Investment Office ANRS

Project Profile on the Establishment of Hand

Pump Assembling Plant

Development Studies Associates

(DSA)

October 2008
Addis Ababa
 Table of Contents

1. Executive Summary............................................................................................1
2. Product Description and Application..............................................................1
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..................................................................................................................4
3.3 Production Program.........................................................................................................4
4. Raw Materials and Utilities..............................................................................4
4.1 Availability and Source of Raw Materials.......................................................................4
4.2 Annual Requirement and Cost of Raw Materials and Utilities.......................................4
5. Location and Site...............................................................................................5
6. Technology and Engineering............................................................................5
6.1 Production Process...........................................................................................................5
6.2 Machinery and Equipment...............................................................................................6
6.3 Civil Engineering Cost....................................................................................................6
7. Human Resource and Training Requirement................................................7
7.1 Human Resource..............................................................................................................7
7.2 Training Requirement......................................................................................................7
8. Financial Analysis.............................................................................................8
8.1 Underlying Assumption...................................................................................................8
8.2 Investment........................................................................................................................9
8.3 Production Costs............................................................................................................10
8.4 Financial Evaluation......................................................................................................10
9. Economic and Social Benefit and Justification.............................................11
ANNEXES...............................................................................................................13
 1. Executive Summary
This project envisages production of 6000 hand pump per annum. The total investment
requirement of the project including the working capital is estimated at Birr 4.4 million; of which
nearly Birr 1,9 million is the cost of the working capital and Birr 1,155 thousand is for machinery
and equipments. Based on the cash flow statement, the calculated internal rate of return (IRR)
and simple rate of return (SRR) the project is 34 % and 27.4 %, respectively. The net present
value (NPV) at 18 % discounting rate is about Birr 3,205 thousand. The plant is expected to
create employment opportunities for about 24 persons.

2. Product Description and Application

Hand pumps are simple hand operated lever type reciprocating pumps used to take out water
from shallow well. Hand pumps are made from C.I. castings and gun metal castings. A hand
pump consists of base body, gun metal valve, valve sheets, glands, handle, bushes, shaft and
piston. Hand pumps, generally, deliver approximately 567-757 liters of water with about 20-30
strokes per minute from maximum depth of 6-7 meters. Hand pumps are used for pumping out
water from wells or tube wells in villages or towns. They are gaining popularity in areas where
tap water supply is not extended or available.

3. Market Study, Plant Capacity and Production Program

3.1 Market Study

3.1.1 Present Demand and Supply

Access to potable water in Ethiopia is very limited, particularly in rural and small urban areas.
Even in big cities such as Addis Ababa and Bahir-Dar, only a portion of the population has
access to protected or potable water. Only small portion of the rural housing units of the ANRS
have access to tap water or protected well/spring water. Although the situation is relatively better
in the urban housing units (that of big cities and towns) in terms of having access to tap water or
protected well/spring water, it is not yet satisfactory.
In some small towns and some rural areas water pumps are fixed to pump out protected drinkable
water from wells or springs to users in very limited areas. Even in the big cities, there are

1
housing units that have no access to protected spring/well water, and are forced to use
unprotected water from lakes, rivers and etc.

The country’s requirement of various types of pumps is met both from local production and
imports. The only producer of pumps in Ethiopia was the publicly owned Akaki metal factory.
Since the factory had been producing pumps that are operated by diesel and electric motors, until
recently, the demand for hand pumps has been entirely met through import. Hence, there is a
good ground to encourage investors to involve in the assembly of water pumps to make more
people have access to potable water.
TABLE 3.1
IMPORTS OF HAND PUMPS
Year E.C Annual Imports (No.)
1990 7,099
1991 5,042
1992 7,852
1993 19,420
1994 62,958
1995 36,978
1996 30,111
1997 76,510
1998 2,008
1999 5,883
Total 253,861
Av. Annual 25,386
Import

As it is seen in the above table, 253 thousands of hand pumps were imported in the past decade;
implies, on average, 25 thousand of the item have been imported annually during the period
under consideration.

