Schedul

e8
2.
Operatin
g costs
03
4
5
47
9 62
2
68
1
74
2
80
3
81
4
91
1
84
2
93
9
7,1
77
3. Debt
service
(total) 0
2
0
5
50
1
47
5
44
9
42
4
39
8
37
2
34
7
32
10
3,4
93
4. Tax
(30%)
0 0 0 23
4
24
1
24
8
25
5
27
8
27
6
32
3
32
0
2,1
75
C.
Surplus(
Deficit)
03
8
9
34
4
47
9
52
6
56
5
58
1
63
4
64
4
75
6
1,
05
1
5,9
69
D.
Cumulat
ive cash
Balance
03
8
9
73
3
1,
21
2
1,
73
8
2,
30
2
2,
88
3
3,
51
8
4,
16
2
4,
91
8
5,
96
9
27,
82
3
2
1

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Preview text

ADMAS UNIVERSITY SCHOOL OF POST GRADUATE STUDIES

MASTER OF BUSINESS ADMINSTRATION

ADVANCED PROJECT MANAGEMENT

SUBMITTED TO: TERAMAJE W (PHD)

Group members ID no.

HELEN SEWALEM
PGM

GB/4201/

GUDISA NIGUSE PGMGB/4202/

YIDNEKACHEW FIKRU PGMGB/4203/

WINTA HAILU PGMGB/4251/

ESKEDAR AYELE PGMGB/4518/

FIREZER BIRHANU PGMGB/4745/

Addis Ababa, Ethiopia.

Table of content

1. Executive Summery----------------------------------------------------------------


1. Executive Summery----------------------------------------------------------------


2. Introduction--------------------------------------------------------------------------


3. Objective of the study--------------------------------------------------------------

4. Organization and management--------------------------------------------------

5. Market and demand analysis----------------------------------------------------

6. Technical Analysis-----------------------------------------------------------------


7. Financial Analysis----------------------------------------------------------------- - 7
8. Total investment costs------------------------------------------------------- - 7.1
9. Fixed Investment Costs----------------------------------------------- - 7.1
10. Working capital requirement ---------------------------------------
 ----------------------------------- 7.1
 Pre- Service Capital expenditure - 7
 Project financing-------------------------------------------------------------- - 7
 Operation and Maintenance----------------------------------------------- - 7.3
  Materials input --------------------------------------------------------- - 7.3
 Utilities----------------------------------------------------------------- - 7.3
 Repair and maintenance-------------------------------------------- - 7.3 Salaries and
wages--------------------------------------------------- - 7.3
Overheads------------------------------------------------------------- - 8 Economic
Analysis------------------------------------------------------------- - 8 Project
benefits------------------------------------------------------------- - 8 Project
cost------------------------------------------------------------------ - 9 Environmental impact
assessment------------------------------------------- - 10 Conclusion and
recommendation--------------------------------------------

1. Executive Summery

The prime intention of this project feasibility study is to set-up a Day Care in Addis Ababa, Bole
Kefele Ketema CMC area, Kebele 14/15, on estimated 1500 square meter of land. This project is
estimated to cost a total Birr 1 millionby which 40% of the indicated total investment cost will be
equity capital and the rest 60% will be financed through bank loan.

The 1500 square meter land required to establish the day care is expected from the city
government on lease basis. Although the exact lease price of the required land will be determined
by the city government to requires 20% down payment.

Besides, the project is expected to generate employment opportunity for more than 50 citizens of
the city on contractual basis during its construction phase and for about 15 people on permanent
basis as it starts its operation. The intended project will not impose a significant threat to its
surrounding environment and will not disturb the project area’s livelihood as it will be placed on
the open space and will not displace any citizens. Thus in general, it can be concluded that this
project is economically, socially and environmentally feasible.

2. Introduction

Affordability of child care came up repeatedly as an issue. The greatest number of survey
comments was about the inability to afford the cost of care at most of the day cares in Addis
Ababa, and the overall high cost of care in the area. Stakeholder interviews also site affordability
as an issue and research on local centers shows that the average cost of child care in Bole sub
city is higher than elsewhere in the county. For example, in FY 2017 the average monthly cost
for infant care was ETB 2,500 in Bole and ETB 2,000 in other Addis Ababa area.

Day care is a service which human beings needs to have at early ages, and values with the aim of
enabling individuals and societies to make comprehensive involvement in the growth and
development process. Day care plays a key role in increasing economic development, bettering
individual wellbeing and societal maturity. The benefits of day care could be reflected in various
dimensions. For instance, it raises labor productivity of parents, increases the number of better
citizenship, contributes to better health as a result, day care is basic for optimal development of
infants.
Many researches show the critical importance of the early years for brain development, as well
as the importance of this period in the development of healthy emotional and social skills and
day care readiness, no public infrastructure has been developed to support working families and
children.

This project is expected to significantly add to the city’s economic and social progress as well as
increment of good citizenship to the nation. Hence, the project is prepared to help the concerned
body make rational decisions to open a Day Care.

