Investment Office ANRS

Project Profile on the

Establishment of Ultra violet fly
repellent Producing plant

Development Studies
Associates (DSA)

September 2016 Revised

Bahir Dar
 Table of Contents

1. Executive Summary..........................................................................................1
2. Product Description and Application..............................................................1
3. Market Study, Plant Capacity and Production Program..............................2
3.1 Market Study....................................................................................................................2
3.1.1 Present Demand and Supply....................................................................................2
3.1.2 Projected Demand....................................................................................................3
3.1.3 Pricing and Distribution...........................................................................................3
3.2 Plant Capacity..................................................................................................................4
3.3 Production Program.........................................................................................................4
4. Raw Materials and Utilities..............................................................................4
4.1 Availability and Source of Raw materials.......................................................................4
4.2 Annual Requirement and Cost of Raw Materials and Utilities........................................4
5. Location and Site...............................................................................................5
6. Technology and Engineering............................................................................5
6.1 Production Process...........................................................................................................5
6.2 Machinery and Equipment...............................................................................................6
6.3 Civil Engineering Cost.....................................................................................................7
7. Human Resource and Training Requirement................................................7
7.1 Human Resource..............................................................................................................7
7.2 Training Requirement......................................................................................................7
8. Financial Analysis.............................................................................................8
8.1 Underlying Assumption...................................................................................................8
8.2 Investment........................................................................................................................9
8.3 Production Costs..............................................................................................................9
8.4 Financial Evaluation......................................................................................................10
9. Economic and Social Benefit and Justification.............................................11
ANNEXES..............................................................................................................12
 1. Executive Summary
This project profile deals with the establishment of ultra violet fly repellant manufacturing plant
in Amhara National Regional State. The following presents the main findings of the study.

Demand projection divulges that the domestic demand for ultra violet fly repellant is substantial
and is increasing with time. Accordingly, the planned plant is set to produce 3,500 units
annually. The total investment cost of the project including working capital is estimated at birr
5.10 million and creates 18 job opportunity and birr 476.66 thousand of income.

The financial result indicates that the project will generate profit beginning from the first year of
operation. Moreover, the project will break even at 23.5% of capacity utilization and it will
payback fully the initial investment less working capital in 2 years and 5 months. The result
further show that the calculated IRR of the project is 28.9% and the net present value at 18 %
discount is Birr 1,814,914.45.

In addition to this, the proposed project possesses wide range of economic and social benefits
such as increasing the level of investment, tax revenue, employment creation and import
substitution.

Generally’ the project is technically feasible, financially and commercially viable as well as
socially and economically acceptable. Hence the project is worth implementing.

2. Product Description and Application

Ultraviolet fly repellant is a piece of equipment that attracts flying insects that are photopositive
with ultraviolet light and killing them with electric shock. The insects (flies) which are attracted
with ultraviolet light source include files, mosquitoes, moths etc. The apparatus is equipped with
a gird made of steel wire rods which is electrified at 3,000 volts, by means of which the insects
are electrocuted when they come in contract with the system. There are different models of
various size such as ceiling mounted, wall mounted, multipurpose, and single tube model.
Depending upon model type, the device can be made of various standard sizes using either one
or two number of ultraviolet tubes of 15w to 40w.

3
The insects (flies) are known to have caused noise, contaminate the surrounding and pollute the
atmosphere. The ultraviolet fly (insect) repellant helps to maintain an atmosphere free of flying
insects. Typical applications are in food and pharmaceutical industries, hotels, restaurants, snack
bars, bottling plants, industrial sheds and canteens, dairies, hospitals, offices, homes and a wide
variety of other establishments.

3. Market Study, Plant Capacity and Production Program

3.1 Market Study

3.1.1 Present Demand and Supply

Basically, there is potential demand in many major towns (especially hot climate towns) where
the climate is conducive for breeding of files. Currently there is no domestic manufacturing of
the ultra violet fly repellent; rather the total demand for the device is met through imports. Data
obtained from Customs Authority aggregates different items of electronic equipments so that
exact figure of the device could not be known. . Therefore, in estimating the effective demand
for the device, the end-use approach is employed

According to CSA, Report on Census of Economic Establishments (2005), there are 71,213
hotels and restaurants in the country. If we assume that on average each establishment provides
the service in 2 rooms, the total number of rooms that need the fly repellent device would be
142,426. A survey made by the consultant on various restaurants in Addis Ababa revealed that
on average one fly repellant device has got a life time of two years. In other words, this implies
that the potential demand by hotels and restaurants is about 71,213 fly repellants annually.

