Tamiru Mesfine Meskelo

project on Building
construction industry
(Level -5)

GENERAL MANAGER; Tamiru Mesfine Meskelo

Oct. 2023

Arbaminch
CONTENTS
1. GENERAL SUMARY OF THE PROJECT .......................................................................................... 4
2. EXECUTIVE SUMMARY............................................................................................................................ 5
3. INTRODUCTION .............................................................................................................................................. 6
4.Back Ground Of The Project............................................................................................................................ 7
4.1 National Back Ground .............................................................................................................................. 7
5. DESCRIPTION OF THE PROJECT PROMOTOR.................................................................................................. 7
6. PROJECT JUSTIFICATION ................................................................................................................................ 8
7. PROJECT IMPLMENTATION PLAN .................................................................................................................. 8
8. VISION, MISSION, OBJECTIVES AND BENEFITS OF THE PROJECT ................................................ 9
8.1 VISION .................................................................................................................................................... 9
8.2 MISSION ................................................................................................................................................. 9
8.3 GOAL ...................................................................................................................................................... 9
8.4 BENEFIT OF THE BUSINESS .............................................................................................................. 9
9. STRENGTH, WEAKNESS, OPPORTUNITIES AND THREATS ANALYSIS ....................................... 10
9.1 STRENGTHs ......................................................................................................................................... 10
9.2 WEAKNESS .......................................................................................................................................... 10
9.3 OPPORTUNITY .................................................................................................................................... 10
9.4 THREATS.............................................................................................................................................. 10
10. MARKETING............................................................................................................................................ 10
10.1 DEMAND ANALYSIS ....................................................................................................................... 10
10.2 COMPETITORS’ OVERVIEW .......................................................................................................... 11
10.3 MAJOR CUSTOMERS ....................................................................................................................... 12
10.4 DEMAND MONITORING AND EVALUATION MECHANISMS ................................................. 12
10.5 MARKET SHARE............................................................................................................................... 12
11. SERVICE PROVISION PLAN ................................................................................................................. 13
11.1 CONSTRUCTION WORKS ............................................................................................................... 13
11.2 BUSINESS STRATEGY ......................................................................................................................... 13
11.3 PROMOTION ACTIVITIES ............................................................................................................... 13
11.4 DIFFERENTIATION STRATEGY .................................................................................................... 13

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12 ORGANIZATION AND ITS MANAGEMENT ........................................................................................ 14
12.1 STAFFING/EMPLOYEES NEED ...................................................................................................... 14
12.2 ORGANIZATIONAL STRUCTURE.................................................................................................. 15
13 FINANCIAL PLAN.................................................................................................................................... 16
13.1 FIXED INVESTEMENT COST .......................................................................................................... 16
13.2 INITIAL WORKING0\........................................................................................................................ 17
13.3 DEPRCIATION COSTS ..................................................................................................................... 18
13.4 INVESTMENT COST ......................................................................................................................... 18
14. Sources of finances .................................................................................................................................... 19
14.1 Bank loan installment .......................................................................................................................... 19
15 PROJECT COST-BENEFIT ANALYSIS .............................................................................................. 19
15.4.1 Operating cost ............................................................................................................................... 19
16. TOTAL REVENUE SUMMARY ..................................................................................................... 20
16.1 Construction profit estimation ............................................................................................................. 20
17. Financial Evaluation .................................................................................................................................. 21
17.1 Profit and Loss statement of the project............................................................................................... 22
18 EXTERNALITIES ...................................................................................................................................... 23
18.1 SOCIAL COST BENEFIT ANALYSIS .............................................................................................. 23
18.2 ENVIRONMENTAL ASSESSMENT ................................................................................................ 23
19. FINANCIAL APPRAISAL OF THE PROJECT ....................................................................................... 23
20. CONCLUSION .......................................................................................................................................... 24

3
1. GENERAL SUMARY OF THE PROJECT
 Name of project Tamiru Mesfine Meskelo General construction industry
(G.C) level 5(five)
 Project promoter Tamiru Mesfine Meskelo
 Citizen Ethiopian
 Types of ownership Sole ownership
 Types of project General construction industry
 Project status New
 Location of the project :-
 Region South Ethiopia region (SER)
 Zone GAMO
 City A/MINCH
 Total project capital 15,000,000 birr
 Job opportunities 12 permanent and 15 casual total 27 workers
 Source of finance :-
 Equity (30%) 4,500,000
 Loan (70%) 10,500,000
 Loan period ten years
 Interest rate 11.5%
 Project life period 2016-2019 E.C
 Project operation start on 2016 E.C