3.1.2 Projected Demand

Due to inadequate tap water facilities, especially in sub-urban or rural areas, spring /well water
supply with the help of hand pumps is widely used. These pumps are used for water supply for
domestic use in villages and towns where facilities of municipal water supply are not extended.
The need for clean water in the rural as well as in small towns is expected to increase with the

2
growth of the economy. In addition to this, expansion of small scale irrigation in the rural areas
and the rise in income of farmers is expected to increase the demand for hand pumps.

Hence, by taking the average annual import of hand pumps as a base year figure and applying 10
% rate of growth, the projected future demand for hand pumps is given below (See Table 3.2).

TABLE 3.2
PROJECTED DEMAND FOR HAND PUMPS

Year E.C NUMBERS

2008 59,859
2009 65,845
2010 72,429
2011 79,671
2012 87,638
2013 96,401
2014 106,040
2015 116,644
2016 128,307
2017 141,137
2018 155,249

The demand for hand pumps is projected to reach nearly 96 thousand per annum in 2013 E.C
while it is expected to reach at 155,249 by the year 2018 E.C. This justifies the establishment of
a hand pump assembling plant in Ethiopia. Since it has a very large population and huge
potential demand for hand pumps, ANRS should take the initiative to attract investors in the
area.

3.1.3 Pricing and Distribution

The prices of hand pumps vary widely depending on quality, brand, country of origin and other
factors. Pumps ranging from Birr 770 to 6,415 are available in the market. However, for the
purpose of finical and revenue calculation, a price of Birr 1,283 per unit is recommended for this
project. The product will find its market outlet through the existing pump distributors and retail
enterprises.

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 3.2 Plant Capacity

The production capacity of the plant is 6,000 hand pumps per annum. The plant will work a
single shift a day for a total of 275 days. Production can be doubled by increasing the number of
shift at later stages if the market warrants. The working days are set by deducting 52 Sundays, 13
public and national holidays, 15 days for annual maintenance work and 10 days for unexpected
work interruptions.

3.3 Production Program

The production program follows gradual capacity utilization due to market and technological
reasons. Accordingly, 75 % and 85 % capacity utilization are assumed for the first and the
second years of the operation, respectively. The third year onwards, 100 % capacity utilization is
assumed.

4. Raw Materials and Utilities

4.1 Availability and Source of Raw Materials

Some of the raw materials required for assembling hand pumps are found locally while some are
imported from other countries.

4.2 Annual Requirement and Cost of Raw Materials and Utilities

The major raw materials required for the production of hand pumps are pig iron & scrap, brass
scrap & ingots, MS rod, Hard coke, hard ware items, bolts nuts screw, foundry fluxes & alloys,
paints. The annual cost and requirement of the raw materials is presented in Table 4.1.

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 TABLE 4.1
RAW MATERIAL REQUIREMENT

Qty. Cost,000 Birr

No Material
Ton Foreign Local Total
1 Pig Iron & Scrap 120 1627 1265 2892
2 Brass Scrap & Ingots 6 446 80 526
3 Ms Rod 12 162 126 290
4 Hard Coke 120 293 1206 1499
5 Hardware Items –Bolts, Nuts, Screw 26 0 26
6 Foundry Fluxes & Alloys 26 0 26
7 Paints 10 0 10
Total 2589 2676 5265
In addition to the above raw materials, utilities such as electricity and water required for the
plant. The annual requirement and costs of utilities are given in Table 4.2.

TABLE 4.2
UTILITES AND COSTS
Total Cost
No. Utility Amount Unit Cost
(In Birr)
1 Electric 24,000 Kwh Birr 0.55/Kwh 13,200
2 Water 1000 m3 Birr 2.65 / m3 2,650
Total 15,850

5. Location and Site

For its convenience to procure the necessary raw materials and to distribute the product to
different parts of the country, Combolcha is an appropriate choice for the Hand Pump
assembling plant in the region.

6. Technology and Engineering

6.1 Production Process

The production process of hand pumps involves designing of components, castings and etc.
Prior to manufacturing the components of hand pump, an appropriate design of each
component part is prepared. All components of the pump body, along with hand lever are

5
 casted separately as per design. Certain components like value, hardware items, or sheets and
etc are bought from outside sources. Casted components are assembled, tested & painted.
Currently, there is no alternative technology to manufacture hand pumps.