In determining the current effective demand for the product it is assumed that 25% of the
establishments make use of ultra violet fly repellent device in their day to day activity. This
proportion is likely increase in the future as awareness of the device grows with time. According
to the above consideration, the total effective demand at present for ultra violet fly repellent
device is about 17,803 units. This estimate is very conservative as it do not consider the possible
demand from other establishments such as bakeries butcheries and some residential homes.

4
 3.1.2 Projected Demand

The future demand for the device is mainly influenced by the growth trend of the service
providing establishments and the likely growth in the awareness of using the device.
Accordingly, it is forecasted that the demand for ultraviolet fly repellent will increase by 5% per
year as shown in table 1 below.

Table 1: Projected Demand for Ultra Violet Fly Repellent Device

Year Projected Demand

2015/16 27,618
2016/17 28,999
2017/18 30,449
2018/19 31,972
2019/20 33,571
2020/21 35,250
2021/22 37,013
2022/23 38,864
2023/24 40,807
2024/25 42,847
2025/26 44,989
2026/27 47,238

According to table 1 the projected demand will reach about 30,449 units in 2017/18 and further
increases in the subsequent years.

3.1.3 Pricing and Distribution

The current retail price of ultra violet fly repellent device is on average birr 1,283 to 2,823. This
range is a result of quality and size differences of the equipment available in the market. Based
on the market research result and the capacity of the envisaged plant, the whole sell price of the
device is set to be birr 1,668. In distributing the product, the plant shall make use of the available
wholesale network.

5
 3.2 Plant Capacity
In consideration of the expected demand for ultra violet fly repellent as presented earlier, and the
planned technology, the envisaged plant is set to produce 3500 units annually. This represents
17% when compared to the forecasted demand of 2017/18.

3.3 Production Program

The program is scheduled based on the consideration that the envisaged plant will work 275 days
in a year in 1 shift, where the remaining days will be holidays and for maintenance. During the
first year of operation the plant will operate at 65 percent capacity and then it grows by 15
percentage point to 80 percent in the 2nd year. The capacity will grow to 100 percent starting
from the 3rd year. This consideration is developed based on the assumption that the presence of
ample demand and the attractiveness of the wholesale price would eliminated the market barrier
with in the first two years of operation.

4. Raw Materials and Utilities

4.1 Availability and Source of Raw materials

The main raw materials used to produce ultra violet fly repellent plant are metal sheets, roads,
weld mesh, wire ropes, ballast, transformer, ultra violet tube, and other electrical components.
These items can be imported by the proposed plant itself or can be purchased from business
firms that import and distribute the goods to the local market.

4.2 Annual Requirement and Cost of Raw Materials and Utilities

The annual raw material and utility requirement and the associated cost for the envisaged plant is
listed in table 2 here under.

6
 Table 2: Material and Utility Requirement

Total Cost(in Birr)

Material and Input Qty L.C. F.C.
M.S Sheet 12 ton 247,044 -
M.S rod 4 ton 85,024 -
Weld mesh 1600 m3 59,367
Chalk (Ballast) 40w&30w 7000 pcs 593,680
HT Transformer, 3kva 7000 pcs 593,680
Electrical components, mica capacitor, set
starter holder, wire, on-off switches,
plug, indicating lamp etc. 445,260
UV tube, 40w&30W 7000 pcs 964,731
Teflon rods, sheets, fuse holders, set
hardware items wire ropes, etc. 74,209

Total Material Cost 332,069 2,730,927

Utility
105,000kw
Electricity h 57750
Water 550 m3 1,458
Total Utility Cost 59,208
The total cost of material and utility at full capacity of operation is estimated to be birr3,122,204.

5. Location and Site

The appropriate locations for the envisaged project in view of the availability of input,
infrastructure qualified personnel and proximity to market for the output are the Bahir Dar and
other major towns of the region.

