ANRS INVESTMENT COMMISSIN

www.investamhara.gov.et

Project Profile on the

DEHYDRATED Vegetables processi

Development Studies
(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......................................................................................................2
3.1.3 Pricing and Distribution.............................................................................................3
3.2 Plant Capacity...................................................................................................................3
3.3 Production Program..........................................................................................................3
4. Raw Materials and Utilities..............................................................................3
4.1 Availability and Source of Raw Materials........................................................................3
4.2 Annual Requirement and Cost of Raw Materials and Utilities.........................................3
5. Location and Site...............................................................................................4
6. Technology and Engineering............................................................................5
6.1 Production Process............................................................................................................5
6.2 Machinery and Equipment................................................................................................5
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.............................................................................................8
8.1 Underlying Assumption....................................................................................................8
8.2 Investment.........................................................................................................................9
8.3 Production Costs.............................................................................................................10
8.4 Financial Evaluation.......................................................................................................10
9. Economic and Social Benefit and Justification.............................................11
ANNEXES..............................................................................................................13
Annex 1: Total Net Working Capital Requirements (in Birr)...................................................14
Annex 2: Cash Flow Statement (in Birr)...................................................................................15
Annex 3: DISCOUNTED CASH FLOW-TOTAL CAPITAL INVESTED.............................18
Annex 4: NET INCOME STATEMENT ( in Birr)...................................................................20
Annex 5: Projected Balance Sheet (in Birr)..............................................................................22
 1. Executive Summary

This profile provides basic information on the production of 270 tons of Dehydrated Vegetables
per annum. The total investment requirement of the project is estimated at about Birr 11.3
million; of which Birr 6.4 million is for machinery and equipment while Birr 908,364 is the cost
of working capital. Based on the cash flow statement, the calculated internal rate of return (IRR)
and simple rate of return of the project are 23.7 % and 20.7 %, respectively. And the net present
value (NPV) at 18 % discounting rate is Birr 2,394,078. The plant is expected to create
employment opportunities for about 30 persons.

2. Product Description and Application

Vegetables are generally perishable food items. Without proper preservation, they are often
spoiled due to microbial degradation or enzymatic reaction. Preservation techniques aim at
complete or partial destruction or elimination of microbial agents (mold, yeast, bacteria) by
inhibiting their growth and activity. Through preservation, it is possible to store, transport and
distribute vegetables without changing their basic natural content. There are several methods of
preserving vegetables from spoilage. These include heat treatment, dehydration, salting,
pickling, preserving with sugar and chemical freezing and sterilization by electric or ultraviolet.
This project deals with the drying (dehydration) forms of preservation. Drying/dehydrating is a
preserving method in which food products are preserved by taking out the moisture from them.

Dehydrated vegetables are basically used as culinary vegetables and as processed raw materials.
They are used as culinary raw vegetables by housewives, caterers and institutions and also in
more specialized applications such as armed forces rations and others. Most widely used
products are potato as granules and flakes, followed by onions, peas, green beans, vegetable
mince and carrot. Dehydrated vegetables have better flavour, colour, aroma, ease of re-hydration
and acceptability in comparison to sun dried products.

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 3. Market Study, Plant Capacity and Production Program
3.1 Market Study
3.1.1 Present Demand and Supply

In recent years, a culture of growing and producing vegetables for commercial purpose has been
developing in the ANRS, especially in communities close to urban centres. Unfortunately, in
some season of the year, large amount of vegetables is harvested which the market can not
absorb. As a result, farmers are forced to sell their produce at very low prices, and this
discourages farmers from producing these crops. In other seasons, the very crops which were in
large supply one or two months before are not available in the market.

One main cause of this fluctuation in the supply of vegetable is the lack of preservation system
for these products. Through the problem of perishablity of vegetable cannot be eliminated
completely, using different methods of preservation will help both the producers (farmers) and
the consumers. Dehydrated vegetables are used as processed raw materials in wide range of food
processing industries. The principal users are frozen food industry, canned food industry, extrude
snack food industry, bakery industry, baby food industry and processed meat industry.

Except some traditional and crude methods of preservation, there is no single plant which is
engaged in the preservation of vegetables through drying and other techniques of preservation in
the ANRS. However, the volume of vegetables that are sold at “throw- away prices” and are left
to rot in some localities in the region could justify the establishment of a plant which will be
engaged in the preservation of vegetables.

