Investment Commission ANRS

Project Profile on the Establishment of Marble

Processing plant

Development Studies Associates

(DSA)

Revised 2016
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.................................................................................4
3.2 Plant Capacity.......................................................................................................4
3.3 Production Program..............................................................................................5
4. Raw Materials and Utilities....................................................................5
4.1 Availability and Source of Raw Materials............................................................5
4.2 Annual Requirement and Cost of Utilities............................................................5
5 Location and Site.....................................................................................6
6 Technology and Engineering.................................................................6
6.1 Production Process................................................................................................6
6.2 Machinery and Equipment....................................................................................7
6.3 Civil Engineering Cost..........................................................................................7
7 Human Resource and Training Requirement......................................7
7.1 Human Resource...................................................................................................7
7.2 Training Requirement...........................................................................................8
8 Financial Analysis...................................................................................9
8.1 Underlying Assumption........................................................................................9
8.2 Investment...........................................................................................................10
8.3 Production Costs.................................................................................................11
8.4 Financial Evaluation...........................................................................................11
9 Economic and Social Benefit and Justification..................................12
ANNEXES....................................................................................................14
Annex 1: Total Net Working Capital Requirements (in Birr).......................................15
Annex 2: Cash Flow Statement (in Birr).......................................................................17
Annex 3: DISCOUNTED CASH FLOW-TOTAL CAPITAL INVESTED.................19
Annex 4: NET INCOME STATEMENT ( in Birr).......................................................21
Annex 5: Projected Balance Sheet (in Birr)..................................................................23
 1. Executive Summary
[

This project profile deals with the establishment of marble processing plant in Amhara
National Regional State. The objective of the project profile is primarily to assist
potential entrepreneurs in project identification for investment. The document/study
covers various aspects of project concept development, start-up, and production and
finance.
[

Demand projection divulges that the domestic demand for marble is increasing with time.
Accordingly, the planned plant is set to produce 6,500 square meters annually. The total
investment cost of the project including working capital is estimated at Birr 10,064,098
million and creates 30 jobs and Birr 844,317 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 35.8% of capacity utilization
and it will payback fully the initial investment less working capital in 3 years. The result
further shows that the calculated IRR of the project is 23.8% and NPV discounted at 18%
is Birr 2,200,276.

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

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

Marble is a crystalline, compact variety of metamorphosed limestone, consisting
primarily of calcite, dolomite or a combination of both minerals. Pure calcite is white, but
mineral impurities add colour in variegated patterns. Commercially the term marble is
extended to include any rock composed of calcium carbonate that takes polish including
ordinary limestone. Marble is a durable stone in dry atmosphere only when protected

1
from rain. The surface of marble crumbles readily when exposed to moist or acidic
environment. Purest form of marble is statuary marble, which is white with visible
crystalline structure. The distinctive lustre of statuary marble is caused by the reflection
of penetrated light from the surfaces of inner crystals.

Marble is gaining popularity in the major urban places of Amhara region and Ethiopia at
large due to increase in its usage in construction industry. Today many of the modern
architectural designs of houses and high rise buildings include the final touch of beautiful
shades of marble in exterior as well as interior portions. This trend is witnessed by the
increase in supply of the product from local production and import. Moreover, marble is
also demanded for funeral trade, sculptures etc.

3. Market Study, Plant Capacity and Production

Program

3.1 Market Study

3.1.1 Present Demand and Supply

The boom being witnessed in the construction industry and the sustainable increase in the
GDP of the country has increased the demand for marble products. The major suppliers
of the product are those firms located in Tigray, Addis Ababa and Awash. However, as
some studies show there is gap between demand and supply where buyers are forced to
wait months to get marble from the factories due to limitation in production capacity.
This indicates that demand is not being met on time due to production limitation. Table 1
presents the level of demand comprised of domestic production and import.

