,392.00
50 restaurant Table w/ 4 Chair 50 9,246.00 462,300.00
51 cafe table 20 1,455.00 29,100.00
52 Restaurant chair- sheraton Type 100 2,510.00 251,000.00
53 cafe chair 100 964.5 96,450.00
54 Open generator-24 KV 389,748.00 1,169,244.00
sub total 5,237,428.40
Page 46
S/N Aerobics and physical fitness Qty Unit cost Total Cost
1 Public addressing system 3 15,000 45,000
2 Aerobics dumbbell 10 3,500 35,000
3 Stepping rocks(assoried) 120 250 30,000
4 Wall mounted mirror 30 200 6,000
5 Bike Proms 9 5,500 49,500
6 Track tread mills(electrical) 2 22,000 44,000
7 Track tread mills(manual) 6 4,000 24,000
8 Heart rate monitors and pedometers 6 2,500 15,000
9 body solid endurance up right 2 11,000 22,000
10 muscular dynamics 2 13,000 26,000
11 Simplex II series 2 16,000 32,000
Portable massage tables with tools and
12
accessories 2 17,000 34,000
13 Massage body work tools 6 4,000 24,000
14 Massage chairs with tools and accessories 2 11,000 22,000
15 massage store heater 2 1,500 3,000
16 Massage table electric warming pad 4 3,000 12,000
17 flece message table pad 12 1,000 12,000
18 Massage table and video kit 2 6,000 12,000
19 pillows/body support/back care 16 4,500 72,000
20 cleaner and sanitizers 8 2,500 20,000
21 wall mirror(1.5 -2 ml) 6 400 2,400
22 sofa guest chair(three set) 10 4,500 45,000
23 Wall maound lockers 20 2,500 50,000
24 receptionist table 2 2,200 4,400
25 swivel chair 4 2,000 8,000
26 satellite dish with color 2 10,000 20,000
27 public addressing system 2 6,000 12,000
28 wall watch 2 400 800
Total 682,100
Page 47
10 Coffee spoon 50 5 250
11 Juice stranner 2 150 300
12 water glass 30 20 600
13 Coffee cups with saucer 20 100 2000
14 tea cups with saucer 20 60 1200
15 ice-cream box 1 5000 5000
16 Water sprinkles 30 40 1200
17 water house nylon rope 4 500 2000
18 Gardner's kits 2 100 200
Total 81,000
Summary of equipment
S/n Description Total cost
1 Furniture and equipment for 90 Bed room
Luxury bed room (10 rooms) 688,000
For double bed room (20) 3,019,000
Single bed room (50) 2,822,500
2 Furniture and equipment for office and reception area 1,295,300
3 Furniture and equipment for bar and cafeteria 1,232,900
4 Furniture and equipment for restaurant and dining room 485,750
5 Furniture and equipment for conference room 1,468,250
6 Furniture and equipment for kitchen materials 5,237,428
7 Sauna and steam bath materials 526,690
8 Aerobics and physical fitness 682,100
9 Massage service materials 300,000
11 Mini market shop establish costs 200,000
12 Garden and creation area 81,000
Total 17,069,918
Page 48
APPENDIX 2: - Stakeholder Analysis
AL-LODE
HOTEL &
RESORT
STAKE
HOLDER
Page 49
APPENDEX 3: - ORGANIZATIONAL STRUCTURE
CEO
Secretary
Page 50
APPENDIX 3:- MANPOWER REQUIREMENT
Table 6.1: Manpower Requirement
Annual
S/n Description of Job Qualification No. Monthly Salary (Br)
1 General Manager BSc in Hotel management 1 10000 120000
2 Coordinator/supervisor BSc in Hotel management 5 6000 360000
1 Assistance Supervisor Diploma in Hotel management 5 6,000 360000