3.1.2 Projected Demand

Sharing some little fraction of the current supply of the products (which is estimated to be in
more than ten thousand tons and mainly supplied from imports), is enough as a market for the
envisaged plant. There is also the possibility of exporting the product. With the growth in
population and urbanization, the future demand for dried vegetables will certainly increases in
the future. Hence, a small manufacturing plant producing some hundred tons of different dried
and canned vegetables and fruits (having competitive qualities and prices) certainly faces
unlimited market demand for its product.

2
 3.1.3 Pricing and Distribution

Dehydrated vegetables are sold at different prices in the groceries or food stores. The prices
range from Birr 36 to Birr 50\ per Kg. Allowing margin for wholesale and retailers the envisaged
plant is expected to sell at Birr 30,792 per ton. The product distribution is handled through
supermarkets and retail shops.

3.2 Plant Capacity

The minimum economic capacity of a unit manufacturing dehydrated vegetables is 270 tons per
annum based on two shift operation of 275 days working schedule in a year. The working days
are set by deducting all Sundays and public holidays in a given year, and by assuming that
annual maintenance works and unexpected work interruptions take 25 days.

3.3 Production Program

As the plant is new and is equipped with new machinery, and to penetrate the market which is
largely occupied by imports, slow production build up or gradually rise to full capacity is
necessary. Therefore, the envisaged plant is expected to operate at 70 % and 90 % in the first and
the second years of the production period, respectively. The third year on wards, the plat will
operate at its full capacity.

4. Raw Materials and Utilities

4.1 Availability and Source of Raw Materials

Production of vegetables is more prominent in areas around Bahir Dar, along Bahir Dar-Woreta
road, around Gondar, near Dessie and Combolcha. Thus, there will be adequate supply of raw
materials in the region.

4.2 Annual Requirement and Cost of Raw Materials and Utilities

The annual requirement of main raw materials for the manufacturing of 300 tons dehydrated and
canned fruits and vegetables at 100 % capacity utilization is given as follows:

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 Table 4.1
Raw Material Requirement and Costs

Unit Qty. Unit Total

No. Type of Raw Material
Price Cost
1. Peas Tons 100 5,132 513,200
2. Potato ,, 110 2,566 282,260
3. Onions ,, 90 3,849 346,410
4. Garlic ,, 20 10,264 205,280
5. Cauliflower ,, 20 3,849 76,980
6. Cabbage ,, 20 2,566 51,320
7. Ginger ,, 20 5,132 102,640
8. Spinach ,, 20 5,132 102,640
9. Chemicals 166,790
10. Packaging 769,800
Total 400 2,617,320

The major utilities required for the plant are fuel oil, water and electricity. Fuel oil is used for the
boiler, water is used for washing the vegetables, and electric power is used as an energy source
for boiler and for driving the motors of the production machinery. The annual consumption of
these utilities in terms of quantity is 30 tons of fuel oil, 4,000 m 3 of water and 13.2 MWH. In
terms of value, fuel oil is estimated to cost Birr 230,940 and electricity costs Birr 7,260 while the
cost of water amounts Birr 10,600.

Table 4.2
UTILITIES REQUIREMENT

No Utility Requirement Cost

. (Annual) (Birr)
1. Electricity 13200 KWH 18,629
2. Water 4000 m3 27,200
3. Fuel Oil 30 tons 307,920
Total 353,749

5. Location and Site

For its convenience to procure different types of raw materials, Bahir-Dar is an appropriate town
to establish the plant.

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 6. Technology and Engineering
6.1 Production Process

The modern process of dehydration consists of removal of moisture from foods by the
application of heat usually in the presence of controlled flow of air. The proposed unit may have
facilities for dehydration of a variety of vegetables. Different types of vegetables require
different treatments for preparing them for dehydration. The treatments include besides selection
of proper size and quality, washing peeling and cutting to required size and in some cases
blanching also. Vegetables are dehydrated in various types of dehydrators like cabinets, stack
dryer, kiln dryers or tunnel dryers. However, now-a-days the most prevalent practice is
dehydrating in tunnel dryers. A tunnel dryer normally consists of a tunnel type chamber through
which the product to be dehydrated moves progressively on trays. Hot air is blown from one end
of the drying chamber or tunnel and moist and cooled air exits from the other end. The material
to be dried is usually spread on trays and is carried through the tunnel either on cars or on
runways.