2
 Table 1: Domestic Production and Import of Finished Marble

Source:
CSA and Customs
Domestic Production Import
Year (in M2) (in KG)
1997/98
93,408 9,260
1998/99
152,235 76,021
1999/00
135,875 82,503
2000/01
114,182 37,976
2001/02
209,803 56,895
2002/03
128,918 55,582
2003/04
344,452 133,665
2004/05
161,002 233,661
2005/06
200,408 435,558
2006/07
224,457 1,013,879
Authority, (various yeas)

The import data is reported in kg while local production is documented in square meters.
Thus, due to aggregation problem of the two figures, the analysis mainly focuses on
demand based on local production. Accordingly, the table reveals the presence of
growing demand for the product especially for the last four years where the construction
industry showed an astonishing growth throughout the country. That is, between 2003/04
up to 2006/07, demand for marble has been on average 232,580 m 2 excluding the import
amount. This demand is expected to expand as the construction industry continues to
expand for the coming decades.

3.1.2 Projected Demand

The analysis made above shows the presence of promising future for marble product. In
projecting the demand for marble product a conservative growth rate of 5% is considered
when the construction sector is growing at about 10% in the economy. Accordingly, the
following demand is forecasted for the years ahead.

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 Table 2: Projected Demand for Finished Marble

Year Projected Demand (in M2)

2016/17 365,617
2017/18 383,898
2018/19 403,093
2019/20 423,248
2020/21 444,410
2021/22 466,631
2022/23 489,962
2023/24 514,460
2024/25 540,183
2025/26 567,192
2026/27 595,552
2027/28 625,330

Based on the conservative approach, demand for marble increases substantially. Such an
increase in demand must be matched by an increase in supply and here lies the
importance of the envisaged plant.

3.1.3 Pricing and Distribution

According to CSA (various years) report on medium and large scale manufacturing, the
producers’ price in the years 2003/04 to 2005/06 has been in the range of Birr 324 up to
400 per meter square. Based on the market research result and the capacity of the
envisaged plant, the selling price of finished marble has been estimated at Birr 900 per
square meter considering the price inflations. The available network shall be used by the
envisaged plant.

3.2 Plant Capacity

In view of the expected demand for the good as presented earlier, and the planned
technology, the envisaged plant is set to produce 6,500 m 2 of finished marble annually.

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Assuming that the plant starts operation in 2016/17, the proposed capacity of the plant is
about 2.5% of the forecasted demand for that year.

3.3 Production Program

The program is scheduled based on the consideration that the envisaged plant will work
275 days in a year, where the remaining days will be holidays and maintenance period.
During the first year of operation the plant will operate at 70 percent capacity which
grows to 85 percent in the 2 nd year. The capacity will grow to 100 percent starting from
the 3rd year. This consideration is developed based on the assumption that market and
logistics barriers would take place for the first two years of operation.

4. Raw Materials and Utilities

4.1 Availability and Source of Raw Materials

The main row material, which is the marble rock, is adequately available in west Gojam
and Awi Zone.

4.2 Annual Requirement and Cost of Utilities

The raw marble will be obtained from the leased site. Nonetheless, the plant requires
electricity and furnace for the machineries and water for cutting of stones. Table 3 states
the cost associated with these utilities

Table 3: Utility Requirement and Cost

Total Cost
Utility Quantity L.C. F.C.
Electricity 325000kwh 178,750  
Furnace Oil 5500 lit 98,791  
Water 55,000 m3 145,750  
Total Utility Cost   423,291  
The annual utility requirement and the associated cost for the envisaged plant is estimated
at Birr 423,291 thousand. The plant shall make arrangements for sufficient water using
storage and recycling of a portion of water used so as to reduce water losses.

5
5 Location and Site

The marble processing industry has high rate of wastages (i.e. almost 45%). Although the
wastages may be reduced if standardized raw material (Square blocks) is provided to the
industry, the establishment of the unit should be in the mining vicinity so as to benefit
from reduced transport cost of wastage. At the same time, the location plays an important
role, as the facility should easily be accessible to the target customers.

Thus, the appropriate locations for the envisaged project in view of the availability of
input, infrastructure as well as market for the output are the towns near the source of the
marble deposit.

