Investment Commission ANRS

Project Profile on the Establishment of

Weaning Food Producing Plant

Development Studies Associates

(DSA)

Revised 2016
Bahir Dar
Table of Contents
1. Executive Summary................................................................................0
2. Product Description and Application....................................................0
3. Market Study, Plant Capacity and Production Program...................1
3.1 Market Study.........................................................................................................1
3.1.1 Present Demand and Supply..........................................................................1
3.1.2 Projected Demand..........................................................................................2
3.1.3 Pricing and Distribution.................................................................................3
3.2 Plant Capacity.......................................................................................................3
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....................................................................................5
6.3 Civil Engineering Cost..........................................................................................6
7. Human Resource and Training Requirement......................................7
7.1 Human Resource...................................................................................................7
Total annual salary expenses including benefits equals Birr 1,313,988.48.....................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....................................................................................................13
Annex 1: Total Net Working Capital Requirements (in Birr).......................................14
Annex 2: Cash Flow Statement (in Birr).......................................................................16
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 project envisages production of 4,000 tons of weaning food per annum. The total
investment requirement of the project is estimated at about Birr 45.3 million; of which
Birr 25.66 million is for machinery and equipment while Birr 12.92 million 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 40 % and 36.8 %, respectively. And the
net present value (NPV) at 18 % discounting rate is Birr 36,068,417. The plant is
expected to create employment opportunities for about 41 persons.
Items L.C(Birr) F.C(Birr) Total(Birr)
Land 9,238 0 9,238
Building and civil works 3,674,512 0 3,674,512
Office equipment 205,280 0 205,280
Vehicles 1,283,000 0 1,283,000
Plant machinery & equipment 3,849,000 21,811,000 25,660,000
Total fixed investment cost 9,021,030 21,811,000 30,832,030
Pre production capital expenditure 451,051 1,090,550 1,541,601
Total initial investment 9,472,081 22,901,550 32,373,631
Working capital at full capacity 12,915,940 0 12,915,940
Total 22,388,022 22,901,550 45,289,572

2. Product Description and Application

Weaning food is a type of food prepared from different ingredients to constitute a
balanced diet. The food is given to babies, children and breast- feeding mothers. For the
purpose of mixing the different ingredients in the required proportion and for large-scale
production, weaning food is mainly produced in factories.

3. Market Study, Plant Capacity and Production

Program
3.1 Market Study
3.1.1 Present Demand and Supply

1
Due to the widespread poverty prevailing in the Amhara Region, pregnant mothers do not
get proper and sufficient diet during pregnancy. This does not physically affect only the
mothers but also the yet-unborn babies. At birth most babies are below the normal
weight. After birth the mothers and the babies do not get the necessary diet in the
required amount and mix. The mothers remain weak and sickly; the children
underweight and susceptible to diseases. This lack of proper diet affects both the
physical and mental conditions of the children. When one travels through Amhara land,
it is common to see underfed, underweight and skinny children.
Currently Dubbe, Miten, Ediget and Fafa are the weaning foods which are available in
the market. All of which are situated in Addis Ababa. Due to the cost of transportation,
the lion share of their supply is for the population of Addis Ababa. Though it will not
eliminate the general shortage of food in the Amhara Region, production of weaning food
on a commercial scale will improve the food consumption of many if not all mothers,
babies and children in Amhara land.
TABLE 3.1
SUPPLY OF WEANING

Year E.C In Tons

1999 14570.00
2000 15706.00
2001 16930.57
2002 18250.62
2003 19673.59
2004 21207.51
2005 22861.03
2006 24643.47
2007 26564.88
2008 28636.10
Source: CSA’s Manufacturing Data
In 2008 E.C, the Amhara Region is estimated have 8.9 million babies and children (0-4
years) and 28 million women between the age of 14 and 49. The babies and children
and women, if provided, will consume weaning food. Currently Fafa Food Products and
private a factory produce weaning food. But for the last 20-25 years, most of the
production was supplied to people where there were acute food shortages. In other
words, no weaning food was supplied to mothers and children on a regular basis