6. Technology and Engineering

6.1 Production Process

The manufacturing process of the device can be briefly described as follows. First, sheet metal is
cut in standard shapes in order to cover and support the various electrical components. This
structure is then painted. A special gird is also to be fabricated from steel wire rod and nickel

7
(chrome plated). Then a suitable protective guard fabricated from weld mesh is provided in order
to prevent accidental contact with the grid.
Various electrical components like transformer, ballasts, switches, fuses etc. are mounted on to
the structure and suitability wired. Finally the whole system is inspected and tested before
dispatch.

The alternative technological option involves the production of sonic repellant. This equipment
makes use of sonic waves instead of UV light. The technology emits dual high-frequencies, i.e.
audible sonic waves that irritate and drive flies away. Nonetheless, this alternative is not
appropriate as it does not kill the flies.

6.2 Machinery and Equipment

The list of plant machineries and equipment required in the manufacturing process is detailed in
table 3 below
Table 3: Machinery and Equipment

Machinery and Equipment Quantity

Power shearing machine 1
Press brake 1
Hacksaw machine 1
Pillar drilling machine 1
Spot welding machine 1
Manually operated press 2
Arc. Welding machine 1
Bench grinder 1
Special tool& dies, set 1
Miscellaneous tools, tackles 1
and electrical instrument, set

The, total cost of machinery and equipment including freight insurance and bank cost is
estimated to be about birr 2,157,408.

The following is machineries supplier address for the envisaged project

Flex Industries Limited
A1, Sector 60, Noida-201301
Uttar Pradesh, India
Tel: 91-0577-4526597

8
 6.3 Civil Engineering Cost

The total site area for the envisaged plant is estimated to be 750m 2 of which 150m2 is allocated to
the manufacturing place, 50m2 for office block and facilities. The remaining space is left for
parking and future expansion.

7. Human Resource and Training Requirement

7.1 Human Resource

The list of required manpower for the envisaged plant is stated in table 4 below

Table 4: Human Resource Requirement

Monthly
Position No. Required Salary Total Annual Salary
Manager 1 8,981 107,772
Accountant 1 2,566 30,792
Secretary/Cashier 1 2,053 24,634
Sales Clerk 1 1,540 18,475
Store Keeper 1 1,540 18,475
Technician 1 2,566 30,792
Operators 6 1,540 110,851
Daily Laborers 3 770 27,713
Cleaners 1 770 9,238
Guards 2 770 18,475
Benefit (20%) 79,443
Total 18 476,660

The envisaged plant creates 18 jobs opportunity and about birr 476.66 thousand of income. The
professionals and support staffs for the envisaged plant shall be recruited from Amhara region.

7.2 Training Requirement

Training of key personnel shall be conducted in collaboration with the suppliers of the plant
machineries. The training should primarily focuses on the production technology and machinery
maintenance and trouble shooting. Birr 51,320 will be allocated as training expense.

9
 8. Financial Analysis
8.1 Underlying Assumption

The financial analysis of ultra violet fly repellent device manufacturing plant is based on the data
provided in the preceding chapters and the following assumptions.

A. Construction and Finance

Construction period 2 year

Source of finance 40% equity and 60% loan
Tax holidays 2 years
Bank interest rate 12%
Discount for cash flow 18%
Value of land Based on lease rate of ANRS
Spare Parts, Repair & Maintenance 3% of fixed investment

B. Depreciation

Building 5%
Machinery and equipment 10%
Office furniture 10%
Vehicles 20%
Pre-production (amortization) 20%

C. Working Capital (Minimum Days of Coverage)

Raw Material-Local 30
Raw Material-Foreign 120
Factory Supplies in Stock 30
Spare Parts in Stock and Maintenance 30
Work in Progress 10
Finished Products 15
Accounts Receivable 30
Cash in Hand 30
Accounts Payable 30

10
 8.2 Investment
The total investment cost of the project including working capital is estimated at Birr 15.13
million as shown in table 5 below. The Owner shall contribute 40% of the finance in the form of
equity while the remaining 60% is to be financed by bank loan.

Table 5: Total initial investment

Items L.C F.C Total

Land 5,774 5,774
Building and civil works 1,026,400 1,026,400
Office equipment 128,300 128,300
Vehicles
Plant machinery & equipment 232,908 1,924,500 2,157,408
Total fixed investment cost 1,393,382 1,924,500 3,317,882
Pre production capital
expenditure* 165,894 165,894
Total initial investment 1,559,276 1,924,500 3,483,776
Working capital at full capacity 455,932 1,191,676 1,647,608
Total 2,015,208 3,116,176 5,131,384
*Pre-production capital expenditure includes - all expenses for pre-investment studies, consultancy fee during
construction and expenses for company‘s establishment, project administration expenses, commission expenses,
preproduction marketing and interest expenses during construction.