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2. EXECUTIVE SUMMARY

Ato Tamirat Mesfin construction industry is a private owned field and the owner of this project has
intended to enter into this business after conducting a thorough preliminary market survey couple
with the practical long year experiences in construction industry works supplying company which
suited at the SER. Ato Tamirat Mesfin is Ethiopian citizen who has considerable demand to be an
investor in construction service sector and currently planning to invest on the construction industry.

The recent rapid urbanization and its resultant pressure of population growth and its required in
developing country cities ,there is an urgent need to increases the supply of good quality
construction throughout Ethiopia in order to improve the competitiveness of them sector . In this
regarded all the towns and cities of SER in general and the Arbaminch town in particular, is one of
the business and investment corroders of Gamo zone and also potentially important agricultural
production and areas having highly growing population rate that deserve adequate facilities of
construction business service

Market study:- demand for general construction services is highly growing in the country and in
the project area as well .Various factors driving demand for business service utilization in the
project area urbanization population growth and improvement in household income and Gamo
zone is one of rapidly growing zonal administration in Ethiopia .Despite of the growing demand of
the urbanization ,population growth ,the project area faces wider shortage in competent construction
facilities .The number of similar service institutions that provide services for clients from
Arbaminch town ,surrounding districts in Gamo zone as well as surrounding special woredas and
zones are very few. Thus lack of sufficient services in the area result a serious problems and feeling
of dissatisfaction and hopelessness on the part of area Therefore , Ato Tamirat Mesfin general
construction service establishment project investment helps to meet the growing demands of
similar services which in turn play crucial role to solve problems in the project area .

5
3. INTRODUCTION
The initiative motives of the investment code and the integration activates of government
organization changes the attitudes of the society towards economic development through a great
increase in saving in addition to the accessibility of credit mechanism in the country.

FDRE is the one in the history of Ethiopia sates changes that has brought economic mass
mobilization at anywhere in the country without a selective nationality views. SNNP, with
endowment of nature that shows exciting changes in infrastructure, is in continuous economic
development and population density.

The overall effects of the country movement, moreover, the development of Ethiopia initiates the
promoter Ato Tamiru Mesfine Meskelo to invest in the country in general and particularly in his
final destination in South Ethiopia Regions, Arba Minch town with the advantage of
transformation plan (GTP) for privet construction industries.

Our country Ethiopia as well as the south regional government has understood the fact that private
sector investment has a key role to the development of an individual and the society at large
through employment creation, capital formation tax revenue negation and the likes. With this
understanding, the government has been promoting private investment and has been creating
enabling conditions for private micro, medium and large business to actively play their role in the
economic development of the SNNPR in particular and the nation in general. Some of these include
stable political climate, liberalized free market economy, attractive macroeconomic policies,
establishment of means of finance, attractive incentive packages for infrastructure development and
the like. From the fact of this many service providers have been entering in many business sectors
in the country nevertheless; the construction industry sector needs huge capital and the shortage has
constrained the activities. Entrepreneur like this has a well come vision and needs to accomplish the
vision, running family life and to support the country development activities so the financial sector
and other stakeholders’ support is very mandatory.

The owner of this project has intended to enter in to this business after conducting a thorough
preliminary market survey coupled with the practical long year experiences in construction works.
The preliminary market search conducted by has shown that all the demand for the envisaged

6
construction related industry as of construction works is high and yet the supply is limited leaving
huge market gap for new entrant with location references.

In this light of the above facts, the owner, Ato Tamiru Mesfine planned to establish the
construction works where he has experienced in doing different kinds of business activities in the
city of Arba Minch and firmly believe that prompt supports will be offered and also the financing of
the projects will be positively considered.

