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A Preliminary Feasibility Study on the Manufacture of Printing Inks

The General Authority for Investment & Free Zones

Economic Performance Sector

Feasibility Study on the

Manufacture of Printing Inks

Prepared by
Economic Performance Sector
Central Department of Feasibility Studies
General Department of Economic Feasibility Studies

March 2021
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A Preliminary Feasibility Study on the Manufacture of Printing Inks

I. Project Basic Information:

Project Manufacture of Printing Inks

Project Area and
5375 m2, Qalyubia Governorate
Location
Permitted Act of
Sale Agreement (Ownership)
Disposition
Price per Square Meter EGP 1650/ m2
Project Economic Life 10 years
Expectancy
15 labourers and Adminstrative
Expected Labor
Officers
Production of printing inks used in
Targeted Products
printing paper, carton and others
Approximately EGP 66,500,000
Expected Investment (around $4.3 million, by estimated
Costs average exchange rate of EGP 15.6
per One USD)
Average Annual Profit EGP 13.5 million
Average Return on
20%
Investment (ROI)
Approximately 4 years and 2
Payback Period (PBP)
months
Date of Feasibility
March 2021
Study

II. Project Market Feasibility Study:

1- Demand Volume:
 Market demand for printing inks increases as this project is complementary
to the printing and packaging sector which witnesses great growth. This is
reflected in the demand for printing inks, which exceeded $14 billion in 2018.
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 Egypt's imports during 2018 amounted to $51 million, including imports of

$46 million from ten countries, which represent 91% of the total imports of
printing inks, and they are respectively (Spain, Germany, Turkey, United
Kingdom, China, France, Italy, Switzerland, Netherlands, and India).
Imports increased by 13% compared to 2017.

2- Supply Volume:
 Only two local companies produce offset printing inks with a total production
capacity meets only around 50% of the local market need, in addition to the
lack of any local products of some types of inks that packaging and printing
industry may need.

3- Market Gap:
 There is a huge demand-supply gap for different types of inks by around 50%
of the market needs, and it increases annually with the flourishing of printing
and packaging sector and its continuous development; and there is a gap of
100% of some types of inks.
 The project also obtains an appropriate share of global demand, which
increases annually by 11% with the increase of industries that need printing
and packaging.

4- Local Market:
 The main objective is to cover the high demand for printing inks in the local
market, which are imported from many countries especially Spain, Germany,
Turkey, United Kingdom and China.
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 The annual value of printing inks imports increased by 13% during 2017 and
2018 in light of prosperity of the printing and packaging industry in Egypt.
The demand for offset printing inks has increased and reached almost 45% of
the total value of imported printing inks, and they are mainly imported from
China and India.
 This project meets the needs of the local market, and it will save the amounts paid
for importing huge quantities of printing inks if the manufacturing process is done
locally; (i.e. it will save an amount of $51 million paid for import in 2018, which
increased by 13% compared to 2017 as it reached $44 million at that time).

5- Potential Export Markets:

 One of the opportunities available to the project is to meet the needs of the
local market and export as well. The project can offer its products at
competitive prices to number of countries that import large quantities, such
as:
 (Germany – France – Netherlands – United Kingdom – Italy - Poland -
Spain) with imports value of ($2,130 - $1,204 - $1,022 - $944 - $521 - $298
- $297) million respectively in 2018.
 (Austria, Belgium, Czech, Switzerland, Turkey, United Arab Emirates and
Saudi Arabia) with imports value of ($268 - $230 - $209 – $162 – $152 –
$99 – $57) million respectively in 2018.

