I.

PROJECT SUMMARY

1 Project Name Kenani Tadese Mixed Use Building

2 Project Owner Kenani Tadese Enterprise
3 Project Location Oromia Regional State, Shegar City Administration, Gefersa Guje Sub- City

4 Project Composition Mixed Use G+5 Building

5 Land Required 2,000 m2
6 Types of Business Mixed Use
7 Legal Status Private Owner
8 Total Initial Capital ETH Birr 13,649,622.00
9 Investment Share Equity 30% Birr 4,094,886.60, Loan 70% Birr 9,554,735.40
10 Employment 10.1 Permanent
Opportunity  Skilled=12
 Unskilled=10
 Total 22 Persons
10.2. Temporary
 Skilled=5
 Unskilled=5
 Total 10 Persons
 Grand Total= 22 Permanent+ 10 Temporary= 32 persons
11 Market Share 100 % domestic
12 Technology Use Labor intensive, low capital use and technology transfer to nearby farmers
13 Benefit of the project 13.1. To the local community:
 Create employment opportunity
 Creation of business opportunity
 Increase income of the local community
 Technology transfer to the local community
13.2 To the Region/ Country
 Increase Revenue
 Reduce level of unemployment

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 II. Profile of the Country

Ethiopia covers an area of 1,104,300 square meters. Climatically there are two seasons: the
dry season, October to May, and the wet season, June to September. The topography of the
country is an elevated central plateau varying in height between 2000 and 3000 meters. In the
north and centre of the country, there are some 25 mountains whose peaks rise above 4000
meters. The most famous Ethiopian river is Blue Nile (or Abbay), which flows north a
distance of 1,450 kilometres from its source in Lake Tana to join the White Nile at Khartoum,
Sudan. The population is estimated at 96,633,458. (Selamta the in flight magazine of
Ethiopian air lines: July/august 2015). The economy of country, about 90 percent of
population earns a living from land, mainly as subsistence farmers. There is also a thriving
livestock sectors, exporting cattle, hides and skins.

Ethiopia is a multi ethnics state with 83 languages and 200 dialects Amharic is the working
language of the federal democratic republic of Ethiopia, while Oromigna, Tigrigna,
Sidamigna, Guragigna, and others are widely spoken. Ethiopia uses 220 volts 50 cycles AC.
Plugs are European two-pin. Ethiopia is the GMT+3 time zones. It follows the Julian
calendars, which consists of 12 months of 30 days each and 13 th month of the five or six days
(on a leap year). The units of currency of the country are the birr and cents. Notes are 200,
100, 50, 10, 5, and 1 birr. The 1 birr coin is also in circulation. ATMs (Automatic Teller
Machines) are found in major Addis Ababa hotels, shopping malls and at the Bole
International Airport. It is important to retain currency exchange receipts. Banking hours are
usually 8 a.m.- 5 p.m. Monday to Friday and 8 a.m. - 4 p.m. Saturdays. Most banks work
through launch time; for courier service, DHL, FedEx, UPS, TNT, and EMS have offices in
Addis Ababa. Telephones, Fax machines and internet access are available in Addis Ababa
Hotels and private internet centres around the city.

Government office hours are 8:30 a.m.-12:30 p.m. and 1:30 a.m.-5:30 p.m. Monday through
Thursday working hours on Friday are 8:30 a.m.-11:30 a.m. and 1:30 a.m.-5:30 p.m. private
and public businesses are often open on Saturdays. Public holidays are celebrated according
to Ethiopian (Julian) calendar (see ‘’Time”). The calendar is seven years behind the western
or Gregorian calendar, with the New Year falling in the September. The country is known by
its scenic mountain ranges, laying on one side of the country the Danakil depression, on the
other side. The country’s cultural mosaic utilizes more than 83 languages, remaining
harmonious, in its diversity.