The foreign component of the project accounts for 60.7% of the total investment cost.

8.3 Production Costs

The total production cost at full capacity operation is estimated at Birr 4.31 million as detailed in
table 6 below.
Table 6: Production Cost

Items Cost
1. Raw materials 3,062,996
2. Utilities 59,208
3. Wages and Salaries 476,660
4. Spares and Maintenance 99,538
Factory costs 3,698,402
5. Depreciation 313,070
6. Financial costs 307,884
Total Production Cost 4,319,355.61

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 8.4 Financial Evaluation

I. Profitability
According to the projected income statement attached in the annex part (see annex 4) the project
will generate profit beginning from the first year of operation. Ratios such as the percentage of
net profit to total sales, return on equity and return on total investment are 6%, 11% and 22% in
the first year and are gradually rising. Furthermore, the income statement and other profitability
indicators show that the project is viable.

II. Breakeven Analysis

The breakeven point of the project is estimated by using income statement projection.
Accordingly, the project will break even at 23.5% of capacity utilization.

III. Payback Period

Investment cost and income statement projection are used in estimating the project payback
period. The projects will payback fully the initial investment less working capital in 2 years and
6 months.
IV. Simple Rate of Return
For the envisaged plant the simple rate of return equals to 25%

V. Internal Rate of Return and Net Present Value

Based on cash flow statement described in the annex part, the calculated IRR of the project is
26.4% and the net present value at 18 % discount is Birr 1,407,699.59.

I. Sensitivity Analysis

The envisaged plant is slightly sensitive with considerable cost increment. That is the plant incur
a loss of birr 12,658.79 in the first year of operation and starts to get profit starting from the
second year when 10 % cost increment takes place in the sector. This result is accompanied with
payback period of 2 years and 8 months.

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 9. Economic and Social Benefit and Justification
The envisaged project possesses wide range of other benefits which it promotes the socio-
economic goals and objectives stated in the strategic plan of the Amhara National Regional
State. It also plays positive role in diversifying the economic activity by enhancing the industrial
sector of the region. The other major benefits are listed as follows:

A. Profit Generation

The project is found to be financially viable and earns on average a profit of birr 10.1 million
within the project life. Such result induces the project promoters to reinvest the profit which,
therefore, increases the investment magnitude in the region.

B. Tax Revenue
In the project life under consideration, the region will collect about birr 3.85 million from
corporate tax payment alone (i.e. excluding income tax, sales tax and VAT). Such result create
additional fund for the regional government that will be used in expanding social and other basic
services in the region

C. Import Substitution and Foreign Exchange Saving

Based on the projected figure we learn that in the project life an estimated amount of US Dollar
5.3 million will be saved as a result of the proposed project. This will create room for the saved
hard currency to be allocated on other vital and strategic sectors

D. Employment and Income Generation

The proposed project is expected to create employment opportunity to several citizens of the
region. That is, it will provide permanent employment to 18 professionals as well as support
stuffs. Consequently the project creates income of birr 476.66 thousands per year. This would be
one of the commendable accomplishments of the project.

E. Pro Environment Project

The proposed production process is environment friendly.

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ANNEXES

14
 Annex 1: Total Net Working Capital Requirements (in Birr)
CONSTRUCTIO
N PRODUCTION
Year 1 Year 2 1 2 3 4

Capacity Utilization (%) 0.00 0.00 65% 75% 85% 95%

1824510.3
1. Total Inventory 0.00 0.00 7 2105204 2385898 2666592
798136.90
Raw Materials in Stock- Total 0.00 0.00 3 920927.2 1043717 1166508
23546.693
Raw Material-Local 0.00 0.00 7 27169.24 30791.82 34414.4
774590.23
Raw Material-Foreign 0.00 0.00 4 893757.9 1012926 1132093
2910.2545
Factory Supplies in Stock 0.00 0.00 6 3357.97 3805.712 4253.427
Spare Parts in Stock and Maintenance 0.00 0.00 7058.0396 8143.894 9229.748 10315.6
72756.081
Work in Progress 0.00 0.00 7 83949.33 95142.58 106335.8
145512.18
Finished Products 0.00 0.00 9 167898.7 190285.2 212671.6
2. Accounts Receivable 0.00 0.00 413942.45 477625.9 541309.4 604992.8
44572.600
3. Cash in Hand 0.00 0.00 4 51429.93 58287.23 65144.56
1484888.5
CURRENT ASSETS 0.00 0.00 2 1713333 1941777 2170222
4. Current Liabilities 0.00 0.00 413942.45 477625.9 541309.4 604992.8
Accounts Payable 0.00 0.00 413942.45 477625.9 541309.4 604992.8
1070946.0
TOTAL NET WORKING CAPITAL REQUIRMENTS 0.00 0.00 7 1235707 1400468 1565229