2
throughout the country; and the benefit of feeding weaning food was not popularized by
the media. But there is a strong need for the supply of weaning food for the demand is
there waiting to be met. It might be unrealistic to expect that all children in the Amhara
Region will consume weaning food simply because their parents may not afford to buy
the food. But, if, at least, 5 percent or 447,300 of the 8.9 million babies and children
(between 0-4 years of age) consume weaning food, and if a child consumes at the
minimum 100gm of weaning food per day, the annul demand will be 63,880 quintals or
6,388 tons of weaning food per year. This is more than the production capacity of 2
medium scale weaning food factories.
Such project contributes to the reduction of nutrition deficiency in the region, stimulates
production of legumes by creating a new demand for the crops, and diversifies the pattern
of food consumption in the region by reducing the high dependency on cereals and by
increasing the consumption of legumes.

3.1.2 Projected Demand

Though it has not yet met, there is a potential demand for weaning food in the ANRS.
Future demand for the product will be influenced by population growth, income growth
and change in taste as well as awareness to more nutritive food items. The average GDP
growth rate for the period between1996 E.C and 2000 E.C was reported to be 10 %. With
high elasticity of demand for food and population growth (i.e. nearly 3 %), the fast
income growth is expected to generate a shift of demand from quantity to quality of food.
Thus, it will be reasonable to assume that the demand for composite flour can grow at
least 10 % per year for the coming decades. Based on this, the future demand for
composite flour is projected as follows.

TABLE 3.2
PROJECTED DEMAND FOR WEANING FOOD IN ANRS

Year E.C Projected Demand

(In Tons)
2000
6388
2001
7026

3
 2002
7729
2003
8502
2004
9352
2005
10287
2006
11316
2007
12447
2008
13692
2009
15061
2010
16568
As it is seen in the above projection, the demand for a weaning food in the ANRS is
expected to reach at 10,287 tons in 2005 E.C and 16,568 tons in 2010 E.C. This clearly
justifies the establishment of a medium scale composite flour producing plant in the
region.

3.1.3 Pricing and Distribution

The current average retail price of weaning food is Birr 31 .00 per Kg. Producers can sell
their product at factory gate price of Birr 23 per Kg. The project should mainly focus on
distributing their products to different urban centers of the ANRS using their own means.

3.2 Plant Capacity

The annual production capacity of the envisaged plant is 4000 tons per year. The plant
will operate 275 days a year. Sundays and national holidays, amounting to 65 days a year,
are registered holidays for the plant. For maintenance and repair work as well as for
contingence of unexpected work interruption additional 25 days are assigned.

3.3 Production Program

The production programme is scheduled in such a way that during the first, the second
and the third years, the plant will produce at 60 %, 75 % and 90 % of its capacity while
the fourth year on wards the plant will produce at its full capacity. Capacity build up is
established considering the time required for introducing the product

4
 4. Raw Materials and Utilities
4.1 Availability and Source of Raw Materials

As mentioned above, the main raw materials for weaning food are cereals (wheat, barley,
and oats), legumes (peas, beans, soybeans, click peas, lentils.....) and fruits. The ANRS is
one of the regions in the country, where these groups of crops grow relatively in large
quantities. The region can supply sufficient quantities of these crops for the plant to be
established.

4.2 Annual Requirement and Cost of Raw Materials and

Utilities

The annual requirement of the raw materials and utilities are indicated in Table 4.1 and
Table 4.2 below.
TABLE 4.1
RAW MATERILA REQUIREMENTS

Raw Material Qty Unit Cost Total Annual Cost

(in tons) (in Birr) ('000 Birr)
1.Cereals 4000 7668 30,672
2. Legumes 2000 11502 23,004
3. Soybean 1000 7668 7,668
3. Packing Bags 10,000,000 Pieces 0.1278 1,278
Total Costs Raw Materials 62,622

TABLE 4.2
UTILITY REQUIREMENT AND COST

Utilities Qty Unit Cost Total Cost

(In Birr)
Electric 500 MWH Birr 0.55/kwh 273,928
Water 2000 m3 Birr 2.63/m3 5279.35

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Total 279,207.35

5. Location and Site

For its convenience to procure the necessary raw materials and to distribute the product to
different parts of the region, Bahir-Dar is an appropriate place to establish a composite
flour producing plant in ANRS.