Alternatively, vegetables can be dehydrated in various types of other dehydrators like cabinets,
stack dryer, kiln dryers or tunnel dryers. However, due to its efficiency and effectiveness now-a-
days the most prevalent practice is dehydrating by tunnel dryers.

6.2 Machinery and Equipment

The list of machinery and equipment that are required to dehydrate vegetables is given in Table
6.1.

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 Table 6.1
LIST OF MACHINERY & EQUIPMENT
No. Specification No
1. Boiler 1
2. Can reforming Unit 1
3. Heavy Duty Double Seamers 1
4. Grinding Machine: Screen Type 1
5. Pea Hullers with 1H P Motor 1
6. Spray Washing Machine 1
7. Abrasive peelers 1
8. Halving machine 1
9. Slicing machine 1
10. Pulp machine 1
11. Tunnel Dryer 1
12. Preparation/Filling Tables 2
13. SS Blanching Lye Peeling Equipment 1
14. SS Steam Jacketed Kittle: Tilting Type 1
15. Exhaust Box: Go Round Type 1
16. Pasty Material Filling Unit 1
17. Retort System With Spare Crates 1
18. Cooling Tank for Processed Cans 1
19. Cain Hoist 1
20. Counter Weight Scale 1
21. SS Knives 1
22. Utensil of Aluminum 1
23. Empty Can Wash 1
The Price for Machinery and
Equipment is Approx Birr 6.4 million

Most these machineries and equipment are to be imported. The total cost of machinery and
equipment to be imported is estimated to be Birr 5.65 million while the balance 300 thousand are
procured locally.

Machinery Suppliers Address:

Geeta Food Engineering
Plot No.C-7/1 Pawne Midc Savita Chemicals, Thane-Belapur Road,
Navi Mumbai-4000705,
Maharashatra, India

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 6.3 Civil Engineering Cost

It is estimated that a total area of 800 m 2 of land will be required for the envisaged project, out of
which 400 m2 is built-up area. The total cost of the building, including the civil work, is about
Birr 2,566,000. The total cost of land lease is equal to Birr 48,000; which is based on the land
lease price of Dessie for industrial purpose- which is Birr 60 per square meter. Of the total cost
of the lease, 5 % is paid in the beginning while the rest will be paid in 40 years.

7. Human Resource and Training Requirement

7.1 Human Resource

The man power required for operating the plant on a single shift basis is indicated in Table 7.1.
Table 7.1
MANPOWER REQUIREMENT
Description No Monthly Salary Annual
(Birr) Salary (Birr)
A. Administration
1. Manager 1 12830 153960
3 Chemist 1 6415 76980
4. Technicians 2 3849 92376
5. Personnel Officer 1 3849 46188
6. Accountant 1 3849 46188
7.Seretary 1 2052.8 24633.6
8.Slaesman 1 3079.2 36950.4
9. Storekeeper 1 2052.8 24633.6
10.Guards 4 1026.4 49267.2
11. Driver 1 1796.2 21554.4
Sub-total 12 0 572,731
B. Production
1. Skilled Workers (operators) 6 1539.6 110851.2
2. Unskilled Workers (labourers) 12 1026.4 147801.6
Sub-total 258,652.8
Benefits (20%) 166,277
Total 30 997,661

The total annual wages and salary, including 20 % benefits, amount to Birr 997,661.

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 7.2 Training Requirement

Canning operation demands good knowledge of the hygienic requirements and treatment levels
of the products to be handled. Therefore, the proper on job training should be given to the
workers at least for a month by hiring one or more experts in the area.