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1. Introduction
1.1. General Background
The current fast and dynamic economic growth of Ethiopia especially in urban area
necessitates equivalent growth of building and construction sector. The sector should expand
rapidly to support the overall economic development sustainable. In the building sector of the
economy, the multipurpose in the one becoming rapidly expanding in urban areas of the
nation since dynamic economic development of urban economy requires the construction of
these buildings in towns to support the growing of business service sectors like supermarkets,
beauty salon, shops, offices cinema computer centre, cafeterias, restaurant, assembly hall,
guest house and other activities. In this regard, dairy used building expands in the all parts of
the country. Investment and property development play an important in any emerging
markets or economies. Property generally comprises residential houses and commercial real
estate property (mainly mixed use building) developed for rental business and sale. The
property investment market in Ethiopia remained under developed for several years. As a
consequence, the supply of residential houses and non residential real estate that can be used
for residence, office space, shopping malls and catering services in the urban centres of the
country is disproportionately low to cope with the growing demand in the country spinning
from the average growth in GDP of 5.5 percent over the last ten years and population
increase. The relatively good performance of the macro economy (real growth in GDP, low
inflation rate and growth in investment and export sector) has stimulated unprecedented
investment growth in the property sector over the last five years. The growth of investment in
the property market over the last five years in consistent with the global experience
suggesting that investment in the residential and commercial property (real estate) is greatly
influenced by the performance of the main economic conditions. In general, a stable
macroeconomic condition leads to economic and business growth and develops investors’
confidence. This certainly spurs large demand in the property market for office space,
shopping malls, catering services, apartment and residential houses. Following growing
demand trends, and with the expectation of high return on their investment capital, large
number of land developers pooled their financial resources and invested in the property
market. To this effect, the owner of the envisioned Multipurpose Building of Kenani
Tadese Enterprise that established with indigenous micro enterprise which live in Shegar
City Administration, Gefersa Guje Sub-City Administration. This micro enterprise prefers
to invest in modern way and undertaken this project study to check the market, technical and
financial feasibility of this project. The promoters are very ambitions and committed to

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 realize the project. Hence, they expect to get the necessary support from the city
administration to make the project to be operational. Looking at the past trends and permits
issues by the government to the construction of real estate properties including the dairy farm
building in the major urban areas of the country especially in Addis Ababa one can easily
conclude that the momentum is more likely to continue. Besides, the government polices and
incentives for the private sector investment are very promising that motivates the promoter to
engage in mixed use building business.

1.2 Objective of the project

The major goal of this project is indigenous farmer and their Childers wish to invest on their
areas for sustainable growth rather than take land compensation money as cash and to
contribute towards the growth of Gefersa Guje Sub-City Administration as association. Its
specific objectives include the following.
Specific objectives
 To construct and develop modern shops, offices, and restaurant, bedroom & cafeteria
facilities that enable to provide standard services.
 To undertake trading and other refuted business activities that enable to generate a
reasonable to the invested capital.
 To develop modern business centre that would provide services of international standard
in order to attract foreign visitors and thereby contribute towards the generation of hard
currency for the country.
 To create employment opportunities for the population in the town and
 Contribute towards the beautification of the town through the construction of modern
building infrastructure and facilities.

1.3 Project description

The long-term goal of the project is become the best choice in Gefersa Guje Sub-City
Administration and its surrounding areas by creating a differentiated experience capitalizing on
personal service. The proposed project will have a total area of 2,000 m2, designed to reader a
multipurpose giving business, which will in turn plays significant role towards solving shortage
of business centre in Gefersa Guje Sub-city. The historical nature of the town as business
unique location in one of the most attractive parts of the occurrence of the town along Addis
Ababa to Ambo new asphalt road and near to capital city. The owner plans the project to render
banking and insurance, shopping facility, bank and cafeteria services to create high quality

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class to satisfy the interest of customers in the town, Based on environmental and other
considerations, the entrepreneur has determined the type and size of the building which is
already determined by the site; conceptual planning and preliminary analysis have been carried
out by analysts. In order to attract its clients to the service, the project will develop high
standard shop & banking rooms and office of best choices and will also save best quality
restaurant and cafe, national and international dish and various types of soft drinks.

2. Market Analysis

The existing market condition is quite favourable for smooth commodity turnover
privatization process and the free market economic system have favourable pre-condition for
the growing demand for commodities day-today increasing price office rent, hotel and other
service in response to population growth and improvement beaver of the people In the area of
the project there is unattached market for, cinema, swimming pool, computer centre, hall,
restaurant and other purpose. More over mixed use service are expected to increase which
case will entailed growing demand for different multiservice. In addition to that, free market
policy and the abolishment of price control and permission of free commodity mobility and
transfer its input and output good condition for the project sustainability.

2.1. The Demand-Supply Gap

Gefersa Guje is one of the fastest growing cities in the Oromia Regional State, towns
surrounding Finfine and western part of the region at large. It is located at 12 kilometres from
the centre of the city; Finfine. Gefersa Guje Sub-City Administration has expanded to
western and southern part while the older settlement of Burayu is found smoothly continuing
from the boundary of the city in the way of Gefersa Guje. The opening of new road from
Lukanda to Ambo that passes through has attracted huge settlement and investments in the
city.