6. Technology and Engineering

6.1 Production Process

The production processes generally include the following operations: Sorting, Cleaning,
Soaking, Steam Cooking, Drying, Roasting, Crushing and Grinding, Cooking and
Packing. Soaking and steam cooking are done only for Soya beans.
Alternatively, it is possible to use a computerized capital intensive plant with an
equivalent production capacity but with a lesser labor requirement. In this case, a single
machine can handle different stages of the production. However, this alternative capital
intensive technology is relatively expensive.

6.2 Machinery and Equipment

The major equipment required for the plant include winnowing machine, electric dryers,
electric ovens, cooling steel vat, a crushing machine and mill stone.

TABLE 6.1
MACHINERY AND EQUIPMENT

Machinery Qty (pcs)

6
 1. Winnowing Machine 1
2. Weighing Machine 1
3. Electric Dryers 1
4. Electric Ovens 1
5. Cooling Steel Vat 1
6. Crushing Machine 1
7. Dust Collector 1
8. Mill Stone 1

The total cost of Machinery and equipments is estimated to be Birr 25.6 million; of which
Birr 21.7 million is required in foreign currency.

Machinery Supplies Address:

Labh Group of Companies Snacks Plant Division
403-405, Time Square, Near Pariseema Complex,
C.G. Road, Ahmedabad, Gujarat,380006,
India

6.3 Civil Engineering Cost

Due to technological and engineering requirements the production hall shall have four
story building with a total floor area of 716m2, and it costs Birr 3,660,192.00. This would
include cost of land preparation and associated civil works. The total land area of the
plant including the open space is 1200 m2. The cost of the land lease is Birr 72,000 which
is as per ANRS land lease rate for Bahir-Dar (which is equal to Birr 60 per square meter
for industrial purpose). Of the total cost of the lease, 5 % is paid in the beginning while
the rest will be paid in 40 years.

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 7. Human Resource and Training Requirement
7.1 Human Resource
Manpower requirement of the plant is indicated in Table 7.1 below.

TABLE 7.1
MANPOWER REQUIREMENTS
Salary/Month Annual Salary
Post No
(Br.) Expenses (Birr)
Plant Manager 1 8,946.00 107,352.00
Technologist 1 5,623.20 67,478.40
Engineer 1 5,112.00 61,344.00
Secretary 1 2,044.80 24,537.60
Mechanics 6 2,556.00 184,032.00
Operators 18 2,044.80 441,676.80
Driver 2 1,533.60 36,806.40
Clerks 3 1,022.40 36,806.40
Cashier 1 1,533.60 18,403.20
Administrator 1 5,112.00 61,344.00
Guards 6 766.8 55,209.60
Sub-Total
41 - 1,094,990.40
Benefits 20 %
  - 218,998.08
Total 41   1,313,988.48

Total annual salary expenses including benefits equals Birr 1,313,988.48.

7.2 Training Requirement

Training of technical staffs and operators of the plant can be managed by hiring one or
more experts from the technology suppliers.

8. Financial Analysis
8.1 Underlying Assumption
The financial analysis of Weaning Food producing plant is based on the data provided in
the preceding chapters and the following assumptions.

A. Construction and Finance

8
Construction period 2 year
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 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 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 45
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(Birr) F.C(Birr) Total(Birr)

9
 Land 9,238 0 9,238
Building and civil works 3,674,512 0 3,674,512
Office equipment 205,280 0 205,280
Vehicles 1,283,000 0 1,283,000
Plant machinery & equipment 3,849,000 21,811,000 25,660,000
Total fixed investment cost 9,021,030 21,811,000 30,832,030
Pre production capital expenditure 451,051 1,090,550 1,541,601
Total initial investment 9,472,081 22,901,550 32,373,631
Working capital at full capacity 12,915,940 0 12,915,940
Total 22,388,022 22,901,550 45,289,572

*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 major components of the investment are plant machinery and equipment, and
working capital. The foreign component of the project accounts for Birr 22.8 million or
50.6 % of the total investment cost.