2 Receptionist Diploma in Accountant 5 5,000 300000
3 Pastry and Staff Cafeteria diploma in food preparation 5 7,000 420000
4 Cafeteria supervisor diploma in Hotel management 2 5,000 120000
5 Waiter diploma and Certificate 20 2,000 480000
6 Cooker diploma in food preparation 20 7,000 1680000
7 Coffee machine operator 12th complete 2 3,000 72000
9 Pastry attendant Certificate 5 5,000 300000
10 Coffee machine operator 12th complete 5 3,000 180000
11 Dessert attendant Skill 4 1,500 72000
12 Massage expert professional 5 5,000 300000
13 Physiotherapist Certificate 5 5,000 300000
14 Sauna /steam Bath Certificate 5 5,000 300000
15 Sauna and Steam bath Certificate 5 5,000
attendant Certificate 300000
16 Life saver 4 5,000 240000
17 Casher Certificate 4 2,500 120000
18 Cleaner vice Diploma in Accountant 8th 10 1,500 180000
19 Plumber grade complete 2 2,000
Diploma in electrical 48000
20 Electrician engineering diploma 2
in electrical 2500 60000
21 Gardener engineering 2 1000
Skill professional 24000
22 Guards 8 96000
gardener 1500
Total 125 6,432,000
Page 51
APPENDIX 4:-IMPLEMENTATION PLAN (GANT CHART)
2022 2023
5 6 7 8 9 10 11 12 1 2 3 4
Acquis ion of
investment
land(2022)
Opening&
processing of
L/C
Building
Construction
Delivery of
plan
machinery
Installation
and
Commissioning
Recruitments
of man power
arrangement
Startup
commercial
activities
Loan
Repayment
Page 52
APPENDIX 7:- Table 7.10 Loan Repayment Schedule
Page 53
2.6
Advertising
50,000 52,500 55,125 57,881 60,775 63,814 67,005 70,355 73,873 77,566
expense
2.7 Telephone expense 365,000 383,250 402,413 422,533 443,660 465,843 489,135 513,592 539,271 566,235
2.8
Wi fi Internet
60,000 63,000 66,150 69,458 72,930 76,577 80,406 84,426 88,647 93,080
service
2.9 Office supplies 100,000 105,000 110,250 115,763 121,551 127,628 134,010 140,710 147,746 155,133
Miscellaneous
2.1 150,000 157,500 165,375 173,644 182,326 191,442 201,014 211,065 221,618 232,699
expense
Sub total 11,063,318 11,616,484 12,197,309 12,807,174 13,447,533 14,119,909 14,825,905 15,567,200 16,345,560 17,162,838
Total cost working capital 25,790,318 27,079,834 28,433,826 29,855,517 31,348,293 32,915,708 34,561,493 36,289,568 38,104,046 40,009,249
Note: Production costs are assumed to increase by 5% annually.
Page 56
APPENDIX 9:- Projected Profit/loss statement
Project Year
Description 1 2 3 4 5 6 7 8 9 10
Revenue 57,390,000 60,259,500 63,272,475 66,436,099 69,757,904 73,245,799 76,908,089 80,753,493 84,791,168 89,030,726
Less: Production
25,790,318 27,079,834 28,433,826 29,855,517 31,348,293 32,915,708 34,561,493 36,289,568 38,104,046 40,009,249
costs
Gross Income 31,599,682 33,179,666 34,838,649 36,580,581 38,409,610 40,330,091 42,346,595 44,463,925 46,687,121 49,021,478
Less: Interest on
5,923,804 5,331,424 4,739,043 4,146,663 3,554,282 2,961,902 2,369,522 1,777,141 1,184,761 592,380
loan
Less: Depreciation 4,779,731 4,779,731 4,779,731 4,779,731 4,779,731 4,779,731 4,779,731 4,779,731 4,779,731 4,779,731