8. Financial Analysis
8.1 Underlying Assumption

The financial analysis of Dehydrated Vegetables processing plant is based on the data provided
in the preceding chapters 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 Lease Rate of ANRS
Spare Parts, Repair & Maintenance 3% of the Fixed Investment

B. Depreciation

Building 5%
Machinery And Equipment 10%
Office Furniture 10%
Vehicles 20%
Pre-Production (Amortization) 20%

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 C. Working Capital (Minimum Days of Coverage)

Raw Material-Local 30 Days

Raw Material-Foreign 120 Days
Factory Supplies In Stock 30 Days
Spare Parts In Stock And Maintenance 30 Days
Work In Progress 10 Days
Finished Products 15 Days
Accounts Receivable 30 Days
Cash In Hand 30 Days
Accounts Payable 30 Days

8.2 Investment
The total investment cost of the project including working capital is estimated at Birr 11.3
million as shown in Table 8.1 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 8.1
Total Initial Investment
Items L.C F.C Total
Land
6,158 0 6,158
Building And Civil Works
2,566,000 0 2,566,000
Office Equipment
256,600 0 256,600
Vehicles
641,500 0 641,500
Plant Machinery & Equipment
769,800 5,645,200 6,415,000
Total Fixed Investment Cost
4,240,058 5,645,200 9,885,258
Pre Production Capital
Expenditure* 212,003 282,260 494,263
Total Initial Investment
212,003 282,260 494,263
Working Capital at Full Capacity
903,720 0 903,720
Total Working Capital
903,720 0 903,720
Total 5,355,781 5,927,460 11,283,241
*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 Birr 5.9 million or 52.5 % 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 7.1 million (See Table
8.2). Raw materials and utilities account for 41.8 %.

Table 8.2
PRODUCTION COST AT FULL CAPACITY

Raw Material Requirement Cost

1. Local Raw Materials 2,617,320
2. Foreign Raw Materials 0

Total Production Cost at full Capacity

Items Cost
1.      Raw materials 2,617,320
2.      Utilities 353,749
3.      Wages and Salaries 997,661

4.      Spares and Maintenance 296,558

Factory Costs 4,265,288
5.      Depreciation 1,022,613
6.      Financial Costs
1,816,664
  Total Production Cost 7,104,565

8.4 Financial Evaluation

I. Profitability
According to the projected income statement (See Annex 4) the project will generate profit
beginning from the first year of operation and increases on wards. The income statement and
other profitability indicators also show that the project is viable.

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 II. Breakeven Analysis

The breakeven point of the projects is given by the formula:

BEP = Fixed Cost

Sale –Variable Cost at full capacity.

The project will break even at 32.5 % of capacity utilization

III. Payback Period

Investment cost and income statement projection are used in estimating the project payback
period. The project will payback fully the initial investment less working capital in four years.

IV. Simple Rate of Return

The project’s simple rate of return (SRR) is given by the formula:

SRR= (Net Profit + Interest)/ (Total Investment outlay) at full capacity utilization.
The SRR would be 20.7% at full capacity utilization.

V. Internal Rate of Return and Net Present Value

Based on cash flow statement (See Annex 2) the calculated internal rate of return (IRR) of the
project is 23.7 % and the net present value (NPV) at 18 % discount is Birr 2.4 million.

VI. Sensitivity Analysis

The sensitivity test result which undertaken by increasing the cost of production by 10 % still
indicates that the project would be viable.

9. Economic and Social Benefit and Justification

Based on the foregoing presentation and analysis, we can learn that the proposed project
possesses wide range of benefits that complement the financial feasibility obtained earlier. In
general the envisaged project promotes the socio-economic goals and objectives stated in the
strategic plan of the Amhara National Regional State. These benefits are listed as follows

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 A. Profit Generation

The project is found to be financially viable and earns on average a profit of Birr 1.9 million per
year and Birr 19 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 7.4 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

The commencement of this project relieves a portion of the import burden. That is, based on the
projected figure we learn that in the project life an estimated amount of US Dollar 8 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
country. That is, it will provide permanent employment to 30 professionals as well as support
stuffs. Consequently the project creates income of birr 1.9 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