6.2 Machinery and Equipment

The list of machinery and equipment required for manufacturing of hand pumps is provided in
Table 6.1. The total cost of machinery and equipment is Birr 1,155 thousand out of which Birr
770 thousand will be required in foreign currency.

TABLE 6.1
MACHINERY AND EQUIPMENT REQUIREMENT

NO Description Qty, pcs.

1 SS & SC Lathe 6’’ (Motorized) 1
2 SS & SC Lathe 4-1/2” 2
3 Metal Cutting Power Hacksaw 6 Diameter Cap. 1
4 Universal Bench Radial Drilling Machine 1” Cap. 1
5 Shaping Machine 24” Cap. 1
6 Pedestal Grinder 14” Diameter Wheel 1
7 Spray Painting Equipment 1
Pit, Furnace, Blower, Core Oven Molding Boxes 1
8 Patterns Molding Tools etc.
9 Testing Equipments & Measuring Tools Ls
10 Miscellaneous Hand Tools etc. Ls

Machinery Supplier’s Address:

Shenzhen China Dragon Limited
No. 2301, A Block, United Plaza, No. 5022 Binhe Ave.,
Futian District, Shenzhen
Guangdong
China  518033

6.3 Civil Engineering Cost

The building area required by the plant is estimated to be 200 m2, and it costs Birr 1,026,400. This
would include cost of land preparation and associated civil works. The total land area of the
plant, including the open space, is 500 m 2 and its lease cost equals Birr 27,250. The cost of the
land lease is as per ANRS land lease rate for Combolcha which is equal to Birr 54.50 per square

6
meter for industrial purpose. Of the total cost of the lease, 5 % is paid in the beginning while the
rest will be paid in 40yearrs.

7. Human Resource and Training Requirement

7.1 Human Resource

Details of the manpower requirement of the plant is shown in Table 7.1

TABLE 7.1
MANPOWER REQUIREMENT

Description No Monthly Salary Annual

(Birr) Salary (Birr)
A. Administration
1. Manager 1 5132 61584
2.Seretary 1 2053 24634
3.Slaesman 1 2053 24634
4. Cashier 1 1540 18475
5. Storekeeper 1 1540 18475
6.Guards 4 770 36950
Sub-Total 9 13086.6 184752
B. Production    
1. Skilled workers (Operators) 5 2053 123168
2. Unskilled Workers (Assistants) 10 770 92376
Benefits (20%)   80059.2
24 480,355

The total annual wages and salary, including 20 % benefits, amount to Birr 480,355

7.2 Training Requirement

One month on job training is required for the technical personnel. And this can be managed by
hiring one expert in the area locally.

8. Financial Analysis
8.1 Underlying Assumption

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The financial analysis of Hand Pump Assembling 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 4.3 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 27250 27250
 
Building And Civil Works
1,026,400 0 1,026,400
Office Equipment
51,320 0 51,320
Vehicles
0 0 0
Plant Machinery & Equipment
384,900 769,800 1,154,700
Total Fixed Investment Cost
1,489,870 769,800 2,259,670
Pre Production Capital
Expenditure* 73,305 0 111,795
Total Initial Investment
1,565,925 769,800 2,374,215
Working Capital at Full Capacity
857,539 1,129,787 1,987,326
Total 2,420,715 1,899,587 4,358,791
*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 740 thousand or 43.8 % 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 6.2 million (See Table
8.2). Raw materials and utilities account for 84.1 %.

TABLE 8.2
PRODUCTION COST AT FULL CAPACITY

Raw Material Requirement Cost

1. Local Raw Materials 2,676,338
2. Foreign Raw Materials 2,589,094

Total Production Cost at full Capacity

Items Cost
1.      Raw materials 5,265,432
2.      Utilities 15,850
3.      Wages and Salaries 480,355
4.      Spares and Maintenance 67,078
Factory Costs 5,828,715
5.      Depreciation 194,282
6.      Financial Costs 260,103
  Total Production Cost 6,283,100

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 20.1 % 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 two 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 27.4 % 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 34 % and the net present value (NPV) at 18 % discount is Birr 2,032 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:

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 A. Profit Generation

The project is found to be financially viable and earns on average a profit of Birr 1,024 thousand
per year and Birr 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 3.6 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

As there is no enough mechanical pump production in the country, 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 7 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 24 professionals as well as support
stuffs. Consequently the project creates income of Birr 480 thousands per year. This would be
one of the commendable accomplishments of the project.