These are due to its location the most important groups of potential customers that include
both the local and foreign tourists and the modern business community who choose services
that range from economic to high class standards. These groups would also choose a healthy
comfortable climate that combines a more traditional type with that of farm, hall, bedrooms
restaurants and cafeterias. Even though when compared with similar town surrounding
Finfine, Gefersa Guje seems to have no developed mixed use building, the existing supply is
far behind the growing demand for standard service. Hence, the project will solve the serous

5
demand problem in the town. Over the last decade, there has been a significant growth in the
number of local and international trades across the country. This increase is mainly associated
with the stimulation of economic activist and partly due to an increase in the flow of
international and local traders in to the town. Since Gefersa Guje Sub-City Administration is
an important huge market centre in addition there is a significant increase in business
activates and hence increasing the number of investor invest on different sector. Even though,
there is lack of quantitative estimates that depict the actual demand and also the annual
growth rate. Mixed use building facilities and rural commercial facilities are null in the
country side. So far in the town there is no development of such kind standard building it is
the first of its kind in the town and will promote other investors from the town and the
surrounding areas. The other are mostly constructed restaurant not comfortable for such kind
of activities. As a result, there is a large gap between the developed and that of the supply for
modern bedrooms; Bank and cafeteria accommodation hence this project would not face any
problem of demand scarcity of business centre and it would provide good service to
customers.

2.2. Current Supply of Mixed use Building

Commercial building/office sector has shown a dynamic change in the past few years. The
reason for this could be rapid economic growth and supporting public infrastructural
development other factor relevant in specific case of commercial building are the large
increases in national and international businesses, particularly firms in the service sector. The
business of modern dairy farm booming highly due to the recent rapid growth experienced in
Ethiopia. As a result, a good number of local and international organizational are coming in
place.

2.3. Future Market or Demand Commercial Building Rental

The demand for office is a derived demand because firms rent space as an input to the
production of services or goods they provide to business and households in the local regional
or national economy. Following our survey of office space users in Burayu surrounding area
are mainly firms providing Banking, cafeteria and restaurants, bedrooms, supermarkets and
computer centre service. The different customers for commercial buildings also include shops
and offices that are currently renting out to provide their goods and services. Future demand
for office space is actually driven from growth in number of offices in the city which in turn
is influenced by the macroeconomic growth in country. Following the government five year

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growth and transformation plan (GTP), the Ethiopia economy is expected to increase by 11%
for base case scenario and 14% under the optimistic case scenario.

2.4. Target customers

The target customer of this envisage project include:-

 Business community
 Nearby business organization
 The government Bureau
 Small accounts (SOHO) SME
 Non-governmental Organizations

2.5 Marketing Promotion and Strategy

In order to penetrate and gain considerable market share, one of the major marketing
strategies for the project is consistently rendering quality service to its tenants. Due emphasis
must be placed on improving quality of service and facilities. The major marketing strategies
to promote the project and gain considerable market share include:

 advertising through different means focusing on the existing service and facilities
 promote in association to the key location nearby business
 Working on sustained promotional work.
 Working on public relation to reach and influence key persons and organization with a
capacity of making decision.
 Keeping the quality of its service/facilities and consistently improving with changing
situation
 Seasonal discount pricing different others customer centric marketing strategies will be
used by company.

II.6 Competitions

There are different forms of competition that may face the envisaged mixed use-building.
These are price and non price based competition. Moreover, there are different competitors
that will compete with the project either direct or indirectly. But the mixed use-building
under discussion has diversified marketing strategies that could enable it come up with the
different competitors in the market. Moreover it will frequently conduct competitor’s
research which focuses on, the strength and the weaknesses, the different competitors’

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strategies, the techniques they use in rendering the service, their customer handling methods
and others. Generally the project has many other projects all over Ethiopia which competes
with it.

3. The Project Facilities and Services Plan

In order to provide mixed use business centre building services of high standard, it has been
planned to construct and develop the infrastructure and facilities that would viable to meet the
requirement of an international standard business centre. Accordingly, various buildings and
facilities will be constructed phase by phase starting with most needed ones that are essential
to commence the operations of business activities. With the completion of construction, the
building will provide combined services such as shops, bedroom, restaurant and cafe services
as well as modern business centre that primarily serve its guests and major clients.