13
Annex 1: Total Net Working Capital Requirements (in Birr)
CONSTRUCTION PRODUCTION
Year 1 Year 2 1 2 3 4

Capacity Utilization (%) 0 0 70% 90% 100% 100%

1. Total Inventory 0 0 729272.85 937636.52 1041818.4 1041818.4

Raw Materials in Stock- Total 0 0 199868.08 256973.22 285525.83 285525.83

Raw Material-Local 0 0 199868.08 256973.22 285525.83 285525.83

Raw Material-Foreign 0 0 0 0 0 0

Factory Supplies in Stock 0 0 4038.0372 5191.7621 5768.6246 5768.6246

Spare Parts in Stock and Maintenance 0 0 22646.233 29116.582 32351.743 32351.743

Work in Progress 0 0 100950.83 129793.9 144215.46 144215.46

Finished Products 0 0 201901.63 259587.82 288430.9 288430.9

2. Accounts Receivable 0 0 634875.05 816267.92 906964.38 906964.38

3. Cash in Hand 0 0 103198.54 132683.86 147426.5 147426.5

CURRENT ASSETS 0 0 1267478.4 1629615.1 1810683.4 1810683.4

4. Current Liabilities 0 0 634875.05 816267.92 906964.38 906964.38

Accounts Payable 0 0 634875.05 816267.92 906964.38 906964.38

TOTAL NET WORKING CAPITAL REQUIRMENTS 0 0 632603.32 813347.15 903719.05 903719.05

INCREASE IN NET WORKING CAPITAL 0 0 632603.32 180743.81 90371.903 0

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 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%

1. Total Inventory 1041818 1041818 1041818 1041818 1041818 1041818

Raw Materials in Stock-Total 285525.8 285525.8 285525.8 285525.8 285525.8 285525.8

Raw Material-Local 285525.8 285525.8 285525.8 285525.8 285525.8 285525.8

Raw Material-Foreign 0 0 0 0 0 0

Factory Supplies in Stock 5768.625 5768.625 5768.625 5768.625 5768.625 5768.625

Spare Parts in Stock and Maintenance 32351.74 32351.74 32351.74 32351.74 32351.74 32351.74

Work in Progress 144215.5 144215.5 144215.5 144215.5 144215.5 144215.5

Finished Products 288430.9 288430.9 288430.9 288430.9 288430.9 288430.9

2. Accounts Receivable 906964.4 906964.4 906964.4 906964.4 906964.4 906964.4

3. Cash in Hand 147426.5 147426.5 147426.5 147426.5 147426.5 147426.5

CURRENT ASSETS 1810683 1810683 1810683 1810683 1810683 1810683

4. Current Liabilities 906964.4 906964.4 906964.4 906964.4 906964.4 906964.4

Accounts Payable 906964.4 906964.4 906964.4 906964.4 906964.4 906964.4

TOTAL NET WORKING CAPITAL REQUIRMENTS 903719.1 903719.1 903719.1 903719.1 903719.1 903719.1

INCREASE IN NET WORKING CAPITAL 0 0 0 0 0 0

Annex 2: Cash Flow Statement (in Birr)

CONSTRUCTION PRODUCTION
Year 1 Year 2 1 2 3 4

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 TOTAL CASH INFLOW 5,189,761 6,093,480 6,454,563 7,663,849 8,404,536 8,313,840
1. Inflow Funds 5,189,761 6,093,480 634,875 181,393 90,696 -
Total Equity 2,075,904 2,437,392 - - - -
Total Long Term Loan 3,113,856 3,656,088 - - - -
Total Short Term Finances - - 634,875 181,393 90,696 -

2. Inflow Operation - - 5,819,688 7,482,456 8,313,840 8,313,840

Sales Revenue - - 5,819,688 7,482,456 8,313,840 8,313,840
Interest on Securities - - - - - -
3. Other Income - - - - - -
TOTAL CASH OUTFLOW 5,189,761 5,189,761 6,001,046 6,024,080 6,857,027 6,581,180
4. Increase In Fixed Assets 5,189,761 5,189,761 - - - -
Fixed Investments 4,942,629 4,942,629 - - - -
Pre-production Expenditures 247,131 247,131 - - - -
5. Increase in Current Assets - - 1,267,478 362,137 181,068 -
6. Operating Costs - - 2,916,904 3,721,226 4,123,386 4,123,386
7. Corporate Tax Paid - - - - 747,254 787,874
8. Interest Paid - - 1,816,664 812,393 676,994 541,596
9.Loan Repayments - - - 1,128,324 1,128,324 1,128,324
10.Dividends Paid - - - - - -
Surplus(Deficit) - 903,719 453,517 1,639,769 1,547,509 1,732,660
Cumulative Cash Balance - 903,719 1,357,236 2,997,005 4,544,515 6,277,175

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

PRODUCTION
5 6 7 8 9 10
TOTAL CASH INFLOW 8,313,840 8,313,840 8,313,840 8,313,840 8,313,840 8,313,840
1. Inflow Funds - - - - - -