4.Back Ground Of The Project

4.1 National Back Ground

In past two regimes the country there was in appropriate polices .they intensified socio-economic
problem of the nation both in urban and rural settlement there was difference b/n urban and rural
dwellers in access to services .Currently asserting free market privatizing or transferring service
and production sector from state or public private owner ship ,free flow of idea and rural centered
economically with new working policy to the urban development have started to pave right path in
solving socio economic problem .The present national policy is attracting investment from every
corner of the region to each other as well as from other countries as a result of the policy .

Ato Tamirat Mesfin general construction will have great contribution in solving lack of
construction industry problem in the town .It is good opportunity for Ethiopian of being free of
tourists attack .In Ethiopia Especially in SNNPR there are aplenty underexploited tourism potential
areas such as resort area which use natural and cultural wonder as an input .In general ,the countries
decentralized state bases economy ,privatized and free market economy ,good governance creates
favorable environment for the development of investment for private investors .

5. DESCRIPTION OF THE PROJECT PROMOTOR

The promoter of the project Ato Tamirat Mesfin was born learns and lives in Arbaminch city for a
long period of time and currently He is working and living in Arbaminch town .He has been
participate in business sectors and experienced long period of time .During this time he gained a
vast knowledge and skill with this reliable experience he knows how to manage and lead any
organization to profit .Currently ,He has planned to general construction level 5(five) .HE is
interested and capable to implement the project in order to contribute for the development of his
country and in order to create job opportunities to the local community of the town and surrounding
area.

7
6. PROJECT JUSTIFICATION
Business is always dynamic in its nature so it needs change. Globalization on the other hands
increase the exchange of technologies in the societies and the demands of development construction
of housing and road networks are the major part in development especially in the urging areas that
enhance other part of development to play in this dynamic world as competent, there is a must of
fitness in the field of the ride the owner runs meanwhile; your organization could understand the
problem of finance and legal ground for that he has been facing to establish his business to play in
the development works in need facing to establish his and at large to support our country. It is
greater than 15, 000, 000 Ethiopian birr to this business as he needs as the feasibility shows for this
he is confident and presenting project proposal.

7. PROJECT IMPLMENTATION PLAN

The promoter of this general construction (GC) level 5 (five) industry service investment has set
plan to attain the objectives

Accordingly

 Getting investment license

 Preparing work place for parking of vehicles and machines importing companies
 Processing to get duty free of the vehicle and machines from customs
 Recruiting man power administrative and technical work
 Recruit and hire permanent employees
 Setting price and starting project operation
 Monthly collection of service charge
 Timely loan payment
 Undertake management
 Advertising and delivering the service

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8. VISION, MISSION, OBJECTIVES AND BENEFITS OF THE PROJECT

8.1 VISION
The owner wants to see himself by establishing sustainably quality output of construction works
with affordable costs to country and South Ethiopia Region where advantageous entrepreneurs
could reach.

8.2 MISSION
 The major mission of this business is to prepare sustainably quality output of construction
for country and South Ethiopia Region vicinities. That needs reasonable costs and makes
them satisfied.
 To become sample competent in the field of construction.
 To employ well experienced employees and others in the business

8.3 GOAL
Business goal is the direction where the business organization moves at the end of the project and
the goal is as follows.

 Annually, earning 1, 580,000 birr profit

 Creating job opportunities to 12 temporarily and for many other permanently employed
worker. And also there are plenty of highly temporary employments at the time of
construction project handling.
 To become economically free in the coming two years.
 To build sustainably construction outputs with reasonable costs to Ethiopia and SER
peripheries.

8.4 BENEFIT OF THE BUSINESS

The movement of this business has direct benefits to its stakeholders accordingly; there are
the following benefits.
 Earnings/ profits to the owner
 It is the means of further investment
 Means of income generation to unemployed
 Means of tax revenue to government
 Developing healthy completion among competitors

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9. STRENGTH, WEAKNESS, OPPORTUNITIES AND THREATS ANALYSIS

9.1 STRENGTHs
 Strong work experiences in construction material supply and availability of Trucker and
back loader in advance for the planned project
 The presence of experienced work force in the market
 Prides and famousness in the related field
 Selected competent in the customers
 The presence of the necessary and different care and skill