6- Products, Expected Sales Volume and Prices During the Fiscal Year
According to what is dominant in the field of industry, the mentioned prices are
indicative and based on ordinary rates, and may be subject to adjustment according
to the study date.
Annual production cycle data can be summarized as per the following table:

Expected Average
Unit of Expected Sale Total Expected Annual
Product Selling Price per
Measuring Volume Sales
Tonne
Printing inks of different EGP 25,000/
Tonne 3000 tonnes EGP 75,000,000
types and colours tonne
7- Expected Costs of Marketing Campaigns:
 The annual costs of the marketing campaign are estimated at EGP 500,000 (only five
hundred thousand Egyptian pounds), especially at the beginning of the project to achieve
spread.
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III. Project Technical and Engineering Feasibility:

1- Machinery and Equipment:

Production Process

It may be determined as follows:

Net Book
Value at
Useful Total Cost Annual
Asset the End of
Life of Assets Depreciation
Productive
Life
 Mixer
 Grinding
machine 10
2,000,000 200,000 1,000,000
 Scale years
 Packaging
line
Total 2,000,000 200,000 1,000,000
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According to the previous table, it is clear that the expected total cost of the machinery,
equipment and tools is EGP 2 million, and that their annual depreciation value is EGP 200
thousand, with an estimated economic life of 10 years. Thus, the net book value at the end
of the estimated 5 year- project period amounts to EGP 1 million.

2- Location:
The project is implemented in (Qalyubia) Governorate in the Arab Republic of Egypt,
preferably at Al-Shorouk Industrial Zone in (Al-Khanka), where utilities and licenses
required for chemical industries are available, as well as the availability of skilled labour
at reasonable prices, and allocating the land free of charge.
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Project Location on Qalyubia Governorate Map:

The project land area should be 5375 m2:

The average price of the land per square meter in the Industrial Zone of Qalyubia is EGP
1650, where all the facilities required for the project are available. In addition, the
Governorate grants licenses for the chemical industries required for the project. The land
has 3 buildings on it with an area of only 91 m2 that are used as service rooms.

Therefore, total estimated cost of the land = 5,375 m2 * EGP 1,650 = EGP 9,000,000
including service buildings (only nine million Egyptian Pounds).

3- Buildings:
Building footprint is 60% of the whole land. In calculating the square-metre price of
buildings, fences; security and electricity rooms; tanks; and trusses with a fair-faced
concrete floor are included, some of which are fully finished and built from bricks and
reinforced concrete. Presuming that the average square-metre price of buildings is
EGP3000/m2, therefore, the estimated cost of the total buildings and constructions would
be = 3000 m2 x EGP 3000/m2= EGP 9,000,000 (only nine million Egyptian pounds).
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4- Required Annual Operating Cost:

i. Production Required Raw Materials to Achieve Expected Sales Volume
In order to be able to produce and achieve expected sales volume (30,000 tonnes), the
project needs the following raw materials: (Binders "emulsifiers" – colours - Titanium
dioxide – water). The expected average cost of raw materials per annum is EGP 52,000,000
(fifty-two million Egyptian Pounds).

ii. Electricity, Water and Production Requirements Required to Reach the

Expected Sales Volume:
 Electricity Consumption = K.W.h;
 Water Consumption = 2000 m3; and
 Other requirements (oils and greases - cleaning chemicals).
According to industrial averages, the raw materials quantity required for the
production of 30,000 tonnes amounts to EGP 2,500,000 (only two million five
hundred thousand Egyptian pounds).
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iii. Labour:
The expected labour size of the project is 15 workers, by assuming the average worker
wage is EGP 5,000 with a monthly total of EGP 75,000. The annual estimated cost
of labour mounted EGP 900,000 and can be divided into (administrative labour
mounted EGP 180,000 annually, productive employment at a cost of EGP 720,000
annually).
iv. Costs of Packaging Materials:
Based on the expected sales volume, the project will need packing materials made of 500
m3 of cardboard per annum with an estimated value EGP 4000/ cardboard m3. Therefore,
the average annual total cost of packing materials will be as per the following formula:
500m3 x EGP 4000 = EGP 2,000,000 (only two million Egyptian Pounds).
v. General and Administrative Expenses:
Data Expected Annual Cost
Lightening and Electricity
Costs 250,000

Transport Allowance 250,000

Attorney Fees to review
various contracts 100,000
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Food and Beverage for

Workers 500,000

Safety and Security

Requirements 250,000

Hospitality Fees 250,000

Chartered Accountants 100,000
Invoices, Publications and
Stationery 100,000

Miscellaneous Expenses 200,000

Total 2,000,000

According to the previous table, the estimated annual cost of general and administrative
expenses is equal to EGP 2,000,000 (only two million Egyptian Pounds).