6 Technology and Engineering

6.1 Production Process

Processing of marble is simple and involves two basic types

A) Gang saw cutting: This is used at the basic processing stage to cut raw block into
slabs of different predefined sizes.
B) Block cutter with supporting range of cutters and polishers to produce finished
marble.
The alternative technological option available involves the production of marble chips.
Marble Chips are tiny pieces normally of crushed marble used in flooring and facing in
the construction industry. They vary in size from large grains of 1 inch to 0.5 centimetre;
depending on the choice of the consumer. Marble chips are processed on completely
different machinery set up that includes stone crushers of various grades. This alternative
technology is not adopted by the envisaged plant since the demand for marble chips is not
as significant as the marble stones (for slabs, tiles etc).

6.2 Machinery and Equipment

The machineries and equipment required for producing marble are listed in table 4 below.

6
 Table 4: Machinery and Equipment

Machinery and Equipment Quantity

Gantry Crane 1
Gang Saw (80-blades, double connecting rods) 1
H/V Cutter (conventional two pillar, regular) 1
Small Cutting Machine (for Splitting / section and Slab
cutting) 2
Cross Cutting Machine 1
Polishing Machine (manual) 1
Water pump machine 1
Water Tank (10,000 lit) 2

The total cost of machinery and equipment including freight insurance and bank cost is
estimated to be about Birr 5.4 million.

The following are some of the machineries suppliers’ address for the envisaged project.

Anumita Enterprises
Sohan Sadan ,Udaipur-.Rajasthan, India

Avon Industrial Cutters

W-23, Okhla Phase-ii,,New Delhi-110020.Delhi, India

6.3 Civil Engineering Cost

The total site area for the envisaged plant is estimated to be 1,500m2 where 300m2 is
allocated for the production place shed, office and facilities.

7 Human Resource and Training Requirement

7.1 Human Resource

The list of required manpower for the envisaged plant is provided in table 5 below.

7
 Table 5: Human Resource Requirement

Monthly Total Annual

Position No. Required Salary Salary
Manager 1 10,264 123,168
Accountant 1 3,079 36,950
Secretary 1 2,181 26,173
Sales Clerk 3 1,925 69,282
Store Keeper 3 1,925 69,282
Mechanic 1 2,566 30,792
Electrician 1 2,566 30,792
Gang Saw Operator 1 2,309 27,713
H/V cutter Operator 1 2,309 27,713
Small Cutter Operators 2 2,309 5,426
Daily Laborers 5 1,026 61,584
Cleaners 2 1,026 24,634
Messengers 1 1,026 12,317
Driver 2 1,925 46,188
Guards 5 1,026 61,584
Benefit (20%)     140,719
 Total 30   844,317

The envisaged plant, therefore, creates 30 jobs and about Birr 844,317 of income. The
professionals and support staff for the envisaged plant shall be recruited from Amhara
region.

7.2 Training Requirement

Training of key personnel will be arranged in one of the existing plants in the country.
The training should primarily focus on the production technology and machinery
maintenance and trouble shooting. Birr 40,000 will be allocated for training expense.

8
8 Financial Analysis
8.1 Underlying Assumption

The financial analysis of marble processing plant is based on the data provided in the
preceding sections and the following assumptions.

A. Construction and Finance

Construction period 2 years

Source of finance 30% equity and 70% loan
Tax holidays 2 years
Bank interest rate 12%
Discount for cash flow 18%
Value of land Based on land rent 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%

9
 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
[

8.2 Investment

The total investment cost of the project including working capital is estimated at Birr
10,064,098 million as shown in table 6 below. The Owner shall contribute 30% of the
finance in the form of equity while the remaining 70% is to be financed by bank loan.

Table 6: Total initial investment

Items L.C F.C Total

Land 11,547 - 11,547
Building and civil works 1,539,600 - 1,539,600
Office equipment 128,300 - 128,300
Vehicles 2,052,800 - 2,052,800
Plant machinery & equipment 256,600 5,132,000 5,388,600
Total fixed investment cost 3,988,847 5,132,000 9,120,847
Pre production capital expenditure* 456,042 - 456,042
Total initial investment 456,042 - 456,042
Working capital at full capacity 487,209 - 487,209
Total initial investment 487,209 - 487,209
Total 4,932,098 5,132,000 10,064,098

*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 about 51% of the total investment cost.