3.1. Construction of Project

The project schedule was developed using the preliminary design given to the project team.
Additionally, the group considered typical construction activities and durations taken from
similar construction projects as well as realistic constraints on building development. For
instance, it is necessary for the structural frame to be completed before concrete can be
placed for the slab on deck. Hand drawn construction plan detailing site entrance and storage
areas were coordinated with the project schedule to give the reader visualization of the
construction site setup through various periods of construction process. The construction
process for this project is normally a disjointed three wages development by which the
conceptualized need of the promoter of this project is translated into a functional facility that
will meet their needs in terms of time, cost and quality. Based on a general program of the
project owners the consultant who is going to be hired makes site studies, develops structural
designs, prepares drawings and specifications and determines quantities involved and
estimated the resultants costs. All these activities will be done in the first phase of the project
which is the design stage after the document are produced by the designers have been
received and the works secured the project is supposed to enter the tendering stage. At this
stage contractor studies the project document analyzes subsequently determine the
construction methods, built up their unit rate and submit their bids for the works. The
promoter of this project intends to compare the bids and award the contract for the lowest
responsible bidder. This, is of course, presupposes that the favourable proposal does not
exceed the allocated budget. After the award is made and the contract signed between this

8
 project owner and the contractor, project constructor is expected to prepare and submits a
detailed construction program which includes material schedule, manpower requirement and
cash flow forecast.

After the award is made and the contract signed between this project owner and contractor
the project constructor expected to prepare and submits a detailed construction program
which include material schedule, manpower requirement and cash flow forecast.

3.2 Service plan

1. Bank and office service

At the flower this building has access used for Bank service and super market service. At 3 rd
flower of the building different office will be arranged for rent.

2. Boutique and different service

The building has different service on 2nd floor like Boutique, different durable and non-
durable goods sells shop, haircut, launder and etc.

3. Super Market

The Hotel has one supermarket at 1 st floor of the building that serves the customer’s addition
to hotel service.

4. Multipurpose Assembly Hall

The Hotel has two comfortable multi-purpose assembly halls at fourth floor of the building
which have 100-160 seats. The hall is planned to accommodate and serve multiple purposes.
It can be used for multi-purpose activities by rearranging of seat and adding appropriate
facilities on time and site. The owner has various options to use available rooms such as for
conventions, wedding services, training, workshops, and other public gatherings.

5. Coffee shops, Cafeteria, Bar and Restaurant

The building has cafeteria, Bar and Restaurant on 3 rd floor of the building, which each serve
for different consumption and recreational purpose.

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 a) Cafeteria Service

A cafeteria is a type of food service location in which there is little or no waiting staff table
service, whether a restaurant or within an institution such as a large office building or school;
a school dinning location is also referred to as a dining hall or canteen.

b) Bar

There is a different bar that will provide in house and terrace food and beverage services. Its
total capacity one bar is estimated to be 120 persons at a time.

c) Restaurant

Two restaurants one modern and the other traditional with capacity of 100 set at a time each
will be established. The restaurants will basically serve breakfast, lunch and dinner by
providing daily menu, weekly buffet, and other choices of customers.

d) Coffee shop

Five small comfortable coffee shops will be established with a capacity of 30-35 seats.

6. Bedroom

The mixed use business has bedrooms on 4th flower of the building which offer versatile
service and facilities. Bedrooms will be more spacious allowing ample and generous ease of
movement, comfort and relaxation for guest. Among the features of the guest rooms the
major ones are:

 Private bath and shower room, all bath rooms equipped with an excellent quality of
sanitary wares and fittings:
 Newspaper and magazine,
 ETV and other channels,
 Hot and cold water,
 Wake up call, and
 Hair dryer

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3.3 Utilities and project implementation

A number of utilities world be put in place in order to ensure smooth functioning of the
project. These utilities include:

 Water supply
 Supplementary electricity supply
 Telephone line Broadband
 Fuel, oil, lubricant
 Drainage facility
3.4 Project Implementation

The project implementation is expected to take 24 months. The major activities include Bank
loan processing construction offer the above matured major activities is presented below
building, cleaning the area around the building, procurement of equipment’s and start
rendering services. The time schedule for the above matured major activity is presented
below:

Table 1 Project Implementation Schedule

N0. Activities Date

1 Land Requested April-May, 2026
2 Land Approval June, 2026
3 Bank loan processing July- September 2026
4 Site Development September, 2026
5 Building and construction work October, 2026-June, 2027
6 Preparation for service July 2027- September 2028
7 Service execution October, 2028-January, 2028

4. Organizational Structure

4.1. Organization and Management

The Organizational structure should be in a way that the company abele to achieve its
objectives as well the satisfaction of standard requirement. In additional to this the structure
should fit that dynamics of all customers in the building ranging from small business to large
tenants.