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 Total Equity - - - - - -
Total Long Term Loan - - - - - -
Total Short Term Finances - - - - - -
2. Inflow Operation 8,313,840 8,313,840 8,313,840 8,313,840 8,313,840 8,313,840
Sales Revenue 8,313,840 8,313,840 8,313,840 8,313,840 8,313,840 8,313,840
Interest on Securities - - - - - -
3. Other Income - - - - - -
TOTAL CASH OUTFLOW 6,486,400 6,459,767 6,364,988 5,141,884 5,141,884 5,141,884
4. Increase In Fixed Assets - - - - - -
Fixed Investments - - - - - -
Pre-production Expenditures - - - - - -
5. Increase in Current Assets - - - - - -
6. Operating Costs 4,123,386 4,123,386 4,123,386 4,123,386 4,123,386 4,123,386
7. Corporate Tax Paid 828,493 937,259 977,878 1,018,498 1,018,498 1,018,498
8. Interest Paid 406,197 270,798 135,399 - - -
9. Loan Repayments 1,128,324 1,128,324 1,128,324 - - -
10.Dividends Paid - - - - - -
Surplus(Deficit) 1,827,440 1,854,073 1,948,852 3,171,956 3,171,956 3,171,956
Cumulative Cash Balance 8,104,615 9,958,688 11,907,540 15,079,495 18,251,451 21,423,407

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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 - - 5,819,688 7,482,456 8,313,840 8,313,840

1. Inflow Operation - - 5,819,688 7,482,456 8,313,840 8,313,840

Sales Revenue - - 5,819,688 7,482,456 8,313,840 8,313,840

Interest on Securities - - - - - -

2. Other Income - - - - - -

TOTAL CASH OUTFLOW 5,189,761 5,189,761 3,549,507 3,901,969 4,961,012 4,911,260

3. Increase in Fixed Assets 5,189,761 5,189,761 - - - -

Fixed Investments 4,942,629 4,942,629 - - - -

Pre-production Expenditures 247,131 247,131 - - - -

4. Increase in Net Working Capital - - 632,603 180,744 90,372 -

5. Operating Costs - - 2,916,904 3,721,226 4,123,386 4,123,386

6. Corporate Tax Paid - - - - 747,254 787,874

(5,189,761
NET CASH FLOW (5,189,761) ) 2,270,181 3,580,487 3,352,828 3,402,580
(10,379,521
CUMMULATIVE NET CASH FLOW (5,189,761) ) (8,109,340) (4,528,854) (1,176,026) 2,226,554
(4,398,102
Net Present Value (at 18%) (5,189,761) ) 1,630,409 2,179,195 1,729,351 1,487,299
(9,587,863 (2,561,609
Cumulative Net present Value (5,189,761) ) (7,957,454) (5,778,260) (4,048,908) )

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 Annex 3: DISCOUNTED CASH FLOW-TOTAL CAPITAL INVESTED (Continued)
PRODUCTION
5 6 7 8 9 10
TOTAL CASH INFLOW 8,313,840 8,313,840 8,313,840 8,313,840 8,313,840 8,313,840

1. Inflow Operation 8,313,840 8,313,840 8,313,840 8,313,840 8,313,840 8,313,840

Sales Revenue 8,313,840 8,313,840 8,313,840 8,313,840 8,313,840 8,313,840

Interest on Securities - - - - - -

2. Other Income - - - - - -

TOTAL CASH OUTFLOW 4,951,880 5,060,645 5,101,265 5,141,884 5,141,884 5,141,884

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

Fixed Investments - - - - - -

Pre-production Expenditures - - - - - -

4. Increase in Net Working Capital - - - - - -

5. Operating Costs 4,123,386 4,123,386 4,123,386 4,123,386 4,123,386 4,123,386

6. Corporate Tax Paid 828,493 937,259 977,878 1,018,498 1,018,498 1,018,498

NET CASH FLOW 3,361,960 3,253,195 3,212,575 3,171,956 3,171,956 3,171,956

CUMMULATIVE NET CASH FLOW 5,588,514 8,841,709 12,054,284 15,226,240 18,398,195 21,570,151

Net Present Value (at 18%) 1,245,376 1,021,259 854,668 715,137 606,048 513,600

Cumulative Net present Value 1,316,233) (294,974) 559,694 1,274,830 1,880,878 2,394,478