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 8.3 Production Costs

The total production cost at full capacity operation is estimated at Birr 3.28 million as
detailed in table 7 below.

Table 7: Production Cost

Items Cost
1. Raw materials
2. Utilities 423,291
3. Wages and Salaries 844,317
4. Spares and Maintenance 273,625
Total Factory costs 1,541,233
5. Depreciation 1,130,438
6. Financial costs 603,847
  Total Production Cost 3,275,518

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 second year of operation. Ratios such as
the percentage of net profit to total sales, return on equity and return on total investment
are 30%, 37% and 22% respectively in the second 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 35.8% of capacity utilization.

11
 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 3 years and 4 months.

IV. Simple Rate of Return

For the envisaged plant the simple rate of return equals to 19.4%.

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 23.8% and the net present value at 18 % discount is Birr 2,200,276.

VI. Sensitivity Analysis

The envisaged plant will earns profit starting from the second year when 10 % cost
increment takes place in the sector. The plant’s payback period in such situation is 3
years and 4 months.

9 Economic and Social Benefit and Justification

The envisaged project possesses wide range of benefits and it promotes the socio-
economic goals and objectives stated in the strategic plan of the Amhara National
Regional State. It plays positive role in diversifying the economic activity by improving
the industrial sector that make use of the natural resources of the region. The other major
benefits are listed as follows:

A. Profit Generation

The project is found to be financially viable and will earn Birr 16.6 million during the
project life. Such result induces the project promoters to reinvest the profit which,
therefore, increases the investment magnitude in the region.

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 B. Tax Revenue

In the project life under consideration, the region will collect about Birr 8.1 million from
corporate tax payment alone (i.e. excluding income tax, sales tax and VAT). Such result
creates additional fund for the regional government that will be used in expanding social
and other basic services in the region

C. Employment and Income Generation

The proposed project is expected to create employment opportunity for several citizens of
the region. That is, it will provide permanent employment to 30 professionals as well as
support staff. Consequently the project creates income of Birr 844,317 per year. This
would be one of the commendable accomplishments of the project.

D. Pro Environment Project

The proposed production process is environment friendly.

E. Diversification and InterSectoral linkage.

The proposed project helps to diversify ANRS’ and Ethiopian economy. It contributes to
industrialization of the region as well as the county’s economy.

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ANNEXES

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

Capacity Utilization (%) 0.00 0.00 70% 85% 100% 100%

205,441.3 249,464.4 293,487. 293,487.
1. Total Inventory - - 0 2 58 58

Raw Materials in Stock- Total - - - - - -

Raw Material-Local - - - - - -

Raw Material-Foreign - - - - - -
2,428.2 3,468. 3,468.
Factory Supplies in Stock - - 3 2,948.56 92 92
20,895. 25,372.5 29,850. 29,850.
Spare Parts in Stock and Maintenance - - 04 3 05 05
60,706. 73,714.4 86,722. 86,722.
Work in Progress - - 02 3 87 87
121,412 147,428.8 173,445. 173,445.
Finished Products - - .01 9 74 74
445,784 541,309.3 636,834. 636,834.
2. Accounts Receivable - - .17 8 55 55
135,604 164,662.7 193,720. 193,720.
3. Cash in Hand - - .61 3 86 86
135,604 164,662.7 193,720. 193,720.
CURRENT ASSETS - - .61 3 86 86
445,784 541,309.3 636,834. 636,834.
4. Current Liabilities - - .17 8 55 55
445,784 541,309.3 636,834. 636,834.
Accounts Payable - - .17 8 55 55
TOTAL NET WORKING CAPITAL REQUIRMENTS 341,045 414,127.1 487,208. 487,208.
15
 - - .91 5 45 45
341,045 73,081.2 73,081.
INCREASE IN NET WORKING CAPITAL - - .91 7 27 -

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%

293,487. 293,487. 293,487. 293,487. 293,487. 293,487.
1. Total Inventory 58 58 58 58 58 58