8.3 Production Costs

The total production cost at full capacity operation is estimated at Birr 72.4 million (See
Table 8.2). Of the total production cost, raw materials and utility account for 87.8 %.

TABLE 8.2
PRODUCTION COST AT FULL CAPACITY

Raw Material Requirement Cost

10
 1. Local Raw Materials 62,867,000.00
2. Foreign Raw Materials 0

Total Production Cost at full Capacity

Items Cost
1.      Raw materials 62,867,000
2.      Utilities 719,250
3.      Wages and Salaries 1,319,129
4.      Spares and
924,961
Maintenance
Factory Costs 65,830,340
5.      Depreciation 3,335,174
6.      Financial Costs 3,260,850
  Total
72,426,364
Production Cost

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.
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 15.3 % of capacity utilization

III. Payback Period

11
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 two years.

IV. Simple Rate of Return

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

SRR= (Net Profit + Interest)/ (Total Investment Outlay) at full capacity utilization.

The SRR would be 36.8 % 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 40 % and the net present value (NPV) at 18 % discount is Birr 36,208.63
thousands.

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

A. Profit Generation

12
The project is found to be financially viable and earns on average a profit of Birr 14.5
million per year and birr 142.4 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 53 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. 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 41 professionals as well as
support stuffs. Consequently the project creates income of birr 1,318,924.00 thousands per
year. This would be one of the commendable accomplishments of the project.

D. 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)
CONSTRUCTION PRODUCTION
  Year 1 Year 2 1 2 3 4
Capacity Utilization (%) 0 0 60% 75% 90% 100%
1. Total Inventory - - 11,685,357 14,606,697 17,528,036 19,475,595
Raw Materials in Stock- Total - - 4,098,895 5,123,618 6,148,342 6,831,491
Raw Material-Local - - 4,098,895 5,123,618 6,148,342 6,831,491
Raw Material-Foreign - - - - - -
Factory Supplies in Stock - - 45,096 56,369 67,643 75,159
Spare Parts in Stock and Maintenance - - 60,307 75,384 90,460 100,512
Work in Progress - - 1,127,389 1,409,236 1,691,083 1,878,981
Finished Products - - 2,254,777 2,818,471 3,382,166 3,757,962
2. Accounts Receivable - - 6,022,865 7,528,582 9,034,298 10,038,109
3. Cash in Hand - - 132,901 166,127 199,352 221,502
CURRENT ASSETS - - 13,742,229 17,177,787 20,613,344 22,903,716
4. Current Liabilities - - 6,022,865 7,528,582 9,034,298 10,038,109
Accounts Payable - - 6,022,865 7,528,582 9,034,298 10,038,109
TOTAL NET WORKING CAPITAL REQUIRMENTS - - 7,719,364 9,649,205 11,579,046 12,865,607
INCREASE IN NET WORKING CAPITAL - - 7,719,364 1,929,841 1,929,841 1,286,561

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

15
 PRODUCTION
  5 6 7 8 9 10

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

1. Total Inventory 19,475,595 19,475,595 19,475,595 19,475,595 19,475,595 19,475,595
Raw Materials in Stock-Total 6,831,491 6,831,491 6,831,491 6,831,491 6,831,491 6,831,491
Raw Material-Local 6,831,491 6,831,491 6,831,491 6,831,491 6,831,491 6,831,491
Raw Material-Foreign - - - - - -
Factory Supplies in Stock 75,159 75,159 75,159 75,159 75,159 75,159
Spare Parts in Stock and Maintenance 100,512 100,512 100,512 100,512 100,512 100,512
Work in Progress 1,878,981 1,878,981 1,878,981 1,878,981 1,878,981 1,878,981
Finished Products 3,757,962 3,757,962 3,757,962 3,757,962 3,757,962 3,757,962
2. Accounts Receivable 10,038,109 10,038,109 10,038,109 10,038,109 10,038,109 10,038,109
3. Cash in Hand 221,502 221,502 221,502 221,502 221,502 221,502
CURRENT ASSETS 22,903,716 22,903,716 22,903,716 22,903,716 22,903,716 22,903,716
4. Current Liabilities 10,038,109 10,038,109 10,038,109 10,038,109 10,038,109 10,038,109
Accounts Payable 10,038,109 10,038,109 10,038,109 10,038,109 10,038,109 10,038,109
TOTAL NET WORKING CAPITAL REQUIRMENTS 12,865,607 12,865,607 12,865,607 12,865,607 12,865,607 12,865,607
INCREASE IN NET WORKING CAPITAL - - - - - -