9.2 WEAKNESS
 Financial shortage
 The presence of dependency on capital and contractor

9.3 OPPORTUNITY
 Presence of relative work opportunities, residential area expansion, development and the
increment of the city infrastructure are a good advantage to the envisage business.
 Governmental focus for sustainable development
 The expansion of investment in construction sectors
 The presence of sustainable investment appreciation

9.4 THREATS
 High inflation rate on construction materials

10. MARKETING

10.1 DEMAND ANALYSIS

The South Ethiopia Region also Embraces many governmental and non- governmental
organization. Moreover; there are hospitals, higher clinics, and many educational institutions. This
situation by its self, favors for the sake of the envisaged business and many firms haven’t simply
been engaged. Such situation by itself brings about the creation of sustainably and quality oriented
enterprise in the business of construction. Moreover; the mismatch of demand and supply, there is
zoning of villages to commercial centers. In general, there is an opportunity of competition in that
there are changes of quality. Finally, since there are open entry and exit, the nature of high demand
in the field, there is no as such simplicity to establish the business.

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 10.2 COMPETITORS’ OVERVIEW
In the field of construction business at higher grade in a case of SER is insignificant, many road and
other huge building constructors have been not yet getting in the case of dwellers. Most huge
construction industries will come from other vicinities especially from Addis Ababa. But it is
clearly seen that there are a lot of small and medium enterprises engaged in the construction
business due to the fact that our region becomes the area of investment, visiting and employment.
These and other factors indicate that there is a need of quality building constructors with reasonable
costs. All these conditions were observed when he privately studied the demand situation from his
previous experiences in this related business, region as a whole. There is a great gap between the
demand from customer and the suppliers of the services along with the development and
transformation set by government for five years, the gap between demand and supply become so
wide due to the creation of employment and industrialization. But there is a risk of inflation and the
speed of employment which may affect. More or less, the situation continues so there is no threat
that comes through time because; it is understood from the situation Moreover; his long experiences
in the related business, respect to his customers and his pried given from customers will help him to
succeed the competition smoothly since there is open entrances to investors. In addition, there is
preparation of comment box which support him to assess the need of his customers. These and
other conditions generally support him to pass the competition created. More above all
entrepreneurs have systems to pass a hard problems as trend has showed him so with the help of
your organization families and relative, he is sure that he passes with a special rank in the field of
construction works. This business has been one of those businesses which are still insignificant in a
case of SER in one way direction and wide competitions in the construction which are the
additional supply to the shortage of finance and the service is based on customers’ needs. If we get
further finance to expand this business he still continues with good performance in the business.

In general the service given compared with rivals

 He is with a good exposure and even adequate experience to run the business
 He respects the promise
 Quality is our indicative
 Strong members support the business
 Transparent and reasonable costs to win the business game are his bases in the
completion.

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 10.3 MAJOR CUSTOMERS
Customers’ differentiation and identification are the basis of business to give the service as the need
of them and to survive in the business game sustainably so there were efforts exerted to differentiate
customers, accordantly the customers of this business are as follows SER dwelling builders,
government and non-government organization those do infrastructures, investors, city periphery
dwellers, construction constructor etc.

10.4 DEMAND MONITORING AND EVALUATION MECHANISMS

One of the methods to monitor and evaluate the business is as follows

 An assessment of national and regional condition

 Gathering customers satisfaction feedback information
 Identify the last users descriptions

Based on the present situation and the above evaluation criteria, the rising of population and the
expansion of industrialization and more the agriculture is hold by small farmers in the future, the
society go to stick with industrialization so it is believable that the need of construction becomes
increased.

10.5 MARKET SHARE

There are factors which need to be clearly determined by the firm who run the business like us
construction industries embrace.

 The capacity of rivals or competent

 The number of rivals
 The nature of construction outputs (Building)
 Presentation system
 Facilities to customers in service delivery and costs are mentioned

As the preliminary study shows, 90% of the demands of higher level construction industries are still
none covered by business entrant even we only cover 10% from the remaining market share.
Through time will increase our share up to 30% by expanding our business.

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11. SERVICE PROVISION PLAN

11.1 CONSTRUCTION WORKS

In South Ethiopia Region there are many governmental and non-governmental organizations. In
addition; the development of infrastructure and the attraction of the SER increase the numbers of
investors who need to build houses and apartments and contractors who are employed for. In
general, the rises of migrants to the city to search job opportunities are the sources of indirect
customers of our business. For all the organization customers, the firm supplies construction out
puts like dwelling houses, factories, offices, bridges, roads etc.