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4.2. Organizational structure

The organizational structure of the project is designed by including all the necessary
personnel under the right division. At the top of the organizational structure, there will be
board which selected in two years from member of the share company. These board members
under take its work based on the rule and regulation they prepared and responsibility of
supervising the overall activity of the building. Depending up on the nature of the centre and
the amount of work to be performs; there exist auxiliary units under the general manager.
Employees under each unit will be supervised by the department head that is accountable for
the general manager. General Manager is appointed by owner.

4.3. Manpower Requirement

The project is expected to generate several working places during construction and its
implementation. Based on the organizational structure of the project, it is anticipated that
about 32 workers will be employed permanently in the project. The manpower requirement of
the project and salary bill is given as follows.

Table 4.1 Man power and salary

No Description Qualification No Req Monthly Salary Annual Salary

1 Project Manager BA in Mgt/Eco. 1 3,000 36,000
2 Executive Secretary Dip. In Secretarial SC, 1 1,000 12,000
3 Marketing officer BA in Market./Econ. 1 2,000 24,000
4 Electrician Dip. Electricity 1 1,500 18,000
5 Plumber Plumbing 1 1,500 18,000
6 Administer & BA in Accounting/Mgt 1 2,500 30,000
finance officer
7 Accountant BA in Accounting/Mgt 2 2,000 48,000
8 Cashier Dip. in Acc./Mgt 4 1,000 48,000
9 Driver Driving License 2 1,300 31,200
10 Cleaners Read and Right 4 500 24,000
11 Guards Read and Right 4 600 28,800
12 Whiter 10/12 Complete 10 600 72,000
Total 32 384,000

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5. Investment Plan

5.1. Fixed Investment Costs

I. Building and construction

The project construction activates shall be carried out contractor and supervised by a
professional manger who will be responsible for the proper of the project. To estimate the
construction cost of building the prevailing contractors’ average unit cost considered.

The project will construct G+4 multipurpose building with high quality construction and best
quality materials at a cost of birr 4000 per square meter area. The building will rest on 300 m 2
area of the total site and the total investment cost for building is estimated to Birr
8,532,800.00.

Table5.1. Building Construction

SN Description Land in m2 Unit cost in Birr Total Area

Building G+4
1 Ground Floor 300 400 2,200,000
1st Floor 300 3500 2,050,000
2st Floor 300 3300 1,890,000
3st Floor 300 3000 900,000
4st Floor 300 2500 750,000
Store 100 2000 200,000
Guard House 100 200 20,000
2 Parking, Spacing and internal road 400 375 150,000
3 Green area 80,000
4 Fence and others 120,000
5 Site Development 60,000
6 Land Lease initial fee 112,800
Total 8,532,800
II. Building Machineries, equipment’s and Vehicles

The Project requires one Toyota pickup & Min bus vehicle to be used for the day to day
administrative activities and daily work of business service. This vehicle imported according

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to investment rule. On the other hand, in order to guarantee power and light the Hotel will
have a stand by diesel generator.

Building Machineries equipment’s

SN Description Measurement Qty Unit cost in Br. Total cost in Br.

1 Generator Unit 1 300,000 300,000
2 Maintenance kit Set 1 60,000 70,000
3 Carpentry tool Set 1 35,000 35,000
4 Electrician tool box Set 1 75,000 75,000
5 Fire extinguisher Unit 5 10,500 50,500
(security equipment)
Total 530,500

III. Vehicles

Type of Vehicles Unit Qty Unit price (Br) Total price

(Br)
Toyota pick up No 1 2,000,000 2,000,000
Total - - - 2,000,000
Table 5.2: Office furniture’s and equipment’s

T/L Description Cost Estimate(Birr)

1 Bed room and Guest House equipment 250,000
2 Office Equipment 150,000
3 Assembly hall equipment 100,000
Total 500,000

IV. Utilities

This includes cost of water, electric power and telephone line estimated to be birr 50,000.