1
 1070946.0
INCREASE IN NET WORKING CAPITAL 0.00 0.00 7 164760.9 164760.9 164760.9

Annex 1: Total Net Working Capital Requirements (in Birr) (continued)

PRODUCTION
5 6 7 8 9 10

Capacity Utilization (%) 100% 100% 100% 100% 100% 100%

2806939.0 2806939.03
1. Total Inventory 3 2806939 2806939 2806939 2806939 5
1227902.9 1227902.95
Raw Materials in Stock-Total 5 1227903 1227903 1227903 1227903 1
36225.6589
Raw Material-Local 36225.659 36225.66 36225.66 36225.66 36225.66 6
1191677.2 1191677.26
Raw Material-Foreign 7 1191677 1191677 1191677 1191677 6
Factory Supplies in Stock 4477.2851 4477.285 4477.285 4477.285 4477.285 4477.2851
10858.516 10858.5165
Spare Parts in Stock and Maintenance 5 10858.52 10858.52 10858.52 10858.52 4
111932.43 111932.435
Work in Progress 5 111932.4 111932.4 111932.4 111932.4 4
223864.89 223864.896
Finished Products 7 223864.9 223864.9 223864.9 223864.9 5
636834.550
2. Accounts Receivable 636834.55 636834.6 636834.6 636834.6 636834.6 1
68573.219 68573.2194
3. Cash in Hand 5 68573.22 68573.22 68573.22 68573.22 8
2284443.8 2284443.87
CURRENT ASSETS 8 2284444 2284444 2284444 2284444 9
4. Current Liabilities 636834.55 636834.6 636834.6 636834.6 636834.6 636834.550

2
 1
636834.550
Accounts Payable 636834.55 636834.6 636834.6 636834.6 636834.6 1
1647609.3 1647609.32
TOTAL NET WORKING CAPITAL REQUIRMENTS 3 1647609 1647609 1647609 1647609 9
82380.454
INCREASE IN NET WORKING CAPITAL 9 0 0 0 0 0

Annex 2: Cash Flow Statement (in Birr)

CONSTRUCTION PRODUCTION
Year 1 Year 2 1 2 3 4
TOTAL CASH INFLOW 1741888 3389497 4208415 4441921 5025686 5609451
1. Inflow Funds 1741888 3389497 413942.4 63683.45 63683.45 63683.45
Total Equity 696755.1 1355799 0 0 0 0
Total Long Term Loan 1045133 2033698 0 0 0 0
Total Short Term Finances 0 0 413942.4 63683.45 63683.45 63683.45
2. Inflow Operation 0 0 3794473 4378238 4962003 5545768
Sales Revenue 0 0 3794473 4378238 4962003 5545768
Interest on Securities 0 0 0 0 0 0
3. Other Income 0 0 0 0 0 0
TOTAL CASH OUTFLOW 1741888 1741888 4738723 3946433 4597838 4991148
4. Increase In Fixed Assets 1741888 1741888 0 0 0 0
Fixed Investments 1658941 1658941 0 0 0 0
Pre-production Expenditures 82947.05 82947.05 0 0 0 0
5. Increase in Current Assets 0 0 1484889 228444.4 228444.4 228444.4
6. Operating Costs 0 0 2462128 2835390 3208653 3581915
7. Corporate Tax Paid 0 0 0 0 339719.1 421342.8

3
8. Interest Paid 0 0 791706.4 369459.7 307883.1 246306.5
[Link] Repayments 0 0 0 513138.5 513138.5 513138.5
[Link] Paid 0 0 0 0 0 0
Surplus(Deficit) 0 1647609 -530308 495488 427848 618303.4
Cumulative Cash Balance 0 1647609 1117302 1612790 2040638 2658941