IV. Project Financial Feasibility Study:

1. Foundations and Hypothesis of the Financial Study:

 Data used in this study and the expected revenue estimates of sales' volume and
value are founded on the market study results.
 Investment cost values and other costs and expenses have been estimated based on
the technical study results.
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 Buildings and machinery annual depreciation premium is estimated based on the

technical study results. Same buildings and machinery sale value is presumed to be
matching their book value at the end of the expected lifetime of the project.
 It is presumed that the first operating cycle requirements will be procured from
suppliers at a 25% discount.
 It is taken into account that the estimated value of the fixed assets mentioned in the
current study is time-bound to the prevailing circumstances at the time of preparing
the present study. Accordingly, such value may change to reflect changes in
circumstances, obsolescence of the report or change in the overall economic climate.
 It is presumed that incorporation and pre-commencement expenditures are fully
depreciated by the first year of revenue in accordance with Egyptian Accounting
Standards.
 The economic life of the project is estimated to be five years.
 The estimated income statements have been prepared on the presumption that there
is no fundamental change in the revenue values and expected annual costs during
the study period other than the estimated growth rate in sales, which corresponds to
a similar rate of growth in costs of 10% per annum.
 Pursuant to the Egyptian legislation prevailing at the time at which this study has
been prepared, a tax rate (TR) of 22.5% on companies' annual profits and a TR of
20% on companies' returns on treasury bonds issued by the Egyptian Ministry of
Finance are applicable [to this project].
 Annual cash flows are estimated using the indirect estimation method; necessary
adjustments have been applied to the results of the estimated income statements of
the years in this study.
 The criteria of Return on Investment (ROI), Payback Period (PBP), Net Present
Value (NPV), and Internal Rate of Return (IRR) are applied in assessing the
economic feasibility of the project, taking into account the Required Rate of Return
(RRR) on investment.
 RRR on investment has been determined according to the method of Weighted
Average Cost of Capital (WACC), presuming that the project is fully funded by the
owners.
 Future financial estimates include estimated and intangible risks and other factors
that may lead to a difference between project expected performance – founded in
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this study upon the business climate prevailing at the time of preparing this study –
and the actual performance and results achieved by the project.

2. Required Rate of Return (RRR)

 It is the minimum return required by an investor in order to invest in Egypt,
provided that such return be assessed in light of the industrial risks to be faced by
the project being the subject-matter of this study.
 It is concluded under this study that an RRR with a value of 28%, based on this
industry risks in Egypt is to be used and calculated as follows:

o RRR = [RFR + (CRP x β)]

 Based on the official data published by CBE regarding the Egyptian treasury bonds
to be mature at the end of 2026 – a period covering almost all project valuation
period (five years) – the Risk Free Rate (RFR) is calculated using the Weighted
Average Yield of various bond issues during the said period.
https://www.cbe.org.eg/en/Auctions/Pages/AuctionsEGPTBondsCouponHistorical.aspx

Pre-tax average yield ‫متوسط العائد قبل خصم الضرائب‬

After-tax average yield 20% %20 ‫متوسط العائد بعد خصم الضريبة‬

Country Risk Premium (CRP) of 5.33% is used based on Egypt's global ranking
issued by (Moody's Corporation) and (Standard & Poor's – S&P) as per Egypt's 2021
market data as updated on Damodaran’s website.

http://www.stern.nyu.edu/~adamodar/pc/datasets/ctryprem.xlsx
 In respect of this industry risks in the Egyptian market, the beta coefficient is
estimated to be 1.20 based on the average risks of such industry.
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http://www.stern.nyu.edu/~adamodar/pc/datasets/betas.xls
Accordingly, RRR on investment is calculated as follows:

RRR = (11.43 + 5.33 x 1.20) = 18% Approximately

3. Estimation of Project Investment Cost:

 In accordance with Article (11) of the Executive Regulations of Investment Law No.
72 of 2017 issued by Prime Minister Decree No. 2310 of 2017, Project Investment
Cost is defined as follows:
"Project investment cost shall mean such costs required to set up an Investment Project.
These include property rights; long-term liabilities invested in setting up or establishing
fixed corporeal (tangible) assets or incorporeal (intangible) assets, conditional on
payment of value thereof in cash; and working capital."
The opening budget of the investment project can be prepared in accordance with the
results of the estimated technical feasibility study as follows:
Item Value (EGP)
LONG-TERM ASSETS
Incorporation, licensing and pre-commencement 100,000
expenditure
Lands 9,000,000
Buildings 9,000,000
Machinery and equipment 2,000,000
Total long-term assets 20,100,000
CURRENT ASSETS
Stock of materials and production requirements 52,000,000
Stock of packing materials 2,000,000
Cash and cash equivalents 1 5,900,000
Total current assets 59,900,000
CURRENT LIABILITIES

1 The cash required to cover the expenses of the first operating cycle is estimated to be EGP 5.9 million divided as follows: (EGP
0.9 million for labour payroll, EGP 0.5 million for marketing expenses, about EGP 2.5 million for energy, gas and electricity
consumption, and EGP 2 million for general and administrative expenses including food, allowances, stationery, professional
fees…etc.).
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Suppliers of raw materials and production requirements 13,000,000

Suppliers of packing and packaging materials 500,000
Total current liabilities 13,500,000
Working capital 46,400,000
Total investments 66,500,000
To be funded as follows:
Property Rights
Capital 66,500,000
Total Project Cost 66,500,000

Hence, project total investment costs = total long-term assets + working

capital = ~ EGP 66,500,000 (Only sixty-six million five hundred thousand
Egyptian pounds) or ~ $4.3 million (Only four million three hundred
thousand United States Dollars, if the exchange rate of USD 1 equals
EGP 15.6
4. Expected Income Statements for the Years of Investment Project:
Such Statements Can Be Prepared according to the Results of the Technical Feasibility Study
as Follows:
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Item ‫البيان‬
Year 1 ‫السنة األوىل‬
Year 2 ‫السنة الثانية‬
Year 3 ‫السنة الثالثة‬
Year 4 ‫السنة الرابعة‬
Year 5 ‫السنة الخامسة‬
Total revenue ‫إجماىل اإليرادات‬
‫ي‬
Subtract: :‫يخصم‬
Cost of Sales ‫تكلفة المبيعات‬
Gross Profit ‫مجمل الرب ح‬
Subtract: :‫يخصم‬
Incorporation and pre-commencement ‫مرصوفات التأسيس وما قبل النشاط‬
expenditure
Depreciation of fixed assets ‫اهالك األصول الثابتة‬
General and administrative expenses ‫مرصوفات عمومية وإدارية وتسويقية‬
‫صاف الرب ح المحاسب قبل ر‬ ‫ر‬
Net accounting profit before tax ‫الضائب‬ ‫ي‬ ‫ي‬
Subtract: :‫يخصم‬
Tax (at a rate of 22.5%) )%22.5 ‫الرصيبة (بمعدل‬ ‫ر‬
‫ر‬ ‫ر‬
Net accounting profit after tax ‫المحاسب بعد الضائب‬
‫ي‬ ‫صاف الرب ح‬‫ي‬
Return Rate on Investment (ROI) ROI ‫معدل العائد عىل رأس المال‬
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5. Estimating the Cash Flow Stream for the Years of the Investment Project:
According to the foregoing, the cash outflow in year (zero) = EGP 66,500,000.
The cash flow stream of the economic life of the project can be estimated indirectly through
adjusting the net accounting profit by re-adding the depreciation premium because it is a
non-cash expense, and by re-adding the incorporation and pre-commencement expenditure
because they are calculated within the value of the outgoing investment costs in year
(zero).
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Item ‫البيان‬
Year 1 ‫السنة األوىل‬
Year 2 ‫السنة الثانية‬
Year 3 ‫السنة الثالثة‬
Year 4 ‫السنة الرابعة‬
Year 5 ‫السنة الخامسة‬
Total revenue ‫إجماىل اإليرادات‬
‫ي‬
Subtract: :‫يخصم‬
Cost of Sales ‫تكلفة المبيعات‬
Gross Profit ‫مجمل الرب ح‬
Subtract: :‫يخصم‬
Incorporation and pre-commencement expenditure ‫مرصوفات التأسيس وما قبل النشاط‬
Depreciation of fixed assets ‫اهالك األصول الثابتة‬
General and administrative expenses ‫مرصوفات عمومية وإدارية وتسويقية‬
‫صاف الرب ح المحاسب قبل ر‬ ‫ر‬
Net accounting profit before tax ‫الضائب‬ ‫ي‬ ‫ي‬
Subtract: :‫يخصم‬
Tax (at a rate of 22.5%) )%22.5 ‫الرصيبة (بمعدل‬ ‫ر‬
‫صاف الرب ح المحاسب بعد ر‬ ‫ر‬
Net accounting profit after tax ‫الضائب‬ ‫ي‬ ‫ي‬
Adding non-cash and operative expenses ‫ تشغيلية‬/ ‫يضاف مصروفات غير نقدية‬
Depreciation and incorporation and pre-commencement expenditure ‫اهالك ومرصوفات التأسيس وما قبل النشاط‬
Net operating cash flow ‫ر‬
‫تشغيل‬
‫ي‬ ‫صاف تدفق نقدي‬ ‫ي‬
Adding other revenues for the last year ‫األخية‬
‫ر‬ ‫يضاف إيرادات أخرى للسنة‬
Net working capital ‫ر‬ ‫ر‬
‫صاف رأس المال العامل المسيد‬ ‫ي‬
Salvage Value of Fixed Assets ‫القيمة التخريدية لألصول الثابتة‬
Net annual cash flow ‫ر‬
‫صاف التدفق النقدي السنوي‬ ‫ي‬
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Accordingly, the annual cash flow stream can be summarized as follows:

Years Zero 1 2 3 4 5
Net Annual Cash Flow (66,500,000) 11,972,500 13,120,250 14,407,525 15,823,528 78,281,130

6. Financial Feasibility Indicators for the Investment Project:

i. ROI
ii. PBP
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iii. NPV
iv. IRR

a) ROI:
According to what was previously explained and by reviewing the estimated income statements for the project, the average
ROI can be calculated as follows:
𝑎𝑣𝑒𝑟𝑎𝑔𝑒 𝑛𝑒𝑡 𝑎𝑛𝑛𝑢𝑎𝑙 𝑝𝑟𝑜𝑓𝑖𝑡
Ratio of average net accounting profit to investment cost = %
𝑡𝑜𝑡𝑎𝑙 𝑖𝑛𝑣𝑒𝑠𝑡𝑚𝑒𝑛𝑡 𝑐𝑜𝑠𝑡𝑠
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Year Net Accounting Profit After Tax Paid-in Capital Expected ROI

1 10,772,500 66,500,000 16%

2 12,020,250 66,500,000 18%

3 13,307,525 66,500,000 20%

4 14,723,528 66,500,000 22%

5 16,281,130 66,500,000 24%

(ROI) 20.2%

Project ROI Results:

The project has recorded an average percentage of net accounting profit for the paid-in capital of 20.2%, which is
equivalent to the investors' RRR, which was previously determined at 18%, and this stresses that the project is
financially feasible.
It is worth noting that this indicator is an aid tool to evaluate the project. However, it cannot be relied upon alone in
determining the economic feasibility of the project, as this indicator is faulted for the following:
1. Its dependence on the net accounting profit, which may be based on depreciation and provisions estimates
that may lead to a return value that is different from the actual value achieved by the project; and

2. Not expressing the actual cash flows, which may give misleading results.
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b) PBP Indicator:

The payback period is the amount of time a project takes to recover its investment costs through the net cash flows
expected to be achieved during the operating years. Therefore, such period reflects the period elapsed from the life of
the project until it achieves net cash flows from operating its assets that is equal to the capital paid at the beginning
of the project operation.