Raw Materials in Stock-Total - - - - - -

Raw Material-Local - - - - - -

Raw Material-Foreign - - - - - -
3,468. 3,468. 3,468. 3,468. 3,468. 3,468.
Factory Supplies in Stock 92 92 92 92 92 92
29,850. 29,850. 29,850. 29,850. 29,850. 29,850.
Spare Parts in Stock and Maintenance 05 05 05 05 05 05
86,722. 86,722. 86,722. 86,722. 86,722. 86,722.
Work in Progress 87 87 87 87 87 87
173,445. 173,445. 173,445. 173,445. 173,445. 173,445.
Finished Products 74 74 74 74 74 74
636,834. 636,834. 636,834. 636,834. 636,834. 636,834.
2. Accounts Receivable 55 55 55 55 55 55
193,720. 193,720. 193,720. 193,720. 193,720. 193,720.
3. Cash in Hand 86 86 86 86 86 86
193,720. 193,720. 193,720. 193,720. 193,720. 193,720.
CURRENT ASSETS 86 86 86 86 86 86
636,834. 636,834. 636,834. 636,834. 636,834. 636,834.
4. Current Liabilities 55 55 55 55 55 55
636,834. 636,834. 636,834. 636,834. 636,834. 636,834.
Accounts Payable 55 55 55 55 55 55

TOTAL NET WORKING CAPITAL REQUIRMENTS 487,208. 487,208. 487,208. 487,208. 487,208. 487,208.
16
 45 45 45 45 45 45

INCREASE IN NET WORKING CAPITAL - - - - - -

Annex 2: Cash Flow Statement (in Birr)

CONSTRUCTION PRODUCTION
  Year 1 Year 2 1 2 3 4
5,275,65
TOTAL CASH INFLOW 4,788,445 3 4,532,139 5,057,528 5,933,175 5,837,650
5,275,65
1. Inflow Funds 4,788,445 3 445,784 95,525 95,525 -
1,582,69
Total Equity 1,436,533 6 - - - -
Total Long Term Loan 3,351,911 3,692,957 - - - -
Total Short Term Finances - - 445,784 95,525 95,525 -
2. Inflow Operation - - 4,086,355 4,962,003 5,837,650 5,837,650
Sales Revenue - - 4,086,355 4,962,003 5,837,650 5,837,650
Interest on Securities - - - - - -
3. Other Income - - - - - -
TOTAL CASH OUTFLOW 4,788,445 ,788,445 3,778,089 3,532,762 4,452,813 4,205,707
4. Increase In Fixed Assets 4,788,445 4,788,445 - - - -
Fixed Investments 4,560,424 4,560,424 - - - -
Pre-production Expenditures 228,021 228,021 - - - -
5. Increase in Current Assets - - 786,830 168,606 168,606 -
6. Operating Costs - - 1,361,994 1,633,130 1,904,266 1,904,266
7. Corporate Tax Paid - - - - 769,685 811,954
8. Interest Paid - - 1,629,265 724,615 603,846 483,077
9.Loan Repayments - - - 1,006,410 1,006,410 1,006,410
10.Dividends Paid - - - - - -
Surplus(Deficit) - 487,208 754,050 1,524,766 1,480,362 1,631,943
Cumulative Cash Balance 0 487,208 1,241,258 2,766,025 4,246,387 5,878,330

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 Annex 2: Cash Flow Statement (in Birr): Continued
PRODUCTION
  5 6 7 8 9 10
TOTAL CASH INFLOW 5,837,650 5,837,650 5,837,650 5,837,650 5,837,650 5,837,650
1. Inflow Funds - - - - - -
Total Equity - - - - - -
Total Long Term Loan - - - - - -
Total Short Term Finances - - - - - -
2. Inflow Operation 5,837,650 5,837,650 5,837,650 5,837,650 5,837,650 5,837,650
Sales Revenue 5,837,650 5,837,650 5,837,650 5,837,650 5,837,650 5,837,650
Interest on Securities - - - - - -
3. Other Income - - - - - -
TOTAL CASH OUTFLOW 4,127,207 4,224,326 4,145,826 3,060,916 3,060,916 3,060,916
4. Increase In Fixed Assets - - - - - -
Fixed Investments - - - - - -
Pre-production Expenditures - - - - - -
5. Increase in Current Assets - - - - - -
6. Operating Costs 1,904,266 1,904,266 1,904,266 1,904,266 1,904,266 1,904,266
7. Corporate Tax Paid 854,223 1,072,111 1,114,381 1,156,650 1,156,650 1,156,650
8. Interest Paid 362,308 241,538 120,769 - - -
9. Loan Repayments 1,006,410 1,006,410 1,006,410 - - -
10.Dividends Paid - - - - - -
Surplus(Deficit) 1,710,443 1,613,324 1,691,824 2,776,734 2,776,734 2,776,734
Cumulative Cash Balance 7,588,773 9,202,097 10,893,921 13,670,655 16,447,389 19,224,123