Annex 2: Cash Flow Statement (in Birr): Continued

PRODUCTION
5 6 7 8 9 10
TOTAL CASH INFLOW 5869492 5837650 5837650 5837650 5837650 5837650
1. Inflow Funds 31841.72 0 0 0 0 0
Total Equity 0 0 0 0 0 0
Total Long Term Loan 0 0 0 0 0 0
Total Short Term Finances 31841.72 0 0 0 0 0
2. Inflow Operation 5837650 5837650 5837650 5837650 5837650 5837650
Sales Revenue 5837650 5837650 5837650 5837650 5837650 5837650
Interest on Securities 0 0 0 0 0 0
3. Other Income 0 0 0 0 0 0
TOTAL CASH OUTFLOW 5052028 4904656 4861553 4305310 4305310 4305310
4. Increase In Fixed Assets 0 0 0 0 0 0
Fixed Investments 0 0 0 0 0 0
Pre-production Expenditures 0 0 0 0 0 0
5. Increase in Current Assets 114222.2 0 0 0 0 0
6. Operating Costs 3768547 3768547 3768547 3768547 3768547 3768547
7. Corporate Tax Paid 471391.1 499817.8 518290.8 536763.7 536763.7 536763.7
8. Interest Paid 184729.9 123153.2 61576.61 0 0 0

4
 9. Loan Repayments 513138.5 513138.5 513138.5 0 0 0
[Link] Paid 0 0 0 0 0 0
Surplus(Deficit) 817463.3 932993.8 976097.4 1532340 1532340 1532340
Cumulative Cash Balance 3476404 4409398 5385495 6917835 8450175 9982514

Annex 3: DISCOUNTED CASH FLOW-TOTAL CAPITAL INVESTED

CONSTRUCTION PRODUCTION
Year 1 Year 2 1 2 3 4
TOTAL CASH INFLOW 0 0 3794473 4378238 4962003 5545768
1. Inflow Operation 0 0 3794473 4378238 4962003 5545768
Sales Revenue 0 0 3794473 4378238 4962003 5545768
Interest on Securities 0 0 0 0 0 0
2. Other Income 0 0 0 0 0 0
TOTAL CASH OUTFLOW 1741888 1741888 3533074 3000151 3713133 4168019
3. Increase in Fixed Assets 1741888 1741888 0 0 0 0
Fixed Investments 1658941 1658941 0 0 0 0
Pre-production Expenditures 82947.05 82947.05 0 0 0 0
4. Increase in Net Working Capital 0 0 1070946 164760.9 164760.9 164760.9
5. Operating Costs 0 0 2462128 2835390 3208653 3581915
6. Corporate Tax Paid 0 0 0 0 339719.1 421342.8
NET CASH FLOW -1741888 -1741888 261398.7 1378086 1248870 1377748
CUMMULATIVE NET CASH FLOW -1741888 -3483776 -3222377 -1844291 -595421 782327.1

5
 Net Present Value (at 18%) -1741888 -1476176 187732.4 838745.8 644153 602226.5
Cumulative Net present Value -1741888 -3218064 -3030332 -2191586 -1547433 -945206

Annex 3: DISCOUNTED CASH FLOW-TOTAL CAPITAL INVESTED (Continued)

PRODUCTION
5 6 7 8 9 10
TOTAL CASH INFLOW 5837650 5837650 5837650 5837650 5837650 5837650
1. Inflow Operation 5837650 5837650 5837650 5837650 5837650 5837650
Sales Revenue 5837650 5837650 5837650 5837650 5837650 5837650
Interest on Securities 0 0 0 0 0 0
2. Other Income 0 0 0 0 0 0
TOTAL CASH OUTFLOW 4322318 4268364 4286837 4305310 4305310 4305310
3. Increase in Fixed Assets 0 0 0 0 0 0
Fixed Investments 0 0 0 0 0 0
Pre-production Expenditures 0 0 0 0 0 0
4. Increase in Net Working Capital 82380.45 0 0 0 0 0
5. Operating Costs 3768547 3768547 3768547 3768547 3768547 3768547
6. Corporate Tax Paid 471391.1 499817.8 518290.8 536763.7 536763.7 536763.7
NET CASH FLOW 1515332 1569286 1550813 1532340 1532340 1532340
CUMMULATIVE NET CASH FLOW 2297659 3866944 5417757 6950096 8482436 10014775
Net Present Value (at 18%) 561326.6 492638 412575.3 345475.3 292775.6 248115