In accordance with the above mentioned, and by reviewing the estimated annual cash flow statements for the project, the
payback period can be calculated as follows:

𝑃𝑎𝑦𝑏𝑎𝑐𝑘 𝑃𝑒𝑟𝑖𝑜𝑑
= 𝑙𝑎𝑠𝑡 𝑦𝑒𝑎𝑟 𝑜𝑓 𝑛𝑒𝑡 𝑛𝑒𝑔𝑎𝑡𝑖𝑣𝑒 𝑐𝑢𝑚𝑢𝑙𝑎𝑡𝑖𝑣𝑒 𝑐𝑎𝑠ℎ 𝑓𝑙𝑜𝑤
𝑎𝑏𝑠𝑜𝑙𝑢𝑡𝑒 𝑣𝑎𝑙𝑢𝑒 𝑜𝑓 𝑙𝑎𝑠𝑡 𝑛𝑒𝑔𝑎𝑡𝑖𝑣𝑒 𝑐𝑢𝑚𝑢𝑙𝑎𝑡𝑖𝑣𝑒 𝑐𝑎𝑠ℎ 𝑓𝑙𝑜𝑤
+
𝑐𝑎𝑠ℎ 𝑓𝑙𝑜𝑤 𝑜𝑓 𝑡ℎ𝑒 𝑓𝑜𝑙𝑙𝑜𝑤𝑖𝑛𝑔 𝑦𝑒𝑎𝑟

Years Zero 1 2 3 4 5

Net Annual Cash Flows (66,500,000) 11,972,500 13,120,250 14,407,525 15,823,527 78,281,130

Net Cumulative Annual Cash Flows (66,500,000) (54,527,500) (41,407,250) (26,999,725) (11,176,198) (67,104,933)

Payback Period by Years 4.14

(absolute value of last negative cumulative cash

Number of years of net negative cash flow +
flow)/(cash flow of the following year)
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4 + 11,176,198 / 78,281,130

4 + 0.14

Payback period = 4.14

Project PBP Results:

The project has successfully recovered all of its investment costs within a PBP of four years and two months in
operation, and this period does not exceed the expected economic life of the project, which is five years. This stresses
that the project is financially feasible and its potential risks are reduced.

It is worth noting that the project has recovered its investment costs within a short period, which presents an
opportunity for investors to reinvest the recovered capital in other projects or to make expansions in the project, and
maximize ROI.

However, this indicator is criticized to have overlooked the time value of money, which will be taken into consideration
later in NPV and IRR below.

c) NPV Indicator and IRR Indicator:

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NPV is the difference between the present value of net cash inflows during the operating years and the present value of net
cash outflows during the establishment period. IRR is the discount rate at which the net present value of the project is zero.
𝑛𝑒𝑡 𝑐𝑎𝑠ℎ 𝑓𝑙𝑜𝑤 𝑑𝑢𝑟𝑖𝑛𝑔 𝑡ℎ𝑒 𝑦𝑒𝑎𝑟
Present value of cash inflows = Σ [ ]
( 1 + 𝑟)𝑖

By reviewing the estimated annual cash flow statements for the project, NPV can be calculated using a discount rate of 18%,
and it represents the return required by investors as follows:

Years ‫السنوات‬
‫ر‬
Net Annual Cash Flow ‫صاف التدفق النقدي السنوي‬
‫ي‬

The Present Value Factor for an amount at discount rate )‫ وعدد (ن‬%18 ‫معامل القيمة الحالية لدفعة عند معدل خصم‬
of 18% and (i) years ‫من السنوات‬

Present Value of Cash Flow ‫القيمة الحالية للتدفق النقدي‬

‫ر‬
NPV of Cash Flow ‫صاف القيمة الحالية للتدفقات النقدية‬
‫ي‬
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A Preliminary Feasibility Study on the Business of Producing Steel and Stainless Steel Sections and Flats

IRR ‫الداخل‬
‫ي‬ ‫معدل العائد‬

 PV of net cash inflows during the operating years = EGP 70,716,813.

 PV of net cash outflows during the establishment period = EGP 66,500,000.
 NPV = the present value of net cash inflows - the present value of net cash outflows.
 NPV = EGP 70,716,813 - EGP 66,500,000 = EGP 4,216,813.