Annex 2: Cash Flow Statement (in Birr)

CONSTRUCTION PRODUCTION
  Year 1 Year 2 1 2 3 4
TOTAL CASH INFLOW 16,123,734 28,989,340 61,232,465 70,517,716 84,320,116 93,019,811

16
 1. Inflow Funds 16,123,734 28,989,340 6,022,865 1,505,716 1,505,716 1,003,811
Total Equity 6,449,493 11,595,736 - - - -
Total Long Term Loan 9,674,240 17,393,604 - - - -
Total Short Term Finances - - 6,022,865 1,505,716 1,505,716 1,003,811
2. Inflow Operation - - 55,209,600 69,012,000 82,814,400 92,016,000
Sales Revenue - - 55,209,600 69,012,000 82,814,400 92,016,000
Interest on Securities - - - - - -
3. Other Income - - - - - -
TOTAL CASH OUTFLOW 16,123,734 16,123,734 60,264,069 60,512,542 75,072,402 80,882,644
4. Increase In Fixed Assets 16,123,734 16,123,734 - - - -
Fixed Investments 15,355,937 15,355,937 - - - -
Pre-production Expenditures 767,797 767,797 - - - -

5. Increase in Current Assets - - 13,742,229 3,435,557 3,435,557 2,290,372

6. Operating Costs - - 39,516,326 49,317,536 59,118,745 65,652,884
7. Corporate Tax Paid - - - - 5,300,008 6,262,654
8. Interest Paid - - 7,005,513 3,248,141 2,706,784 2,165,428
9.Loan Repayments - - - 4,511,307 4,511,307 4,511,307
10.Dividends Paid - - - - - -
Surplus(Deficit) - 12,865,607 968,396 10,005,175 9,247,714 12,137,166
Cumulative Cash Balance - 12,865,607 13,834,003 23,839,177 33,086,891 45,224,058

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

PRODUCTION
  5 6 7 8 9 10
TOTAL CASH INFLOW 92,016,000 92,016,000 92,016,000 2,016,000 92,016,000 92,016,000

17
1. Inflow Funds - - - - - -
Total Equity - - - - - -
Total Long Term Loan - - - - - -
Total Short Term Finances - - - - - -
2. Inflow Operation 92,016,000 92,016,000 92,016,000 2,016,000 92,016,000 92,016,000
Sales Revenue 92,016,000 92,016,000 92,016,000 2,016,000 92,016,000 92,016,000
Interest on Securities - - - - - -
3. Other Income - - - - - -
TOTAL CASH OUTFLOW 78,213,323 78,003,189 77,624,239 2,733,982 72,733,982 72,733,982
4. Increase In Fixed Assets - - - - - -
Fixed Investments - - - - - -
Pre-production Expenditures - - - - - -
5. Increase in Current Assets - - - - - -
6. Operating Costs 65,652,884 65,652,884 65,652,884 5,652,884 65,652,884 65,652,884
7. Corporate Tax Paid 6,425,061 6,756,283 6,918,690 ,081,097 7,081,097 7,081,097
8. Interest Paid 1,624,071 1,082,714 541,357 - - -
9. Loan Repayments 4,511,307 4,511,307 4,511,307 - - -
10.Dividends Paid - - - - - -
Surplus(Deficit) 13,802,677 14,012,811 14,391,761 9,282,018 19,282,018 19,282,018
Cumulative Cash Balance 59,026,735 73,039,546 87,431,307 06,713,325 125,995,343 145,277,361