4. Organization and Management

Organizational Chart

The project will have the following Organizational Chart

General Manager

Executive
Secretary

Executive
Secretary

5. Market and demand analysis

With the growth of private investments, marketing has greatly expanded its scope; many
marketing managers take the whole country as their market place. Managers of such broad
activities take in to account differences in business practices.

Usually, marketing study or research is conducted to analyze consumer trends on that particular
service or product and to forecast the size and location of markets for specific products or
services. Besides it helps to gather information concerning marketing problems and opportunities
so that it will help to design appropriate marketing strategies for that selected type of business
activity.

To proceed with, it has already been mentioned that this project is a day care project, which will
render services Day Care and is planned to launch in Bole sub city, CMC area, kebele 14/15 part
of the city. Having this in mind, one can analyze the demand-supply situations from different
angles.

To start day care service, a number of evidences can be indicated for the presence of sufficient
demand for such kind of day care services facilities in the area. It is a fact that services are a
requirement for sustainable development, innovation and discovery.

To start with the city’s perspective, numerous evidences show that the demand for day care
service is increasing from time to time. This rise in the number and enrollment rates implies
presence of a comparable shortage of KGs in the city which requires for additional investment to
increase the number of Day Cares in the city to meet the increasing demand. When we see the
location of Day Care in the city, we found the day care in a distant area. So, this shows that there
is a demand for a Day Care in the city.

To see other dimensions of the need for a Day Care in the planned area, one can closely see the
specific site where this project is expected to be launched. It is well noticed that the area as one
of the major expansion areas. Following this, currently the area is highly growing In terms of
population, socioeconomic and infrastructure development. To this end, introducing such kind of
project would be much helpful for the area’s development, satisfy the residents demand and
generate profit.

6 Technical Analyses

As tried to indicate earlier, the prime objective of this project is to set-up a Day Care, at its first
phase of operation. The project site is located on the feasible social area of the city.

To proceed, the day care is planned to locate on 3,000 square meter area and is planned to be a
kindergarten height level building with a total built up area of 1200 meter square and floor area
of 1,800 square meters. The day care will have a total of 15 classrooms having an average
capacity of 25 to 40 babies per classroom. Of the 15 class rooms, 12 will be for the pr
kindergarten, each grade with two class rooms. The rest three classes will be for the Day Care.
Besides, the day care building is designed to have offices, library, computer room, laboratories,
cafeterias, feeding rooms, resting rooms as well as recreational facilities. Regarding the project
location, the site is convenient to infrastructural facilities such as road, water and electricity. And
this will help the project to undergo smoothly.

The required land for the project is expected to be acquired on lease basis from the city
administration. It is assumed that clearing and leveling of the land, constructing the building and
making it ready for the planned education service will utilize a one-year period of time and the
day care will start giving its service at the second year with 50%capacity. The day care will have
a total of 33 staffs at full capacity operation. As tried to illustrate on the organizational chart of
this project, the day care will have two major sub-divisions (Administration & Finance and
Service), which will be headed by the management division that include a general manager.
Materials input

Materials input mainly include workers uniform, sanitation and cleaning materials and others.

Item Description Assumptions Annual capacity build up rate Material Inputs '000' Birr

Workers uniform

 Uniform for 15 babies sister, IT expert and librarian,

Sanitation and cleaning material

 This include sanitation and cleaning materials such as details, mops, soaps, broom and
the like

7. FINANCIAL ANALYSIS
Financial analysis is basically helps to make sound decision regarding financial conditions of the
intended project and is also helpful for any decisions made by financial institutions.

 The project is assumed to be implemented within two years. In the first year, the project is
expected to acquire the land, construct as well as furnish the building. The project is expected to
start its operation at the second year with 50% teaching capacity, then increase to 75 % at the
third year and reach full capacity at the fourth year  The land required to establish this day
project is expected to be acquired on lease basis from the city administration;

 About 60% of the total capital investment costs including the working capital requirement are
assumed to be covered through bank loans of short and long-term credits. The rest 40% will be
covered by equity capital contribution of the project promoters. The expected revenue is assumed
to generate from registration fees, monthly-based service fees. Wages and salaries are assumed
to increase by 2% annually along with 10% incentive for employees every year. The project is
expected to pay 30% business income tax from its revenue.

7 Total investment costs

A total investment cost for this project is estimated to be 1 million birr. The fixed investment
task is expected to be finalized in one-year period of time. In other words, in the first year it will
be invested on land acquisition, construction of the day care building and furnishing of all the
necessary material, equipment and furniture.

7.1. Fixed Investment Costs

The total fixed investment cost for this project is estimated at 1 million birr. The major
components of this cost category are land acquisition, construction cost for the day care building,
costs of day care furniture and equipment as well as pre-service giving capital expenditure.
Costs necessary to furnish the building with the required equipment and furniture is estimated at
birr 211,550. This cost category is allocated mainly to furnish items such as televisions, Toys,
mattress and the like as well as equipment and machinery like game machines, generator, and
audio/video accessories.