11.2 BUSINESS STRATEGY

Quality services and efficiency care will be a vital role in promoting the image and all the services
of the organization to this end therefore, various promotion tools will be employed to communicate
with the potential clients so as to maximize the services and the profits obtained thereof. In order to
achieve the envisaged service and rent plan per annum, it would be necessary to employ various
techniques and the business would be utilizing the following marketing strategies. The unique
renting proposition for the firm is that it will be known as a caring trustworthy firm.

11.3 PROMOTION ACTIVITIES

Advertising as one of its marketing strategy and the firm will advertise its services through mass
media, posters, personal selling’s, brochures, publicity, community support services, south FM
radio, flying paper and letters to be written to various organizations and a total of birr 20,000 will
be allocated to accomplish this task.

11.4 DIFFERENTIATION STRATEGY

To stay sustainable in the market, the business will pursue a differentiation strategy, it is by
servicing customers with sustainable supply and setting reasonable costs, customers demand focus
supply of construction out puts, which satisfies customers, in addition to the above strategy, the
firm will integrate by dealing with organization that is found in construction industries as
contractors by doing so we will win-win games. The firm is not the first time to get in this business
and no representative is assigned so it helps him to see the need and satisfaction of customers and
by which he will continue to reach to the tip of customers serving in this business.

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12 ORGANIZATION AND ITS MANAGEMENT
12.1 STAFFING/EMPLOYEES NEED

Nothing in business is accomplished without the right numbers, qualifications, and attitude of
personnel staffing. In this context this it refers to the personnel that will be hired in the organization
during its operation period. The firm therefore, has decided to hire necessary labor forces that could
carry out the entire business operation smoothly and successfully. The total number of workers
shall be 12 is permanent. Their salaries and number and professions are given below in the table.

Table 1: Human resource and salaries

s/n Title No Monthly salary Annual salary

1 Manager 1 10,000.00 120,000.00
2 Professional engineer 1 8,000.00 96,000.00
3 Clerk 1 4,000.00 48,000.00
Construction
4 2 6,000.00 144,000.00
foremen
5 Drivers 2 4000 96,000.00
6 Cashier 1 2000 24000
7 Janitor 2 2000 48000
8 Guard 2 2000 48000
Total 12 624,000

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 12.2 ORGANIZATIONAL STRUCTURE
This business is not as such a complicated business entity and hence it requires a very simplified
structure on the top and other workers under her/his. Nevertheless there shall be amendments where
and when the objective situation requires so, because flexibility has now become the norm of this
day to serve customers in a customized way.

Professional
manager

Operators

OWNER Drivers

Clerk

Cashier

Salesmen

Janitor

Guards

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13 FINANCIAL PLAN

13.1 FIXED INVESTEMENT COST

Construction sector without adequate machinery has no use for the country and also to the owner
due to its bulkiness of operation along with pre-determined period to finalize the total work the
intended period of time .So due to these facts, the company currently owns one back loader and one
trucker but to be competent in the sector will procure additional 1 tucker, one pick up car and other
construction equipment’s which have the capacity to assist the firm in its construction works.
Additionally; other necessary farm implements (accessories) and auxiliary machineries will be
purchased at the period assigned for the operation. So the total fixed investment cost of the firm is
Birr 1,815,900 and the details of each item and allowed fund are stated in the tables below.

Table 2: fixed investment cost analysis

s/n Description Remark

Fixed cost No of Unit cost Amount
equipment’s
Damp truck 1 8,636,000 8,636,000
1 Pick up 1 5,500,000 5,500,000
Compactor 1 70,000 70,000
Dozer 1
Excavator 1
Vibrator 1 50,000 50,000
Mixer 1 170,000 170,000
Sub total 14,426,000 14,426,000

2 Project preparation 1 15000 15000

License fee 1500 1500
Sub total 16500 16500
Grand total 14,442,500 14,424,500
Table 3: Cost of Office Furniture

s/n Description Unit Amount Unit cost Total cost

1 Table No 1 6000 6000
2 Shelf No 1 10000 10,000
3 Chairs No 5 1000 5000
4 Calculating machine No 1 3000 3000
5 File cabinet No 1 8000 8000
6 Cash box No 1 15,000 15,000
Total 47,000