6
Cumulative Net present Value -383880 108758.4 521333.8 866809 1159585 1407700
Net Present Value (at 18%) 1,407,699.59

Internal Rate of Return 26.4%

Annex 4: NET INCOME STATEMENT ( in Birr)

PRODUCTION
1 2 3 4 5
Capacity Utilization (%) 65% 75% 85% 95% 100%

1. Total Income 3794473 4378238 4962003 5545768 5837650

Sales Revenue 3794473 4378238 4962003 5545768 5837650
Other Income 0 0 0 0 0
2. Less Variable Cost 2302275 2656471 3010667 3364863 3541961
VARIABLE MARGIN 1492198 1721766 1951335 2180904 2295689
(In % of Total Income) 39.33 39.33 39.33 39.33 39.33
3. Less Fixed Costs 472922.5 491988.9 511055.3 530121.7 539654.9
OPERATIONAL MARGIN 1019275 1229778 1440280 1650782 1756034
(In % of Total Income) 27 28 29 30 30
4. Less Cost of Finance 791706.4 369459.7 307883.1 246306.5 184729.9
5. GROSS PROFIT 227568.7 860317.8 1132397 1404476 1571304
6. Income (Corporate) Tax 0 0 339719.1 421342.8 471391.1
7. NET PROFIT 227568.7 860317.8 792677.8 983133.2 1099913
RATIOS (%)

7
 Gross Profit/Sales 6% 20% 23% 25% 27%
Net Profit After Tax/Sales 6% 20% 16% 18% 19%
Return on Investment 22% 26% 23% 24% 25%
Return on Equity 11% 42% 39% 48% 54%

Annex 4: NET INCOME STATEMENT (in Birr):Continued

PRODUCTION
6 7 8 9 10
Capacity Utilization (%) 100% 100% 100% 100% 100%

1. Total Income 5837650 5837650 5837650 5837650 5837650

Sales Revenue 5837650 5837650 5837650 5837650 5837650
Other Income 0 0 0 0 0
2. Less Variable Cost 3541961 3541961 3541961 3541961 3541961
VARIABLE MARGIN 2295689 2295689 2295689 2295689 2295689
(In % of Total Income) 39 39 39 39 39
3. Less Fixed Costs 506476.1 506476.1 506476.1 506476.1 506476.1
OPERATIONAL MARGIN 1789212 1789212 1789212 1789212 1789212
(In % of Total Income) 31 31 31 31 31
4. Less Cost of Finance 123153.2 61576.61 0 0 0
5. GROSS PROFIT 1666059 1727636 1789212 1789212 1789212
6. Income (Corporate) Tax 499817.8 518290.8 536763.7 536763.7 536763.7
7. NET PROFIT 1166241 1209345 1252449 1252449 1252449
RATIOS (%)
Gross Profit/Sales 29% 30% 31% 31% 31%

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 Net Profit After Tax/Sales 20% 21% 21% 21% 21%
Return on Investment 25% 25% 24% 24% 24%
Return on Equity 57% 59% 61% 61% 61%

Annex 5: Projected Balance Sheet (in Birr)