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Annex 3: DISCOUNTED CASH FLOW-TOTAL CAPITAL INVESTED
CONSTRUCTION PRODUCTION
  Year 1 Year 2 1 2 3 4
TOTAL CASH INFLOW - - 4,086,355 4,962,003 5,837,650 5,837,650
1. Inflow Operation - - 4,086,355 4,962,003 5,837,650 5,837,650
Sales Revenue - - 4,086,355 4,962,003 5,837,650 5,837,650
Interest on Securities - - - - - -
2. Other Income - - - - - -

TOTAL CASH OUTFLOW 4,788,445 4,788,445 1,703,040 1,706,212 2,747,032 2,716,220

3. Increase in Fixed Assets 4,788,445 4,788,445 - - - -
Fixed Investments 4,560,424 4,560,424 - - - -
Pre-production Expenditures 228,021 228,021 - - - -
4. Increase in Net Working Capital - - 341,046 73,081 73,081 -
5. Operating Costs - - 1,361,994 1,633,130 1,904,266 1,904,266
6. Corporate Tax Paid - - - - 769,685 811,954
NET CASH FLOW (4,788,445) (4,788,445) 2,383,315 3,255,791 3,090,618 3,121,430
CUMMULATIVE NET CASH FLOW (4,788,445) (9,576,889) (7,193,575) (3,937,784) (847,166) 2,274,264
Net Present Value (at 18%) (4,788,445) (4,058,004) 1,711,659 1,981,575 1,594,106 1,364,406

Cumulative Net present Value (4,788,445) (8,846,449) (7,134,789) (5,153,214) (3,559,108) (2,194,702)

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 Annex 3: DISCOUNTED CASH FLOW-TOTAL CAPITAL INVESTED (Continued)
PRODUCTION
  5 6 7 8 9 10
TOTAL CASH INFLOW 5,837,650 5,837,650 5,837,650 5,837,650 5,837,650 5,837,650

1. Inflow Operation 5,837,650 5,837,650 5,837,650 5,837,650 5,837,650 5,837,650

Sales Revenue 5,837,650 5,837,650 5,837,650 5,837,650 5,837,650 5,837,650

Interest on Securities - - - - - -
2. Other Income - - - - - -

TOTAL CASH OUTFLOW 2,758,490 2,976,378 3,018,647 3,060,916 3,060,916 3,060,916

3. Increase in Fixed Assets - - - - - -

Fixed Investments - - - - - -
Pre-production Expenditures - - - - - -
4. Increase in Net Working Capital - - - - - -

5. Operating Costs 1,904,266 1,904,266 1,904,266 1,904,266 1,904,266 1,904,266

6. Corporate Tax Paid 854,223 1,072,111 1,114,381 1,156,650 1,156,650 1,156,650

NET CASH FLOW 3,079,160 2,861,272 2,819,003 2,776,734 2,776,734 2,776,734

CUMMULATIVE NET CASH FLOW 5,353,424 8,214,696 11,033,699 13,810,433 16,587,167 19,363,901

Net Present Value (at 18%) 1,140,618 898,225 749,962 626,032 530,535 449,606
(1,054,084
Cumulative Net present Value ) (155,859) 594,103 1,220,135 1,750,670 2,200,276