Table 5.3: Summary of fixed costs

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 No Description of item Cost estimate(Birr)
1 Building and Construction 8,532,500
2 Vehicle 2,000,000
3 Building Machineries and equipment’s 530,500
3 Furniture’s and equipment’s 700,000
4 Utilities 50,000
Total 11,813,000.00

5.2. Running Costs

Fuel and Lubricant oils

I. Generator:
 Daily working hours:2hr
 Fuel consumption rate: 4liters per hour
 Oil and lubricants:10% of fuel cost
 Total cost of fuel and lubricant oils=birr 64,240

II. Pick Up:

 Annual Mileage 41,000 km

 Fuel consumption rate: 0.125 liters/km
 Fuel cost:Birr17/liter x 5, 125liter=87,125
 Oil and lubricants: 10% of fuel cost =8712.5

Total cost of Fuel, oil and lubricants =95,837.50

III. Repair and maintenance

Table 5.2.1: Repair and maintenance

No Items Cost estimate/year

% Value
1 Building and Construction 1 56,328.11birr
2 Vehicle and generator 3 30,000birr
3 Office furniture’s and equipment’s 5 35,000birr
4 Utilities 2 1000 birr
Total 122,328 birr

IV. Employee benefits

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It includes medical expense, uniform and other incentive package and assumed to be 10%of
annual salary expense =birr 75,600/year.

V. Travel expense

It is stalemated to be 5% of annual salary expense i.e. Birr 38,400/year

VI. Insurance

It is assumed to be 1% of fixed investment cost=85,131/year

VII. Miscellaneous expense

It includes cost of land rent, legal and license fees, telephone, postage and other
miscellaneous expenses. The total annual cost of these cost components is estimated to be
birr 50,000/year.

Table 5.2.2: Summary of Running Costs

NO Description Annual cost (birr)

1 Salary 384,000
2 Employee benefits 38,400
3 Travel Expense 19,200
4 Fuel and lubricants 223,210
5 Repair &maintenance 164,100
6 Insurance 85,130
7 Miscellaneous expense 150,000
Total 1,064,040
Table5.2.3: Initial Working Capitals Requirement

NO Description Period Annual cost (birr)

1 Salary 1year 384,000

2 Employee benefits 1year 38,400
3 Travel Expense 1year 19,200
4 Fuel and lubricants 1year 223,210
5 Repair &maintenance 1year 164,100
6 Insurance 1year 85,130
7 Miscellaneous expense 1year 150,000
Total 1,064,040

6. Project Capital and Financing

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6.1 Project capital

The total investment capital of the project is estimated at birr 13,649,622.00 of which birr
11,813.000,00 is for fixed investment while the remaining balance of birr 1,064,040 will be
initial working capital.

Table 6.1: Project Capital

No Items Amount(Birr)
1 Building and Construction 8,532,500
2 Vehicle and generator 2,000,000
3 Building Machineries and equipment’s 530,500
Furniture’s and equipment’s 700,000
4 Utilities 50,000
Sub total 11,813,000.00
Initial working Capital 1,064,040.00
Contingences 6% 772,622.00
Total 13,649,662.00

6.2 Source of finance

The total investment capital of the project is to be financed from the promoter’s equity and
Bank loan. Out of the total capital birr 13,649,622.00 of which 30% is 4,094,886.60 is
contributed by the Owen equity. While the remaining balance of birr 70% (9,554,735.40) is
to be financed by local banks.

The bank loan will be repaid based on the following terms and conditions:

 Loan amount=birr 9,554,735.40

 Interest on loan (including service charge) =16.5%

Table 7.1 Loan Repayment Schedule

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 Year Principal Repayment Interest payment Year ending Balance
0 955,,473.5 - 9,554,735.40
1 955,473.5 1,052,285.16 5,739,737.22
2 955,473.5 947,056,641 5,101,988.64
3 955,473.5 841,828.126 4,464,240.06
4 955,473.5 736,599.61 3,826,491.48
5 955,473.5 631,371.094 3,188,742.9
6 955,473.5 526,142.578 2,550,994.32
7 955,473.5 420,914.063 1,913,245.74
8 955,473.5 316,685.547 1,275,497.16
9 955,473.5 210,457.031 637,748.58
10 955,473.5 105,228.516 0

7. Depreciation of fixed investment items

The straight-line method has been used to depreciate/amortize all fixed items of the project.

The depreciation rate applied for all fixed assets is given below:

Table 7.1 Depreciation Schedule

No Item Annual Depreciation

% Value
1 Building and Construction 5 281,640.50
2 Vehicle and generator 10 140,000
3 Furniture’s and equipments 10 53,000
4 Utilities 5 3000
Total - 477,640.50

8. Income Projection

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The company reaches its full capacity after five years. It starts: from 60%, in first year and
increase by 10% every year up to 100% at the end of 5th year.

The cash flow of the project is in one year from bed rent, hall rent, bar & restaurant, coffee
shop, Swimming pool, multipurpose assembling hall, Cinema, computer center and other
service annual revenue estimated to be Birr 2,172,900. From this income tax of 30% birr
651,600 and net income 1,521,300 birr.