E. Pro Environment Project

The proposed production process is environment friendly.

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ANNEXES

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

Capacity Utilization (%) 0 0 75% 85% 100% 100%

1. Total Inventory 0.00 0.00 2514178 2849402 3352238 3352238

Raw Materials in Stock- Total 0.00 0.00 1066313 1208488 1421751 1421751

Raw Material-Local 0.00 0.00 218973.1 248169.5 291964.2 291964.2

Raw Material-Foreign 0.00 0.00 847339.8 960318.5 1129786 1129786

Factory Supplies in Stock 0.00 0.00 4948.223 5607.967 6597.622 6597.622

Spare Parts in Stock and Maintenance 0.00 0.00 5488.161 6219.907 7317.539 7317.539

Work in Progress 0.00 0.00 123705.3 140199.4 164940.5 164940.5

Finished Products 0.00 0.00 247410.7 280398.8 329880.9 329880.9

2. Accounts Receivable 0.00 0.00 629836.4 713814.6 839781.8 839781.8

3. Cash in Hand 0.00 0.00 42629.42 48313.34 56839.24 56839.24

CURRENT ASSETS 0.00 0.00 2120331 2403042 2827108 2827108

4. Current Liabilities 0.00 0.00 629836.4 713814.6 839781.8 839781.8

Accounts Payable 0.00 0.00 629836.4 713814.6 839781.8 839781.8

TOTAL NET WORKING CAPITAL REQUIRMENTS 0.00 0.00 1490495 1689227 1987326 1987326

INCREASE IN NET WORKING CAPITAL 0.00 0.00 1490495 198732.6 298099 0

1
 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 3352238 3352238 3352238 3352238 3352238 3352238

Raw Materials in Stock-Total 1421751 1421751 1421751 1421751 1421751 1421751

Raw Material-Local 291964.2 291964.2 291964.2 291964.2 291964.2 291964.2

Raw Material-Foreign 1129786 1129786 1129786 1129786 1129786 1129786

Factory Supplies in Stock 6597.622 6597.622 6597.622 6597.622 6597.622 6597.622

Spare Parts in Stock and Maintenance 7317.539 7317.539 7317.539 7317.539 7317.539 7317.539