Project NPV and IRR Indicators Results:

The project has recorded a positive NPV that is greater than zero, which means that the project has recovered the entire capital,
achieved the investors' RRR, and exceeded such rates with a surplus, which stresses that the project is financially feasible and able
to face the potential risks and the decline in profits within the surplus limits that such project will achieve.
The project has achieved IRR equal to 20%, which exceeds investors' RRR (18%). This stresses that the project is financially
feasible.
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A Preliminary Feasibility Study on the Business of Producing Steel and Stainless Steel Sections and Flats

V. Conclusions and Recommendations:

The project is economically feasible in light of the following reasons:

 The project achieves an average ROI = 20.2%
Where:
Ratio of average net accounting profit to investment cost
𝑎𝑣𝑒𝑟𝑎𝑔𝑒 𝑛𝑒𝑡 𝑎𝑛𝑛𝑢𝑎𝑙 𝑝𝑟𝑜𝑓𝑖𝑡
= %
𝑡𝑜𝑡𝑎𝑙 𝑖𝑛𝑣𝑒𝑠𝑡𝑚𝑒𝑛𝑡 𝑐𝑜𝑠𝑡𝑠
Average ROI Percentage = 13,420,987 ÷ 66,500,000= 20.2%

 Quick recovery of project costs, PBP = 4.14 years

Where:
𝑃𝑎𝑦𝑏𝑎𝑐𝑘 𝑃𝑒𝑟𝑖𝑜𝑑
= 𝑙𝑎𝑠𝑡 𝑦𝑒𝑎𝑟 𝑜𝑓 𝑛𝑒𝑡 𝑛𝑒𝑔𝑎𝑡𝑖𝑣𝑒 𝑐𝑢𝑚𝑢𝑙𝑎𝑡𝑖𝑣𝑒 𝑐𝑎𝑠ℎ 𝑓𝑙𝑜𝑤
𝑎𝑏𝑠𝑜𝑙𝑢𝑡𝑒 𝑣𝑎𝑙𝑢𝑒 𝑜𝑓 𝑙𝑎𝑠𝑡 𝑛𝑒𝑔𝑎𝑡𝑖𝑣𝑒 𝑐𝑢𝑚𝑢𝑙𝑎𝑡𝑖𝑣𝑒 𝑐𝑎𝑠ℎ 𝑓𝑙𝑜𝑤
+
𝑐𝑎𝑠ℎ 𝑓𝑙𝑜𝑤 𝑜𝑓 𝑡ℎ𝑒 𝑓𝑜𝑙𝑙𝑜𝑤𝑖𝑛𝑔 𝑦𝑒𝑎𝑟

PBP Value = 4 + (11,176,198 ÷ 78,281,130) = Four Years and Two Months

Approximately

 The project achieves a positive value for the NPV Indicator = EGP 2,866,243
Where:
𝑛𝑒𝑡 𝑐𝑎𝑠ℎ 𝑓𝑙𝑜𝑤 𝑑𝑢𝑟𝑖𝑛𝑔 𝑡ℎ𝑒 𝑦𝑒𝑎𝑟
Present value of cash inflows = ∑ [ ]
( 1 + 𝑟)𝑖

NPV = Present Value of Cash Flows - Investment Costs = 70,716,813 – 66,500,000 =

EGP 4,216,813

 The project achieves an IRR = 20%, which exceeds the investors' RRR in
accordance with industry rates.
 The required technical know-how to set up the project is available in Egypt,
especially in Qalyubia Governorate, which is characterized by its proximity to
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A Preliminary Feasibility Study on the Business of Producing Steel and Stainless Steel Sections and Flats

sources of raw materials, as well as the availability of all utilities necessary for the
project. In addition, the Governorate grants chemical industries licenses required
for the project and provides skilled labour at competitive prices.

 Logistics facilities and ports are available, and Egypt's strategic geographical
location gives the project a competitive edge i.e. it helps in reducing costs and
penetrating the global markets with competitive prices.

Note:
(The data presented in the technical study are estimated data according to the data
received from the Industrial Development Authority).