Annex 3: DISCOUNTED CASH FLOW-TOTAL CAPITAL INVESTED

CONSTRUCTION PRODUCTION
  Year 1 Year 2 1 2 3 4

18
 TOTAL CASH INFLOW - - 55,209,600 69,012,000 82,814,400 92,016,000
1. Inflow Operation - - 55,209,600 69,012,000 82,814,400 92,016,000
Sales Revenue - - 55,209,600 69,012,000 82,814,400 92,016,000
Interest on Securities - - - - - -
2. Other Income - - - - - -
TOTAL CASH OUTFLOW 16,123,734 16,123,734 47,235,690 51,247,377 61,048,586 73,202,099
3. Increase in Fixed Assets 16,123,734 16,123,734 - - - -
Fixed Investments 15,355,937 15,355,937 - - - -
Pre-production Expenditures 767,797 767,797 - - - -
4. Increase in Net Working Capital - - 7,719,364 1,929,841 1,929,841 1,286,561
5. Operating Costs - - 39,516,326 49,317,536 59,118,745 65,652,884
6. Corporate Tax Paid - - - - - 6,262,654
NET CASH FLOW (16,123,734) (16,123,734) 7,973,910 17,764,623 21,765,814 18,813,901
CUMMULATIVE NET CASH
FLOW (16,123,734) (32,247,467) (24,273,558) (6,508,934) 15,256,880 34,070,781
Net Present Value (at 18%) (16,123,734) (13,664,181) 5,726,738 10,812,098 11,226,565 8,223,730
Cumulative Net present Value (16,123,734) (29,787,915) (24,061,177) (13,249,079) (2,022,514) 6,201,216

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

PRODUCTION
  5 6 7 8 9 10
TOTAL CASH INFLOW 92,016,000 92,016,000 92,016,000 92,016,000 92,016,000 92,016,000
1. Inflow Operation 92,016,000 92,016,000 92,016,000 92,016,000 92,016,000 92,016,000

19
 Sales Revenue 92,016,000 92,016,000 92,016,000 92,016,000 92,016,000 92,016,000
Interest on Securities - - - - - -
2. Other Income - - - - - -
TOTAL CASH OUTFLOW 72,077,945 72,409,168 72,571,575 72,733,982 72,733,982 72,733,982
3. Increase in Fixed Assets - - - - - -
Fixed Investments - - - - - -
Pre-production Expenditures - - - - - -
4. Increase in Net Working Capital - - - - - -
5. Operating Costs 65,652,884 65,652,884 65,652,884 65,652,884 65,652,884 65,652,884
6. Corporate Tax Paid 6,425,061 6,756,283 6,918,690 7,081,097 7,081,097 7,081,097
NET CASH FLOW 19,938,055 19,606,832 19,444,425 19,282,018 19,282,018 19,282,018
CUMMULATIVE NET CASH FLOW 54,008,836 73,615,668 93,060,094 112,342,112 131,624,130 150,906,148
Net Present Value (at 18%) 7,385,684 6,155,075 5,172,959 4,347,248 3,684,109 3,122,126
Cumulative Net present Value 13,586,900 19,741,975 24,914,935 29,262,183 32,946,291 36,068,417
Net Present Value (at 18%) 36,068,417
Internal Rate of Return 40.0%
Annex 4: NET INCOME STATEMENT ( in Birr)
PRODUCTION
  1 2 3 4 5
Capacity Utilization (%) 60% 75% 90% 100% 100%