Net Present Value (at 18%) 2,394,478.00

Internal Rate of Return 23.7%

Annex 4: NET INCOME STATEMENT ( in Birr)

PRODUCTION

19
 1 2 3 4 5
Capacity Utilization (%) 70% 90% 100% 100% 100%

1. Total Income 5,819,688 7,482,456 8,313,840 8,313,840 8,313,840

Sales Revenue 5,819,688 7,482,456 8,313,840 8,313,840 8,313,840
Other Income - - - - -
2. Less Variable Cost 2,535,781 3,260,290 3,622,544 3,622,544 3,622,544
VARIABLE MARGIN 3,283,907 4,222,166 4,691,296 4,691,296 4,691,296
(In % of Total Income) 56.43% 56.43% 56.43% 56.43% 56.43%
3. Less Fixed Costs 1,403,735 1,483,548 1,523,455 1,523,455 1,523,455
OPERATIONAL MARGIN 1,880,172 2,738,618 3,167,841 3,167,841 3,167,841
(In % of Total Income) 32.31% 36.60% 38.10% 38.10% 38.10%
4. Less Cost of Finance 1,816,664 812,393 676,994 541,596 406,197
5. GROSS PROFIT 63,508 1,926,225 2,490,847 2,626,245 2,761,644
6. Income (Corporate) Tax - - 747,254 787,874 828,493
7. NET PROFIT 63,508 1,926,225 1,743,593 1,838,372 1,933,151
RATIOS (%)
Gross Profit/Sales 1.09% 25.74% 29.96% 31.59% 33.22%
Net Profit After Tax/Sales 1.09% 25.74% 20.97% 22.11% 23.25%
Return on Investment 17.07% 24.47% 21.45% 21.09% 20.73%
Return on Equity 1.41% 42.68% 38.63% 40.73% 42.83%

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

PRODUCTION
6 7 8 9 10

20
 Capacity Utilization (%) 100% 100% 100% 100% 100%

1. Total Income 8,313,840 8,313,840 8,313,840 8,313,840 8,313,840

Sales Revenue 8,313,840 8,313,840 8,313,840 8,313,840 8,313,840
Other Income - - - - -
2. Less Variable Cost 3,622,544 3,622,544 3,622,544 3,622,544 3,622,544
VARIABLE MARGIN 4,691,296 4,691,296 4,691,296 4,691,296 4,691,296
(In % of Total Income) 56.43% 56.43% 56.43% 56.43% 56.43%
3. Less Fixed Costs 1,296,302 1,296,302 1,296,302 1,296,302 1,296,302
OPERATIONAL MARGIN 3,394,994 3,394,994 3,394,994 3,394,994 3,394,994
(In % of Total Income) 40.84% 40.84% 40.84% 40.84% 40.84%
4. Less Cost of Finance 270,798 135,399 - - -
5. GROSS PROFIT 3,124,196 3,259,595 3,394,994 3,394,994 3,394,994
6. Income (Corporate) Tax 937,259 977,878 1,018,498 1,018,498 1,018,498
7. NET PROFIT 2,186,937 2,281,716 2,376,496 2,376,496 2,376,496
RATIOS (%)
Gross Profit/Sales 37.58% 39.21% 40.84% 40.84% 40.84%
Net Profit After Tax/Sales 26.30% 27.44% 28.58% 28.58% 28.58%
Return on Investment 21.78% 21.42% 21.06% 21.06% 21.06%
Return on Equity 48.46% 50.56% 52.66% 52.66% 52.66%