Project income expected increase by 8% and the expense of the project increase by 4.5%
over the whole project life. From these we conclude the project from its operation over the
project year and could be in a position of offset its cost of investment and operation including
the clearing up of its liabilities.

Table 8.1 Income Projection analysis

SN Description Qty Unit Unit price Monthly rent Annual

measurement in birr in birr rent in birr
1 Business centers 500 M2 330 66,000 792,000
2 Cafe, bar and 500 M2 366.7 55,000 660,000
restaurant
Office 500 M2 440 44,000 528,000
Assembly hall 500 M2 165 16,500 198,000
Guest house 300 M2 160 8000 96,000
Total 2,172,000

9. Financial Analysis and Plan

i. Cash flow Statement

The cash inflow statement analysis of the project indicates that there is a negative result of
discounted cumulative annual cash inflow during the first one year. This is normal for newly
starting project. Like as indirectly shows its pay-back or pay-off period. From the 2 nd year the
net discount cumulative annual cash inflow starts increasing with birr 233 thousand and
reaches birr 1883 thousands by the end of the project life. This is attributable to a careful
allocation of resources, good management, proper implementation of recommended inputs
and operation activities and high market potential area because of its proximity; the outcome
being the off-set of the overall cost stream of the project.

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The fact that the project has a cumulative balance of birr 4335 thousands at the end of the 10 th
year shows that, the project financially self –sufficient to carry out its activities without
requiring additional loan except in the first two years for initial startup and implementation of
the project.

ii. Simple Rate of Returns(SRR)

The ratio of the sum of the annual net profit and bank interest the total investment cost of the
project will value the simple rate of return. The values are computed as follows:-

SRR= Net profit +Average Bank Interest x 100%

Total Investment Cost
= 1,521,300 +320,848 x 100% = 1,842,148 x 100% = 20.5%
8,960,000 8,960,000
Profitability
Based on the projected profit and loss statement, the project will generate a profit throughout
its operation life. Annual net profit after tax ranges from birr 62.35 million to birr 248.23
million during the life of the project.

Ratios

In financial analysis financial ratio and efficiency ratio are used as an index or yardstick for
evaluating the financial position of a firm. It is also an indicator the strength and weakness of
the firm or a project. Using the year-end balance sheet figures and other relevant data, the
most important ratios such as return on sales which is computed by dividing net income by
revenue, return on assets (operating income divided by assets), return on equity (net profit
divided by total investment) has been carried out over the period of the project and all the
results are found to be satisfactory.

Break-even Analysis

The break-even analysis establishes a relationship between operation costs and revenues. It
indicates the level at which cost and revenue are in equilibrium to this end, the break-even
point, for capacities utilization and sales value estimated by using income statement project
projection are compared as followed.

Break-Even Sales Value= Fixed Cost +Value cost = 0.489= 48.9%

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 Sales Revenue
Pay-back Period
The pay-back period, also called pay-off period is defined as the period required for
recovering the original investment outlay through the accumulated net cash flows earned by
the project. Accordingly, based on the projected cash flow it is estimate that the project’s
initial investment will be fully recovered with 5 years and 9 months.
p
p=9,110,694/1, 521,300=5.9

Net Present Value

Net present value (NPV) is defined as the total present (discounted) value of a time series of
cash flow NPV aggregates cash flow that occurs during different periods of time during the
life of a project in to a common measuring unit i.e. present value. It is standard method for
using the time value of money to appraise long-term projects NPV Is indicator of how much
value an investment to project adds to the capital invested. In principle, a project is accepted
if the NPV is non-negative.

Accordingly, the net present value of the project at 10% discount rate is found to be Birr
10.65 million which is acceptable .For detail discounted cash flow.

Table 9.1 Financial Analysis of present Net worth /Capital/

Proj-year Sales/benefits Operating Net cash flow Discount factor at 10% Present Value
1 2,172,900 1,064,041 1,108,859.00 0.909 1,007,952.83
2 2,346,732 1,111,923 1,234,809.16 0.826 1,019,952.36
3 2,534,471 1,161,959 1,372,511.19 0.751 1,030,755.90
4 2,737,228 1,214,248 1,522,980.66 0.683 1,040,195.79
5 2,956,206 1,268,889 1,687,317.78 0.621 1,047,824.34
6 3,192,703 1,325,989 1,866,714.30 0.563 1,050,960.15
7 3,448,119 1,385,658 2,062,461.05 0.512 1,055,980.06
8 3,723,969 1,448,013 2,275,955.97 0.473 1,076,527.17
9 4,021,886 1,513,173 2,508,712.90 0.423 1,061,185.55
9,391,334

10. Benefits and Justification

The share of the industrials sector in the national economy is high. The industrial center is
supplementary and stands second to agriculture in both the provision of job opportunity and
the contribution to the gross domestic product of the country. Thus, it has a share in

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contributing to both the economic and social aspects of the country. Some major benefits of
the project include.