1. Total Income 33,609,600 42,012,000 50,414,400 56,016,000 56,016,000

Sales Revenue 33,609,600 42,012,000 50,414,400 56,016,000 56,016,000

20
 Other Income - - - - -
2. Less Variable Cost 23,674,503 29,593,129 35,511,755 39,457,506 39,457,506
VARIABLE MARGIN 9,935,097 12,418,871 14,902,645 16,558,494 16,558,494
(In % of Total Income) 29.56% 29.56% 29.56% 29.56% 29.56%
3. Less Fixed Costs 2,404,022 2,452,016 2,500,011 2,532,007 2,532,007
OPERATIONAL MARGIN 7,531,075 9,966,854 12,402,634 14,026,487 14,026,487
(In % of Total Income) 22.41% 23.72% 24.60% 25.04% 25.04%
4. Less Cost of Finance 4,264,702 1,977,351 1,647,792 1,318,234 988,675
5. GROSS PROFIT 3,266,373 7,989,504 10,754,842 12,708,254 13,037,812
6. Income (Corporate) Tax - - 3,226,453 3,812,476 3,911,344
7. NET PROFIT 3,266,373 7,989,504 7,528,389 8,895,778 9,126,468
RATIOS (%)  
Gross Profit/Sales 9.72% 19.02% 21.33% 22.69% 23.28%
Net Profit After Tax/Sales 9.72% 19.02% 14.93% 15.88% 16.29%
Return on Investment 30.95% 39.08% 34.39% 37.19% 36.83%
Return on Equity 29.73% 72.73% 68.53% 80.98% 83.08%
Annex 4: NET INCOME STATEMENT (in Birr): Continued
PRODUCTION
  6 7 8 9 10
Capacity Utilization (%) 100% 100% 100% 100% 100%

1. Total Income 56,016,000 56,016,000 56,016,000 56,016,000 56,016,000

Sales Revenue 56,016,000 56,016,000 56,016,000 56,016,000 56,016,000

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 Other Income - - - - -
2. Less Variable Cost 39,457,506 39,457,506 39,457,506 39,457,506 39,457,506
VARIABLE MARGIN 16,558,494 16,558,494 16,558,494 16,558,494 16,558,494
(In % of Total Income) 29.56% 29.56% 29.56% 29.56% 29.56%
3. Less Fixed Costs 2,189,444 2,189,444 2,189,444 2,189,444 2,189,444
OPERATIONAL MARGIN 14,369,050 14,369,050 14,369,050 14,369,050 14,369,050
(In % of Total Income) 25.65% 25.65% 25.65% 25.65% 25.65%
4. Less Cost of Finance 659,117 329,558 - - -
5. GROSS PROFIT 13,709,933 14,039,492 14,369,050 14,369,050 14,369,050
6. Income (Corporate) Tax 4,112,980 4,211,847 4,310,715 4,310,715 4,310,715
7. NET PROFIT 9,596,953 9,827,644 10,058,335 10,058,335 10,058,335
RATIOS (%)  
Gross Profit/Sales 24.48% 25.06% 25.65% 25.65% 25.65%
Net Profit After Tax/Sales 17.13% 17.54% 17.96% 17.96% 17.96%
Return on Investment 37.34% 36.98% 36.62% 36.62% 36.62%
Return on Equity 87.36% 89.46% 91.56% 91.56% 91.56%
Annex 5: Projected Balance Sheet (in Birr)

CONSTRUCTION PRODUCTION
  Year 1 Year 2 1 2 3 4
TOTAL ASSETS 16,123,734 45,113,074 56,501,523 66,620,079 75,981,174 87,086,535
1. Total Current Assets - 12,865,607 27,576,232 41,016,964 53,700,235 68,127,773
Inventory on Materials and Supplies - - 4,204,297 5,255,371 6,306,446 7,007,162
Work in Progress - - 1,127,389 1,409,236 1,691,083 1,878,981
Finished Products in Stock - - 2,254,777 2,818,471 3,382,166 3,757,962
Accounts Receivable - - 6,022,865 7,528,582 9,034,298 10,038,109