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Annex 5: Projected Balance Sheet (in Birr)
CONSTRUCTION PRODUCTION
Year 1 Year 2 1 2 3 4
TOTAL ASSETS 5,189,761 11,283,240 11,981,623 12,960,917 13,666,882 14,376,929
1. Total Current Assets - 903,719 2,624,714 4,626,620 6,355,198 8,087,858
Inventory on Materials and Supplies - - 226,552 291,282 323,646 323,646
Work in Progress - - 100,951 129,794 144,215 144,215
Finished Products in Stock - - 201,902 259,588 288,431 288,431
Accounts Receivable - - 634,875 816,268 906,964 906,964
Cash in Hand - - 103,199 132,684 147,427 147,427
Cash Surplus, Finance Available - 903,719 1,357,236 2,997,005 4,544,515 6,277,175
2. Total Fixed Assets, Net of Depreciation 5,189,761 10,379,521 9,356,909 8,334,296 7,311,684 6,289,071
Fixed Investment - 4,942,629 9,885,258 9,885,258 9,885,258 9,885,258
Construction in Progress 4,942,629 4,942,629 - - - -
Pre-Production Expenditure 247,131 494,263 494,263 494,263 494,263 494,263
Less Accumulated Depreciation - - 1,022,613 2,045,225 3,067,838 4,090,450
3. Accumulated Losses Brought Forward - - - - - -
4. Loss in Current Year - - - - - -
TOTAL LIABILITIES 5,189,761 11,283,240 11,981,623 12,960,917 13,666,882 14,376,929
5. Total Current Liabilities - - 634,875 816,268 906,964 906,964
Accounts Payable - - 634,875 816,268 906,964 906,964
Bank Overdraft - - - - - -
6. Total Long-term Debt 3,113,856 6,769,944 6,769,944 5,641,620 4,513,296 3,384,972
Loan A 3,113,856 6,769,944 6,769,944 5,641,620 4,513,296 3,384,972
7. Total Equity Capital 2,075,904 4,513,296 4,513,296 4,513,296 4,513,296 4,513,296
Ordinary Capital 2,075,904 4,513,296 4,513,296 4,513,296 4,513,296 4,513,296
Preference Capital - - - - - -
8. Reserves, Retained Profits Brought Forward - - - 63,508 1,989,732 3,733,325
9.Net Profit After Tax - - 63,508 1,926,225 1,743,593 1,838,372
Dividends Payable - - - - - -
Retained Profits - - 63,508 1,926,225 1,743,593 1,838,372

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

22
 PRODUCTION
5 6 7 8 9 10
TOTAL ASSETS 15,181,756 16,240,369 17,393,762 19,770,257 22,146,753 24,523,248
1. Total Current Assets 9,915,298 11,769,371 13,718,223 16,890,179 20,062,134 23,234,090
Inventory on Materials and Supplies 323,646 323,646 323,646 323,646 323,646 323,646
Work in Progress 144,215 144,215 144,215 144,215 144,215 144,215
Finished Products in Stock 288,431 288,431 288,431 288,431 288,431 288,431
Accounts Receivable 906,964 906,964 906,964 906,964 906,964 906,964
Cash in Hand 147,427 147,427 147,427 147,427 147,427 147,427
Cash Surplus, Finance Available 8,104,615 9,958,688 11,907,540 15,079,495 18,251,451 21,423,407
2. Total Fixed Assets, Net of
Depreciation 5,266,458 4,470,998 3,675,538 2,880,078 2,084,618 1,289,158
Fixed Investment 9,885,258 9,885,258 9,885,258 9,885,258 9,885,258 9,885,258
Construction in Progress - - - - - -
Pre-Production Expenditure 494,263 494,263 494,263 494,263 494,263 494,263
Less Accumulated Depreciation 5,113,063 5,908,523 6,703,983 7,499,443 8,294,903 9,090,363
3. Accumulated Losses Brought
Forward - - - - - -
4. Loss in Current Year - - - - - -
TOTAL LIABILITIES 15,181,756 16,240,369 17,393,762 19,770,257 22,146,753 24,523,248
5. Total Current Liabilities 906,964 906,964 906,964 906,964 906,964 906,964
Accounts Payable 906,964 906,964 906,964 906,964 906,964 906,964
Bank Overdraft - - - - - -
6. Total Long-term Debt 2,256,648 1,128,324 - - - -
Loan A 2,256,648 1,128,324 - - - -
7. Total Equity Capital 4,513,296 4,513,296 4,513,296 4,513,296 4,513,296 4,513,296
Ordinary Capital 4,513,296 4,513,296 4,513,296 4,513,296 4,513,296 4,513,296
Preference Capital - - - - - -
8. Reserves, Retained Profits Brought
Forward 5,571,697 7,504,848 9,691,785 11,973,501 14,349,997 16,726,492
9. Net Profit After Tax 1,933,151 2,186,937 2,281,716 2,376,496 2,376,496 2,376,496
Dividends Payable - - - - - -
Retained Profits 1,933,151 2,186,937 2,281,716 2,376,496 2,376,496 2,376,496

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