Work in Progress 164940.5 164940.5 164940.5 164940.5 164940.5 164940.5

Finished Products 329880.9 329880.9 329880.9 329880.9 329880.9 329880.9

2. Accounts Receivable 839781.8 839781.8 839781.8 839781.8 839781.8 839781.8

3. Cash in Hand 56839.24 56839.24 56839.24 56839.24 56839.24 56839.24

CURRENT ASSETS 2827108 2827108 2827108 2827108 2827108 2827108

4. Current Liabilities 839781.8 839781.8 839781.8 839781.8 839781.8 839781.8

Accounts Payable 839781.8 839781.8 839781.8 839781.8 839781.8 839781.8

TOTAL NET WORKING CAPITAL REQUIRMENTS 1987326 1987326 1987326 1987326 1987326 1987326

INCREASE IN NET WORKING CAPITAL 0.00 0.00 0.00 0.00 0.00 0.00

2
 Annex 2: Cash Flow Statement (in Birr)
CONSTRUCTION PRODUCTION
  Year 1 Year 2 1 2 3 4
TOTAL CASH INFLOW 10323162 27800172 56312427 58281824 68805785 67698000
1. Inflow Funds 10323162 27800172 5538927 738523.6 1107785 0
Total Equity 4129265 11120069 0 0 0 0
Total Long Term Loan 6193897 16680103 0 0 0 0
Total Short Term Finances 0 0 5538927 738523.6 1107785 0
2. Inflow Operation 0 0 50773500 57543300 67698000 67698000
Sales Revenue 0 0 50773500 57543300 67698000 67698000
Interest on Securities 0 0 0 0 0 0
3. Other Income 0 0 0 0 0 0
TOTAL CASH OUTFLOW 10323162 10323162 63158370 52961094 65081072 61031499
4. Increase In Fixed Assets 10323162 10323162 0 0 0 0
Fixed Investments 9831583 9831583 0 0 0 0
Pre-production Expenditures 491579.1 491579.1 0 0 0 0
5. Increase in Current Assets 0 0 18646685 2486225 3729337 0
6. Operating Costs 0 0 38775724 43917656 51630554 51630554
7. Corporate Tax Paid 0 0 0 0 3621448 3758692
8. Interest Paid 0 0 5735961 2744880 2287400 1829920
9.Loan Repayments 0 0 0 3812333 3812333 3812333
10.Dividends Paid 0 0 0 0 0 0
Surplus(Deficit) 0 17477010 -6845943 5320730 3724714 6666501
Cumulative Cash Balance 0 17477010 10631067 15951797 19676511 26343012

3
 Annex 2: Cash Flow Statement (in Birr): Continued
PRODUCTION
  5 6 7 8 9 10
TOTAL CASH INFLOW 7698000 7698000 7698000 7698000 7698000 7698000
1. Inflow Funds 0 0 0 0 0 0
Total Equity 0 0 0 0 0 0
Total Long Term Loan 0 0 0 0 0 0
Total Short Term Finances 0 0 0 0 0 0
2. Inflow Operation 7698000 7698000 7698000 7698000 7698000 7698000
Sales Revenue 7698000 7698000 7698000 7698000 7698000 7698000
Interest on Securities 0 0 0 0 0 0
3. Other Income 0 0 0 0 0 0
TOTAL CASH OUTFLOW 6903532 6873825 6837411 6367493 6367493 6367493
4. Increase In Fixed Assets 0 0 0 0 0 0
Fixed Investments 0 0 0 0 0 0
Pre-production
Expenditures 0 0 0 0 0 0
5. Increase in Current Assets 0 0 0 0 0 0
6. Operating Costs 5870956 5870956 5870956 5870956 5870956 5870956
7. Corporate Tax Paid 443010.4 465324.2 480930.4 496536.5 496536.5 496536.5
8. Interest Paid 156061.4 104040.9 52020.47 0 0 0
9. Loan Repayments 433503.8 433503.8 433503.8 0 0 0
10.Dividends Paid 0 0 0 0 0 0
Surplus(Deficit) 794468.1 824174.7 860589 1330507 1330507 1330507
Cumulative Cash Balance 3789956 4614130 5474719 6805226 8135734 9466241

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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 0 0 5773500 6543300 7698000 7698000

1. Inflow Operation 0 0 5773500 6543300 7698000 7698000

Sales Revenue 0 0 5773500 6543300 7698000 7698000

Interest on Securities 0 0 0 0 0 0

2. Other Income 0 0 0 0 0 0

TOTAL CASH OUTFLOW 1173856 1173856 5899717 5192648 6169055 6298361

3. Increase in Fixed Assets 1173856 1173856 0 0 0 0

Fixed Investments 1117958 1117958 0 0 0 0

Pre-production Expenditures 55897.9 55897.9 0 0 0 0

4. Increase in Net Working Capital 0 0 1490495 198732.6 298099 0

5. Operating Costs 0 0 4409222 4993916 5870956 5870956

6. Corporate Tax Paid 0 0 0 0 0 427404.2

NET CASH FLOW -1173856 -1173856 -126217 1350652 1528945 1399639

CUMMULATIVE NET CASH FLOW -1173856 -2347712 -2473929 -1123277 405667.3 1805307

Net Present Value (at 18%) -1173856 -994793 -90647.1 822048.2 788612.7 611795.3

Cumulative Net present Value -1173856 -2168649 -2259296 -1437248 -648635 -36840.1

5
 Annex 3: DISCOUNTED CASH FLOW-TOTAL CAPITAL INVESTED (Continued)
PRODUCTION
  5 6 7 8 9 10
TOTAL CASH INFLOW 7698000 7698000 7698000 7698000 7698000 7698000