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13.2 INITIAL WORKING0\
Most the time entrepreneurs could not convert their assets to cash when they ate facing shortage of
operating costs in their business. These conditions bring about the failure of many micro and small
enterprises. But entrepreneurs, who have adequate knowledge of their working capital management
in the previous businesses, trusting the respectable organization shall provide adequate financial
support has already assigned amount in order to meet obligation when they fall due so that the
business can survive adverse period and day to day operation of renting individuals and
organizations continue undisturbed.

Generally, it is advisable to keep three to six months, salary of workers operating expenses and
certain amount of cash on hand a meet current liabilities when they fall due. Hence, the initial
working capital estimate project cost is given below.

Table 4: Annual Repaired and Maintenance, and insurance costs of the firm

S/N Description Costs Maintenance Insurance

% Amount % Amount
1 Offices furniture 47000 2.00 940 2.00 940
2 Machineries 14,426,000 2.00 288520 2.00 288520
Total 289460 289460
So annual repair and maintenance cost of the firm is 289,790and for that of insurance is also Birr
289460

Table 5: Other Operating Costs

S/N Cost Description 1st year 2nd year 3rd year

1 Water 2, 400.00 2448 2497
2 Electric power 7,200.00 7344 7491
3 Telephone and postal 6,000.00 6120 6242
4 Uniform 5,000.00 5100 5202
5 Promotion 20,000.00 20400 20808
6 Housing Rent 60,000.00 61200 62424
7 Fuel and Lubricant 760,900.00 776118 791640
Total 859,100.00 876282 894808
NB:- Construction machineries and furniture insurance is estimated by 2% Total annual costs
progress is estimated by 2%

17
 Table 6: Initial Working Capital Requirements of the firm

S/ Kind of Project Yare (000)

N cost 1 2 3 4 5 6 7 8 9 10
1 Salary 624 636 649 662 675 689 703 717 731 746
3 Repair and
289 295 301 307 313 319 325 332 339 345
Maintenance
4 Insurance 289 295 301 307 313 319 325 332 339 345
5 Other
859 876 894 912 930 948 967 987 1006 1027
operating cost
Total 2061 2102 2145 2188 2231 2275 2320 2368 2415 2463

The total initial working cost needed to run the business smoothly is about birr 3.509 million birr
but we don’t need the entire amount at once. We need only half of this so that it can be circulated
two or more times per year depending up on the market situation and we trust your organization to
allow us obtain the estimated amount and help us achieve our vision.

13.3 DEPRCIATION COSTS

The straight method has been applied to compute the depreciation cost of project which amount to
be birr 1,448,950 per annual as it described below.

Table 7: The life span is expected as of ten years in which are going to be salvaged age

S/A Description Cost Depreciation costs

% Amount
1 Machineries, car and trucks 14,426,000 10% 1,442,600
2 Office Furniture 47000 10% 4700
Total 1,447,300

13.4 INVESTMENT COST

Table 8: The Investment cost is as follows

S/no Description Costs

1 Direct cost for construction machineries ,Vehicle and 14,442,500
trucks
2 Offices furniture cost 47,000
3 Project running cost (initial working capital) 25% 510,500
Total 15,000,000

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14. Sources of finances
The project planned to be financed by the inverters’ own capital and loans from local banks.
Although the final allocation of equity and loan will depend on the outcome of negotiation with the
band, reasonable apportionment will be an equity capital of 30% and remain 70% to financing plan
is indicated in the table below.