10.1 Economic Benefits

The project can create employment for 32 persons. The project will generate Birr 1,402.7
thousand in terms of tax revenue through the project. The establishment of such business will
have a foreign exchange saving effect to the country hay substituting the current imports. The
project will also create back ward linkage with the forest sector and generates income for the
Government in terms of payroll tax.

10.2 Sensitivity Analysis

Sensitivity Analysis refers to the testing of key variables in the cash flow pro-forma to
determine the sensitivity of the project’s NPV to changes in these variables. For example, in
project log costs may increase or raw material price may higher than two days cost, higher
labor costs, increase land acquisition by different rates to determine the corresponding impact
on the NPV. It is useful to test a variable in the cash flow that appears to after significant risk
or probability of occurring. The analysis becomes another useful tool when combined with
others to improve the decision making process.

11. Environmental Impact of the Business

The EIA of the project activities was determined by identifying the environmental aspects
and then undertaking an environment risk assessment to determine the significant
environmental aspects. The environmental impact assessment has include all phase of the
project namely construction phase and operational phase. The building has both positive and
negative impact. Environmental aspects are fundamental for sustainability waste
management. In this regard business will undertake a separate and detail environmental
impact assessment.

A. The environmental policy of Ethiopia is to improve and enhance the health and quality
of life of all Ethiopians and to promote sustainable social and economic development through
the sound management and use of natural, human made and culture resource and the
environment as a whole. To this end, the national environmental policy has identified a
number of sectorial and cross sectorial issues. One of the cross sectorial issues addressed in
the national environmental policy is EIA. Article of the environmental policy provides policy
direction for environmental impact assessment (EIA) in Ethiopia. The following are some the

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important policy directions stipulated under article 4.9 that define some of the guiding
principles and procedures.

 Ensure that environmental impact assessments consider not only physical and biological
impacts but also address social, socio-economic, political and cultural conditions.

 Ensure that public and private sector development programs and business recognize any
environmental impacts early and incorporate their containment into the development
design process.

 To ensure that, at specified intervals during business implementation, environmental

audits regarding monitoring, inspection and record keeping take place for activities where
these have been required by environmental impact statement.

B. Proclamation on Environmental pollution control (EPCP): Besides the EIA

Legislation

Proclamation no. 300/2002 on environmental pollution control is another important piece of

legislation which will have a direct bearing on service and other development business. One
of the principle requirements stated in the environmental pollution control proclamation that
can affect all scheduled development business is the provision, which states that no company
is allowed to pollute the environment directly or indirectly by transgressing the relevant
environmental standard([Link]. 2 of environmental pollution control proclamation).

C. Proclamation on Liquid and Solid Waste Management (no.513/2007) the objective is

to enhance at all levels capacities to prevent the possible adverse impact while creating
economically and socially beneficial assets out of solid waste. It also indicates the general
obligation of urban administration, which is creating enabling condition to promote
investment on the provision of solid waste management services. The solid and liquid waste
of the business removed properly without flow to the water source.

Positive impact on the project is:-

 Generation of employment opportunity

 Source of income for the government through business income tax

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 Income generation for the promoter
 Being exemplary for other investors who want to engage in the same business line.
The project has the following negative impacts

 Noise and dust emission during construction

There are some noises during the construction due to the construction operation and the
company will use construct the construction during the day time. Again there is the emission
of dust which will be mitigated by sprinkling water on the service.

 Problem on workers on construction

During construction there are some problems that will materialize on worker. These are:
damage on operation by using machines, construction materials and others. To mitigate such
impact the company will provide safety insurance and safety equipment’s

 Problems during Operation

During operation there is some wastes emitting from the wire house building. These are
wastes from the latrine and will be mitigated by using modern waste treatment technology.

12. Environmental Impact Mitigation Measures

Because there is no high negative impact by the envisaged project except minor water
pollution to mitigate this appropriate environmental degradation corrective measure will be
taken. Waste materials will be collected in the compound disposed to the municipal disposal
site decoration tree will be planted in the compound for esthetical and environmental purpose
thus the project will have no negative impact on the environment.

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