Net Present Value (at 18%) 2,200,276

Internal Rate of Return 23.8%

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Annex 4: NET INCOME STATEMENT ( in Birr)
PRODUCTION
  1 2 3 4 5
Capacity Utilization (%) 70% 85% 100% 100% 100%
1. Total Income 4,086,355 4,962,003 5,837,650 5,837,650 5,837,650
Sales Revenue 4,086,355 4,962,003 5,837,650 5,837,650 5,837,650
Other Income - - - - -
2. Less Variable Cost 1,028,892 1,249,369 1,469,846 1,469,846 1,469,846
VARIABLE MARGIN 3,057,463 3,712,633 4,367,804 4,367,804 4,367,804
(In % of Total Income) 75 75 75 75 75
3. Less Fixed Costs 1,463,540 1,514,199 1,564,858 1,564,858 1,564,858
OPERATIONAL MARGIN 1,593,922 2,198,434 2,802,945 2,802,945 2,802,945
(In % of Total Income) 39 44 48 48 48
4. Less Cost of Finance 1,629,265 724,615 603,846 483,077 362,308
5. GROSS PROFIT (35,343) 1,473,819 2,199,099 2,319,869 2,440,638
6. Income (Corporate) Tax - - 769,685 811,954 854,223
7. NET PROFIT (35,343) 1,473,819 1,429,415 1,507,915 1,586,414
RATIOS (%)  
Gross Profit/Sales -1% 30% 38% 40% 42%
Net Profit After Tax/Sales -1% 30% 24% 26% 27%
Return on Investment 16% 22% 20% 20% 19%
Return on Equity -1% 37% 36% 37% 39%

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 Annex 4: NET INCOME STATEMENT (in Birr):Continued
PRODUCTION
  6 7 8 9 10
Capacity Utilization (%) 100% 100% 100% 100% 100%

1. Total Income 5,837,650 5,837,650 5,837,650 5,837,650 5,837,650

Sales Revenue 5,837,650 5,837,650 5,837,650 5,837,650 5,837,650
Other Income - - - - -
2. Less Variable Cost 1,469,846 1,469,846 1,469,846 1,469,846 1,469,846
VARIABLE MARGIN 4,367,804 4,367,804 4,367,804 4,367,804 4,367,804
(In % of Total Income) 75 75 75 75 75
3. Less Fixed Costs 1,063,090 1,063,090 1,063,090 1,063,090 1,063,090
OPERATIONAL MARGIN 3,304,714 3,304,714 3,304,714 3,304,714 3,304,714
(In % of Total Income) 57 57 57 57 57
4. Less Cost of Finance 241,538 120,769 - - -
5. GROSS PROFIT 3,063,175 3,183,945 3,304,714 3,304,714 3,304,714
6. Income (Corporate) Tax 1,072,111 1,114,381 1,156,650 1,156,650 1,156,650
7. NET PROFIT 1,991,064 2,069,564 2,148,064 2,148,064 2,148,064
RATIOS (%)  
Gross Profit/Sales 52% 55% 57% 57% 57%
Net Profit After Tax/Sales 34% 35% 37% 37% 37%
Return on Investment 22% 22% 21% 21% 21%
Return on Equity 49% 51% 53% 53% 53%