7.1. Working capital requirement

Table: 2: Computation of Materials input

Item Description Assumptions

Year Year 2 Year 3 Year 4 Annual capacity build up rate 50% 75% 100% Material Inputs '000'
Birr

Workers uniform

 Uniform for 15 babies sisters, IT expert and general services at the cost of birr 100
annually per employee,
 Uniform for 7 guards and cleaners and at the cost of birr 240 annually per employee. 3,

Sanitation and cleaning material

 This include sanitation and cleaning materials such as details, mops, soaps, broom and
the like 5, Other 450 Total 9,

7.3. Utilities

Utilities in this project refer to costs of electricity and water for the investigated project.
Accordingly, utilities in this case are estimated at 49,819 birr annually at full capacity operation

Table 3.: Utilities estimation for the project annually (in birr)

Item Description

Year 4 (full capacity operation ) Electricity 27,

Water 21, Total 49,

7.3. Repair and maintenance

These costs include the annual repair and maintenance expenses of machinery and equipment. A
detail regarding these is presented in annex 3 of this paper.

7.3. Salaries and wages

Besides salaries and wages, an incentive for employees is estimated at 10% of the total wages
and salaries to motivate the employees for additional effort. (see annex 3).

7.3. Overheads

For the stated project direct overhead is estimated at 13,000 birr annually at full capacity
operation while that of administrative is estimated at 37,365 birr annually.

Table 3: Annual Direct and Administrative overhead estimation for the project (in birr)

Item Description

Year 4 (at full capacity operation) Direct Overhead Building tax 4,

Building insurance 4, Municipality tax (license and permit, trademark and municipal cleaning) 4,
Sub total 13, Administration Overhead Office supplies 7, Copying, Stationary and office supplies
25, Audit fee 4,

Day care Revenue estimation at full capacity operation

 Total Revenue  Total revenue = Registration fee + Tuition fee  = total registration fee +
total tuition fee = 52000 + 3,606, =3,658,000 Birr

As shown above, the total revenue is estimated to be birr 3 million annually at full capacity
operation (fourth year).

In general, after deducting the total operating costs, the day care is expected to gain an average
annual gross profit of 806,000 birr before interest and tax, and a net profit of 589,000 birr after

1. Day care Revenue estimation at full capacity operation Service fee per month (birr)

No of months per annum

No. of babies per program

Monthly service fee (birr)/babies

Total revenue
A. For full Day Care babies 0 12 75 1500 1,350,

B. For Babies care for half day 1 12 85 800 816, C For Babies care for five working days

3 12 100 1200 1,440, Total Revenue from service fees in birr 3,606,

interest and tax, in its projected 10 years operation. Cash flow and balance sheet projection of
this project also indicate that the anticipated project will run its operations under healthy
financial. Generally, the project can be implemented easily and it can generate revenue.

8 Project costs

Project investment costs are defined as the sum of fixed capital and net working capital, with
fixed capital constituting the resources required for constructing and working capital relating to
the resources needed to operate the project totally or partially.

Of the total outlay for investment capital 40% birr is from own equity capital and the rest equal
amount or 60% is expected from bank loan. In other words, it is assumed that the project will
obtain the 60 % loan facility.

As it is indicated in annex 3, the total annual operating costs are estimated to range from 479,
birr in year 2 to 622,000 million birr in year 3 and then reach 939,000 million in year 10. The
total annual service giving costs, including depreciation and interest, start from 550,000 million
birr in year 2 and it reaches birr 242,000 million birr at the final year of the project.

9. ENVIRONMENTAL IMPACT ASSESSEMENT

Conducting an environmental impact analysis helps one to carefully examine the feasibility of an
intended project and take the necessary actions. The proposed project does not generate waste or
noise pollution to any significant degree to impact the environment and cause any negative
effect, as its major function is rendering guardianship services. There are no solid wastes or
hazardous wastes from the project, which will cause damage to the environment.

Regarding environmental plan, wastewater generated from the building complex will be handled
in a proper manner. Similarly, solid waste generated will be disposed of by the responsible
disposal unit. To facilitate this, waste collection bins will be put at every corner of the building

of the land price

initially ) 0 0

Sub Total (20%

initially) 240,
2 Construction cost

2. Construction cost of

the day care building

as per engineering

estimate

750 1,

1,125,

Sub Total 1,125,

Total land

acquisition and

construction cost

1,365,

ANNEX 2 - INITIAL TOTAL FIXED INVESTMENT COSTS

Investment

category

Unit of

measurem

ent

Quantit
y

Unit

cost

(birr)

Total

cost

(birr)

1. Land

acquisition and

construction

cost

1. Land

Acquisition cost m2 1,000 1,200 1,200,

(20% initially)

1. Construction

cost [as per

engineering

estimate] m2 750 1,500 1,125,

Sub total

2,325,

2. Furniture and
Equipment

2. Furniture

No.

Estimate

d 211,

2. Equipment,

Materials and

Accessories No.

Estimate

d 362,

Sub total 573,

Total 1+

2,898,

Contingency (5%) 144,937.

50

Total 3,043,

7.

3. Pre -Service

Giving Capital

Expenditure

Estimat

ed 450,
Grand total 3,493,

7.

ANNEX 3- TOTAL INITIAL ASSETS

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