Table 9: Source of Finance

S/no Total amount Owners’ equity Bank loan

1 15,000,000 4,500,000 10,500,000
2 100% 30.% 70.%

14.1 Bank loan installment

Table 10 :The loan repayment schedule calculated is indicated in the table below

Year Principals Interest /11.5% Balance

0 10,500,000
1 1,050,000 1207500 2,257,500 9,450,000
2 1,050,000 1,086,750.00 2,136,750 8,400,000
3 1,050,000 966,000.00 2,016,000 7,350,000
4 1,050,000 845,250.00 1,895,250 6,300,000
5 1,050,000 724,500.00 1,774,500 5,250,000
6 1,050,000 603,750.00 1,653,750 4,200,000
7 1,050,000 483,000.00 1,533,000 3,150,000
8 1,050,000 362,250.00 1,412,250 2,100,000
9 1,050,000 241,500.00 1,291,500 1,050,000
10 1,050,000 120,750.00 1,170,750 0

15 PROJECT COST-BENEFIT ANALYSIS

15.4.1 Operating cost

Table 11: Operating cost

Project year and Birr in (000)

No Kind of cost
1 2 3 4 5 6 7 8 9
Initial working
1 3509 3579 3651 3724 3798 3874 3952 4031 4111
capital
2 Bank interest 120.75 1086.75 966 845.25 724.5 603.75 483 326.25 241.5
Total 3630.75 4667.75 4620 4573.25 4527.5 4483.75 4442 4365.25 4361.5
However; the bank interest is not changed as the installment cases, the initial working capital will
change by 2% annually on the basis of the last year.

19
16. TOTAL REVENUE SUMMARY
Annual total revenue of the construction profit are depends on the yearly construction profit and
construction machinery rent amount . The firm is expected to deliver service for 8 hours and all 25
days per month and 300 days per annum and 20% of the cost for the project spent and also rents of
different machineries are supplied for different costumer mentioned in the marketing section
.Therefore at the initial year the total revenue collect from construction profit 9,000,000 birr and
construction machinery rent will be birr 645,000 and total revenue will be birr 9,645,000 and
increases in its optimum birr 11,723,557.5 at the year of fifth and increases 5% per year the detail
is described on the following

16.1 Construction profit estimation

This construction industry will expect to enjoy with projects of construction:-

 For government office in lately developing areas in the region

 For private housing building in urban areas especially in SNNPR
 Road construction of development packages of networking for socio-economic development in
the region.
 Industrial site buildings

Table 12: The total revenue collected from construction profit of different kinds of construction
work

No Description

1st year 2nd year 3rd year 4th year 5th year
1 Government office
2,000,000 2100000 2205000 2315250 2431013
Building
2 Private house
2,000,000 2100000 2205000 2315250 2431013
building
3 Construction Road 3,500,000 3675000 3858750 4051687.5 4254272
4 Industrial site 1,500,000 1575000 1653750 1736437.5 1823259
Total 9,000,000 9,450,000 9,922,500 10,418,625 10,939,556

20
 Table 13: Annual revenue estimated collected from Construction machineries rent

Unit Wor
Work Estimated price
S/n Uni Qt prices k
Items load/ye
o t y birr/da hr/da ar 2nd
y y 1st year 3rd year 4th year 5th year
year
Dam 100 31500
1 No 1 3000 8 days
300,000 330750 347288 364652
truck 0
Compact 100 10500
2 No 1 1000 8 days 100,000 110250 115763 121551
or 0
100
3 Mixer No 1 500 8 days 50,000 52500 55125 57881 60775
18375 192937.
4 Dozer No 1 3500 8 50 days 175,000 202584 212714
0 5
Excavato
4 No 1 200 8 50 days 20,000 21000 22050 23153 24310
r
711112.
Total 645,000 67725
5
746668.1 784001.5

N.B. annual revenue is expected to grow 5% on the basis of the last year reeve

17. Financial Evaluation

Basic Assumption
In order to estimate the project profit and loss the following basic assumptions are to be considered.

 The project will start its implementation on 2016 E.C will all the rate months of this year
and the next year assumed to be preparation period
 The term of loan anticipated to be ten years and also two years expected to have two years
grace period from 2017-2026.
 Annual rate interest assumed to be 11.5%
 The principal payment assumed to be starting 2017 and completed with in ten years .
 Working capital expenses assumed to increase 5% annually and retain more than four times
per annum.
 Depreciation of machinery and equipment assumed to be 10 percent of fixed investment
cost
 The amount income is assumed entirely from construction work and machinery rent.

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 17.1 Profit and Loss statement of the project
The income statement measures the flow of income of a given project and is used to measure
profitability of the business. The detailed is described on table 14 and 15.