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Annex 5: Projected Balance Sheet (in Birr)
CONSTRUCTION PRODUCTION
  Year 1 Year 2 1 2 3 4
TOTAL ASSETS 12,576,371 26,432,346 29,584,792 32,900,852 36,198,789 39,462,675
1. Total Current Assets - 487,208 2,028,089 3,721,461 5,370,430 7,002,373
Inventory on Materials and Supplies - - 23,323 28,321 33,319 33,319
Work in Progress - - 60,706 73,714 86,723 86,723
Finished Products in Stock - - 121,412 147,429 173,446 173,446
Accounts Receivable - - 445,784 541,309 636,835 636,835
Cash in Hand - - 135,605 164,663 193,721 193,721
Cash Surplus, Finance Available - 487,208 1,241,258 2,766,025 4,246,387 5,878,330
Securities - - - - - -
2. Total Fixed Assets, Net of Depreciation 4,788,445 9,576,889 8,446,451 7,316,012 6,185,574 5,055,135
Fixed Investment - 4,560,424 9,120,847 9,120,847 9,120,847 9,120,847
Construction in Progress 4,560,424 4,560,424 - - - -
Pre-Production Expenditure 228,021 456,042 456,042 456,042 456,042 456,042
Less Accumulated Depreciation - - 1,130,438 2,260,877 3,391,315 4,521,754
3. Accumulated Losses Brought Forward - - - - - -
4. Loss in Current Year - - 35,343 - - -
TOTAL LIABILITIES 2,873,067 6,038,459 6,484,243 5,573,358 4,662,474 3,656,064
5. Total Current Liabilities - - 445,784 541,309 636,835 636,835
Accounts Payable - - 445,784 541,309 636,835 636,835
Bank Overdraft - - - - - -
6. Total Long-term Debt 2,873,067 6,038,459 6,038,459 5,032,049 4,025,639 3,019,229
Loan A 2,873,067 6,038,459 6,038,459 5,032,049 4,025,639 3,019,229
Loan B - - - - - -
7. Total Equity Capital 4,914,860 10,329,790 10,329,790 10,329,790 10,329,790 10,329,790
Ordinary Capital 4,914,860 10,329,790 10,329,790 10,329,790 10,329,790 10,329,790
Preference Capital - - - - - -
Subsidies - - - - - -
8. Reserves, Retained Profits Brought Forward - - - (35,343) 1,438,476 2,867,891
9.Net Profit After Tax - - - 1,473,819 1,429,415 1,507,915
Dividends Payable - - - - - -
Retained Profits - - - 1,473,819 1,429,415 1,507,915

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Annex 5: Projected Balance Sheet (in Birr): Continued
  PRODUCTION
5 6 7 8 9 10
TOTAL ASSETS 42,883,561 46,110,210 49,493,858 55,047,326 60,600,794 66,154,261
1. Total Current Assets 8,712,816 10,326,140 12,017,964 14,794,698 17,571,432 20,348,166
Inventory on Materials and Supplies 33,319 33,319 33,319 33,319 33,319 33,319
Work in Progress 86,723 86,723 86,723 86,723 86,723 86,723
Finished Products in Stock 173,446 173,446 173,446 173,446 173,446 173,446
Accounts Receivable 636,835 636,835 636,835 636,835 636,835 636,835
Cash in Hand 193,721 193,721 193,721 193,721 193,721 193,721
Cash Surplus, Finance Available 7,588,773 9,202,097 10,893,921 13,670,655 16,447,389 19,224,123
Securities - - - - - -
2. Total Fixed Assets, Net of Depreciation 3,924,697 3,296,027 2,667,357 2,038,687 1,410,017 781,347
Fixed Investment 9,120,847 9,120,847 9,120,847 9,120,847 9,120,847 9,120,847
Construction in Progress - - - - - -
Pre-Production Expenditure 456,042 456,042 456,042 456,042 456,042 456,042
Less Accumulated Depreciation 5,652,192 6,280,862 6,909,532 7,538,202 8,166,872 8,795,542
3. Accumulated Losses Brought Forward - - - - - -
4. Loss in Current Year - - - - - -
TOTAL LIABILITIES 2,649,654 1,643,244 636,835 636,835 636,835 636,835
5. Total Current Liabilities 636,835 636,835 636,835 636,835 636,835 636,835
Accounts Payable 636,835 636,835 636,835 636,835 636,835 636,835
Bank Overdraft - - - - - -
6. Total Long-term Debt 2,012,820 1,006,410 - - - -
Loan A 2,012,820 1,006,410 - - - -
Loan B - - - - - -
7. Total Equity Capital 10,329,790 10,329,790 10,329,790 10,329,790 10,329,790 10,329,790
Ordinary Capital 10,329,790 10,329,790 10,329,790 10,329,790 10,329,790 10,329,790
Preference Capital - - - - - -
Subsidies - - - - - -
8. Reserves, Retained Profits Brought Forward 4,375,805 5,962,220 7,953,284 10,022,848 12,170,912 14,318,975
9. Net Profit After Tax 1,586,414 1,991,064 2,069,564 2,148,064 2,148,064 2,148,064
Dividends Payable - - - - - -
Retained Profits 1,586,414 1,991,064 2,069,564 2,148,064 2,148,064 2,148,064

24