CONSTRUCTION PRODUCTION
Year 1 Year 2 1 2 3 4
TOTAL ASSETS 1741888 5131385 5772896 6183759 6526981.703 7060660
1. Total Current Assets 0 1647609 2602190 3326122 3982414.885 4829163
Inventory on Materials and Supplies 0 0 808105.2 932429.1 1056752.957 1181077
Work in Progress 0 0 72756.08 83949.33 95142.58422 106335.8
Finished Products in Stock 0 0 145512.2 167898.7 190285.1684 212671.6
Accounts Receivable 0 0 413942.4 477625.9 541309.3753 604992.8
Cash in Hand 0 0 44572.6 51429.93 58287.22886 65144.56
Cash Surplus, Finance Available 0 1647609 1117302 1612790 2040637.596 2658941
Securities 0 0 0 0 0 0
2. Total Fixed Assets, Net of Depreciation 1741888 3483776 3170706 2857636 2544566.818 2231497
Fixed Investment 0 1658941 3317882 3317882 3317881.622 3317882
Construction in Progress 1658941 1658941 0 0 0 0
Pre-Production Expenditure 82947.05 165894.1 165894.1 165894.1 165894.0811 165894.1
Less Accumulated Depreciation 0 0 313069.6 626139.3 939208.8853 1252279
3. Accumulated Losses Brought Forward 0 0 0 0 0 0
4. Loss in Current Year 0 0 0 0 0 0
TOTAL LIABILITIES 1741888 5131385 5772896 6183759 6526981.703 7060660
5. Total Current Liabilities 0 0 413942.4 477625.9 541309.3753 604992.8
Accounts Payable 0 0 413942.4 477625.9 541309.3753 604992.8
Bank Overdraft 0 0 0 0 0 0
6. Total Long-term Debt 1045133 3078831 3078831 2565693 2052553.998 1539416
Loan A 1045133 3078831 3078831 2565693 2052553.998 1539416
Loan B 0 0 0 0 0 0
7. Total Equity Capital 696755.1 2052554 2052554 2052554 2052553.998 2052554

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 Ordinary Capital 696755.1 2052554 2052554 2052554 2052553.998 2052554
Preference Capital 0 0 0 0 0 0
Subsidies 0 0 0 0 0 0
8. Reserves, Retained Profits Brought Forward 0 0 0 227568.7 1087886.492 1880564
[Link] Profit After Tax 0 0 227568.7 860317.8 792677.8145 983133.2
Dividends Payable 0 0 0 0 0 0
Retained Profits 0 0 227568.7 860317.8 792677.8145 983133.2

Annex 5: Projected Balance Sheet (in Birr): Continued

PRODUCTION
5 6 7 8 9 10
TOTAL ASSETS 7679275.69 8332379 9028585 10281034 11533483 12785931.39
1. Total Current Assets 5760848.13 6693842 7669939 9202279 10734618 12266957.89
Inventory on Materials and Supplies 1243238.75 1243239 1243239 1243239 1243239 1243238.752
Work in Progress 111932.435 111932.4 111932.4 111932.4 111932.4 111932.4354
Finished Products in Stock 223864.897 223864.9 223864.9 223864.9 223864.9 223864.8965
Accounts Receivable 636834.55 636834.6 636834.6 636834.6 636834.6 636834.5501
Cash in Hand 68573.2195 68573.22 68573.22 68573.22 68573.22 68573.21948
Cash Surplus, Finance Available 3476404.25 4409398 5385495 6917835 8450175 9982514.034
Securities 0 0 0 0 0 0
2. Total Fixed Assets, Net of Depreciation 1918427.56 1638537 1358646 1078755 798864.3 518973.5
Fixed Investment 3317881.62 3317882 3317882 3317882 3317882 3317881.622
Construction in Progress 0 0 0 0 0 0
Pre-Production Expenditure 165894.081 165894.1 165894.1 165894.1 165894.1 165894.0811
Less Accumulated Depreciation 1565348.14 1845239 2125130 2405021 2684911 2964802.203
3. Accumulated Losses Brought Forward 0 0 0 0 0 0
4. Loss in Current Year 0 0 0 0 0 0
TOTAL LIABILITIES 7679275.69 8332379 9028585 10281034 11533483 12785931.39
5. Total Current Liabilities 636834.55 636834.6 636834.6 636834.6 636834.6 636834.5501
Accounts Payable 636834.55 636834.6 636834.6 636834.6 636834.6 636834.5501
Bank Overdraft 0 0 0 0 0 0
6. Total Long-term Debt 1026277.01 513138.5 0 0 0 0
Loan A 1026277.01 513138.5 0 0 0 0
Loan B 0 0 0 0 0 0
7. Total Equity Capital 2052554 2052554 2052554 2052554 2052554 2052553.998
Ordinary Capital 2052554 2052554 2052554 2052554 2052554 2052553.998

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 Preference Capital 0 0 0 0 0 0
Subsidies 0 0 0 0 0 0
8. Reserves, Retained Profits Brought Forward 2863697.47 3963610 5129852 6339197 7591645 8844094.124
9. Net Profit After Tax 1099912.64 1166241 1209345 1252449 1252449 1252448.716
Dividends Payable 0 0 0 0 0 0
Retained Profits 1099912.64 1166241 1209345 1252449 1252449 1252448.716

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