.Table 14: Profit and loss statement of the project

Description Year 1 Year 2 Year 3 Year 4 Year 5
Annual revenue
9,645,000 10,127,250 10,633,613 11,165,293 11,723,558
Expenses 2,061,000 2,102,000 2,145,000 2,188,000 2,231,000
Depreciation 1,447,300 1,448,950 1,448,950 1,448,950 1,448,950
Bank interest 1207500 1,086,750.00 966,000.00 845,250.00 724,500.00
Total Expense
4,715,800 4,637,700 4,559,950 4,482,200 4,404,450
Profit before tax
4,929,200 5,489,550 6,073,663 6,683,093 7,319,108
Income tax 35%
1725220 1921342.5 2125782.05 2339082.55 2561687.8
Net profit
3,203,980 3,568,208 3,947,881 4,344,010 4,757,420
Accumulative Profit
3,203,980 6,772,188 10,720,068 15,064,079 19,821,499
Table 15 : Project Cash Flow Statement of the project
Project Years
Description
0 1 2 3 4 5
Cash Inflows
Owners’ Equity 4,500,000
Bank Loan 10,500,000
Net Profit 3,203,980 3,568,208 3,947,881 4,344,010 4,757,420
Depreciation 1,447,300 1,447,300 1,447,300 1,447,300 1,447,300
Total Cash Inflows 15,000,000 4,651,280 5,015,508 5,395,181 5,791,310 6,204,720
Cash outflows

Investment on fix Assets 14,473,000

Working capital 510500 2061000 2102000 2145000 2188000 2231000

Pre-operation cost 16500
Loan Repayment 1,050,000 1,050,000 1,050,000 1,050,000 1,050,000
Total Cash out flow 15,000,000 3,111,000 3,152,000 3,195,000 3,238,000 3,281,000
Net cash Flow 1,540,280.00 1,863,508.00 2,200,181.00 2,553,310.00 2,923,720.00

Cumulative cash balance 1,540,280.00 3,403,788.00 5,603,969.00 8,157,279.00 11,080,999.00

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18 EXTERNALITIES

18.1 SOCIAL COST BENEFIT ANALYSIS

The project of construction industry doesn’t make the society to cost, in fact invisible cost as any
particles creates. But when the real activities become operational, there will be a social benefits
depending up on the size of project.

The project may benefit the surrounding society with work/job opportunities. Once the activities are
operational, the owner employees a minimum of 12 person in a permanent and temporary manner.

18.2 ENVIRONMENTAL ASSESSMENT

The project construction industry is one commenced; its environmental impact is very minimal null
since there is a septic tanker for sewages for if there are discharges released from destination.

19. FINANCIAL APPRAISAL OF THE PROJECT

The project construction industry must be appraised by the financial results. It is to determine the
viability of the project, likewise, the approval of this project is calculated by the methods of benefit
cost ratio (BCR) and NPV, when BCR>1and NPV>0, the project is accepted.

IRR= 15+10 (0.24691358)

IRR= 15+2.4691358

= 17.4691358

IRR=17.47%

At the opportunity cost of capital that is at 15% interest rate, the NPV is above zero i.e 10 million
birr and hence the project proposal is accepted according to the criteria that all projects should be
accepted for NPV values grater then zero. NPV is the turns reduce above 15.47% opportunity cost
of capital showing that up to the range the project work is acceptable.

This is a discount rate which equates the present value of future cash flow with the initial
investment. As the gape shows above IRR for this project that makes NPV zero is 15.47% and this
amount are by far greater than the current interest rate (the opportunity cost of capital) and hence
the project is accepted. BCR=NPV/I= 12/2.29=5.24 PV at 15% = 10-2.29 = 7.71.

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20. CONCLUSION
Generally, as per the Growth and Transformation Plan -2 of the land, Ethiopia has plan to maximize

the construction of different kinds of infrastructure facilities and also there is great concern to

intensify urbanization and development of new urban settlements that have an ample of demand for

advancement of construction industry. So it is possible to say this plan is very critical and even

decisive and it is in line with this national objective. So, I hope that the Gamo zonal administration

and SER'S Investment commission will seriously consider my interest and deliver the permit I

requested to bring my dream to true very soon.

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