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 Cash in Hand - - 132,901 166,127 199,352 221,502
Cash Surplus, Finance Available - 12,865,607 13,834,003 23,839,177 33,086,891 45,224,058
Securities - - - - - -
2. Total Fixed Assets, Net of Depreciation 16,123,734 32,247,467 28,925,291 25,603,115 22,280,938 18,958,762
Fixed Investment - 15,355,937 30,711,874 30,711,874 30,711,874 30,711,874
Construction in Progress 15,355,937 15,355,937 - - - -
Pre-Production Expenditure 767,797 1,535,594 1,535,594 1,535,594 1,535,594 1,535,594
Less Accumulated Depreciation - - 3,322,176 6,644,353 9,966,529 13,288,705
3. Accumulated Losses Brought Forward - - - - - -
4. Loss in Current Year - - - - - -
TOTAL LIABILITIES 16,123,734 45,113,074 56,501,523 66,620,079 75,981,174 87,086,535
5. Total Current Liabilities - - 6,022,865 7,528,582 9,034,298 10,038,109
Accounts Payable - - 6,022,865 7,528,582 9,034,298 10,038,109
Bank Overdraft - - - - - -
6. Total Long-term Debt 9,674,240 27,067,844 27,067,844 22,556,537 18,045,230 13,533,922
Loan A 9,674,240 27,067,844 27,067,844 22,556,537 18,045,230 13,533,922
Loan B - - - - - -
7. Total Equity Capital 6,449,493 18,045,230 18,045,230 18,045,230 18,045,230 18,045,230
Ordinary Capital 6,449,493 18,045,230 18,045,230 18,045,230 18,045,230 18,045,230
Preference Capital - - - - - -
Subsidies - - - - - -
8. Reserves, Retained Profits Brought Forward - - - 5,365,584 18,489,730 30,856,416
9.Net Profit After Tax - - 5,365,584 13,124,147 12,366,686 14,612,858
Dividends Payable - - - - - -
Retained Profits - - 5,365,584 13,124,147 12,366,686 14,612,858

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

PRODUCTION
  5 6 7 8 9 10

TOTAL ASSETS 97,567,036 108,820,389 120,452,693 136,975,253 153,497,814 170,020,374

1. Total Current Assets 81,930,450 95,943,261 110,335,022 129,617,041 148,899,059 168,181,077

Inventory on Materials and Supplies 7,007,162 7,007,162 7,007,162 7,007,162 7,007,162 7,007,162
Work in Progress 1,878,981 1,878,981 1,878,981 1,878,981 1,878,981 1,878,981
Finished Products in Stock 3,757,962 3,757,962 3,757,962 3,757,962 3,757,962 3,757,962

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 Accounts Receivable 10,038,109 10,038,109 10,038,109 10,038,109 10,038,109 10,038,109

Cash in Hand 221,502 221,502 221,502 221,502 221,502 221,502

Cash Surplus, Finance Available 59,026,735 73,039,546 87,431,307 106,713,325 125,995,343 145,277,361
Securities - - - - - -
2. Total Fixed Assets, Net of Depreciation 15,636,586 12,877,128 10,117,670 7,358,213 4,598,755 1,839,298

Fixed Investment 30,711,874 30,711,874 30,711,874 30,711,874 30,711,874 30,711,874

Construction in Progress - - - - - -
Pre-Production Expenditure 1,535,594 1,535,594 1,535,594 1,535,594 1,535,594 1,535,594

Less Accumulated Depreciation 16,610,882 19,370,339 22,129,797 24,889,254 27,648,712 30,408,170

3. Accumulated Losses Brought Forward - - - - - -
4. Loss in Current Year - - - - - -

TOTAL LIABILITIES 97,567,036 108,820,389 120,452,693 136,975,253 153,497,814 170,020,374

5. Total Current Liabilities 10,038,109 10,038,109 10,038,109 10,038,109 10,038,109 10,038,109

Accounts Payable 10,038,109 10,038,109 10,038,109 10,038,109 10,038,109 10,038,109

Bank Overdraft - - - - - -
6. Total Long-term Debt 9,022,615 4,511,307 - - - -
Loan A 9,022,615 4,511,307 - - - -
Loan B - - - - - -

7. Total Equity Capital 18,045,230 18,045,230 18,045,230 18,045,230 18,045,230 18,045,230

Ordinary Capital 18,045,230 18,045,230 18,045,230 18,045,230 18,045,230 18,045,230

Preference Capital - - - - - -
Subsidies - - - - - -

8. Reserves, Retained Profits Brought Forward 45,469,275 60,461,083 76,225,743 92,369,354 108,891,915 125,414,475

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9. Net Profit After Tax 14,991,808 15,764,661 16,143,611 16,522,561 16,522,561 16,522,561
Dividends Payable - - - - - -

Retained Profits 14,991,808 15,764,661 16,143,611 16,522,561 16,522,561 16,522,561

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