Profit before tax 20,896,146 23,068,511 25,319,875 27,654,187 30,075,597 32,588,458 35,197,343 37,907,053 40,722,630 43,649,366
Less: Income tax
7313651.22 8073978.79 8861956.08 9678965.58 10526458.90 11405960.22 12319069.96 13267468.52 14252920.36 15277278.13
(35%)
Net Profit 13,582,495 14,994,532 16,457,918 17,975,222 19,549,138 21,182,498 22,878,273 24,639,584 26,469,709 28,372,088
Page 58
APPENDIX 10:- Projected cash flow
Project Year
Description
0 1 2 3 4 5 6 7 8 9 10
Cash Inflow
Equity 22,076,289 - - - - - - - - -
Bank loan 51,511,340
Revenue 57,390,000 60,259,500 63,272,475 66,436,099 69,757,904 73,245,799 76,908,089 80,753,493 84,791,168 89,030,726
Depreciation 4,779,731 4,779,731 4,779,731 4,779,731 4,779,731 4,779,731 4,779,731 4,779,731 4,779,731 4,779,731
Total Inflow 73,587,629 52,610,269 65,039,231 68,052,206 71,215,830 74,537,635 78,025,530 81,687,820 85,533,224 89,570,899 93,810,457
Cash Out Flow
Fixed Cost 47,797,310 - - - - - - - - -
Initial W.C 25,790,318 25,790,318 27,079,834 28,433,826 29,855,517 31,348,293 32,915,708 34,561,493 36,289,568 38,104,046 40,009,249
Loan Repayment 5,151,134 5,151,134 5,151,134 5,151,134 5,151,134 5,151,134 5,151,134 5,151,134 5,151,134 5,151,134
Total Out flow 73,587,629 30,941,453 32,230,968 33,584,960 35,006,651 36,499,427 38,066,842 39,712,627 41,440,702 43,255,180 45,160,383
Net Inflow - 21,668,816 32,808,263 34,467,246 36,209,178 38,038,207 39,958,688 41,975,192 44,092,522 46,315,718 48,650,075
Cumulative
- 21,668,816 54,477,079 88,944,325 125,153,503 163,191,711 203,150,399 245,125,591 289,218,113 335,533,832 384,183,906
balance
Page 59
APPENDIX 11. BALANCE SHEET
Page 60
APPENDIX 12:- Viability and other measurement
Year 0 1 2 3 4 5 6 7 8 9 10
Gross income 57,390,000 60,259,500 63,272,475 66,436,099 69,757,904 73,245,799 76,908,089 80,753,493 84,791,168 89,030,726
Total costs 73,587,629 25,790,318 27,079,834 28,433,826 29,855,517 31,348,293 32,915,708 34,561,493 36,289,568 38,104,046 40,009,249
Gross profit -73,587,629 31,599,682 33,179,666 34,838,649 36,580,581 38,409,610 40,330,091 42,346,595 44,463,925 46,687,121 49,021,478
less: Profit tax 11,059,889 11,612,883 12,193,527 12,803,203 13,443,364 14,115,532 14,821,308 15,562,374 16,340,493 9049001.6
After tax net benefit -73,587,629 20,539,793 13,478,615 13,976,013 14,503,150 15,061,512 14,873,630 15,596,585 16,355,688 17,152,746 17,989,656
DF at 35% rate 1 0.741 0.549 0.406 0.301 0.223 0.165 0.122 0.091 0.067 0.05
Present Value -73,587,629 42,525,990 33,082,466 25,688,625 19,997,266 15,556,013 12,085,557 9,382,787 7,348,568 5,681,008 4,451,536
Net present Value 102,212,186 - - - - - - - - - -
DF at 30% rate 1 0.769 0.592 0.455 0.35 0.269 0.207 0.159 0.123 0.094 0.073
Present Value -73,587,629 44132910.0 35673624.0 28788976.1 23252634.6 18764876.1 15161880.4 12228386.1 9932679.7 7970369.8 6499243.0
Net present Value 128,817,951 - - - - - - - - - -
Page 61
APPENDIX 13:- PROBLEM TREE
LOW
PROFITABILITY
RATE
MAXIMIZING PROFIT
63
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