1. Inflow Operation 7698000 7698000 7698000 7698000 7698000 7698000

Sales Revenue 7698000 7698000 7698000 7698000 7698000 7698000

Interest on Securities 0 0 0 0 0 0

2. Other Income 0 0 0 0 0 0

TOTAL CASH OUTFLOW 6313967 6336281 6351887 6367493 6367493 6367493

3. Increase in Fixed Assets 0 0 0 0 0 0

Fixed Investments 0 0 0 0 0 0

Pre-production Expenditures 0 0 0 0 0 0

4. Increase in Net Working Capital 0 0 0 0 0 0

5. Operating Costs 5870956 5870956 5870956 5870956 5870956 5870956

6. Corporate Tax Paid 443010.4 465324.2 480930.4 496536.5 496536.5 496536.5

NET CASH FLOW 1384033 1361719 1346113 1330507 1330507 1330507

CUMMULATIVE NET CASH FLOW 3189340 4551060 5897173 7227680 8558187 9888694

Net Present Value (at 18%) 512689.6 427477.8 358117.5 299970.9 254212.6 215434.5

Cumulative Net present Value 475849.5 903327.4 1261445 1561416 1815628 2031063
2,031,062.88
Net Present Value (at 18%)

Internal Rate of Return 34.0%

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 Annex 4: NET INCOME STATEMENT ( in Birr)
PRODUCTION
  1 2 3 4 5
Capacity Utilization (%) 75% 85% 100% 100% 100%

1. Total Income 5773500 6543300 7698000 7698000 7698000

Sales Revenue 5773500 6543300 7698000 7698000 7698000
Other Income 0 0 0 0 0
2. Less Variable Cost 4241096 4806575 5654794 5654794 5654794
VARIABLE MARGIN 1532404 1736725 2043206 2043206 2043206
(In % of Total Income) 68.10164 68.10164 68.10164 68.10164 68.10164
3. Less Fixed Costs 362407.6 381621.8 410443.1 410443.1 410443.1
OPERATIONAL MARGIN 1169997 1355103 1632763 1632763 1632763
(In % of Total Income) 51.98716 53.14186 54.42486 54.42486 54.42486
4. Less Cost of Finance 652241.3 312122.8 260102.3 208081.8 156061.4
5. GROSS PROFIT 517755.4 1042980 1372660 1424681 1476701
6. Income (Corporate) Tax 0 0 411798.1 427404.2 443010.4
7. NET PROFIT 517755.4 1042980 960862.2 997276.5 1033691
RATIOS (%)  
Gross Profit/Sales 8.97% 15.94% 17.83% 18.51% 19.18%
Net Profit After Tax/Sales 8.97% 15.94% 12.48% 12.96% 13.43%
Return on Investment 30.48% 33.57% 28.17% 27.81% 27.45%
Return on Equity 29.86% 60.15% 55.41% 57.51% 59.61%

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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 7698000 7698000 7698000 7698000 7698000

Sales Revenue 7698000 7698000 7698000 7698000 7698000
Other Income 0 0 0 0 0
2. Less Variable Cost 5654794 5654794 5654794 5654794 5654794
VARIABLE MARGIN 2043206 2043206 2043206 2043206 2043206
(In % of Total Income) 68.10164 68.10164 68.10164 68.10164 68.10164
3. Less Fixed Costs 388083.9 388083.9 388083.9 388083.9 388083.9
OPERATIONAL MARGIN 1655122 1655122 1655122 1655122 1655122
(In % of Total Income) 55.169 55.169 55.169 55.169 55.169
4. Less Cost of Finance 104040.9 52020.47 0 0 0
5. GROSS PROFIT 1551081 1603101 1655122 1655122 1655122
6. Income (Corporate) Tax 465324.2 480930.4 496536.5 496536.5 496536.5
7. NET PROFIT 1085757 1122171 1158585 1158585 1158585
RATIOS (%)  
Gross Profit/Sales 20.15% 20.82% 21.50% 21.50% 21.50%
Net Profit After Tax/Sales 14.10% 14.58% 15.05% 15.05% 15.05%
Return on Investment 27.45% 27.09% 26.73% 26.73% 26.73%
Return on Equity 62.62% 64.72% 66.82% 66.82% 66.82%

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 Annex 5: Projected Balance Sheet (in Birr)
CONSTRUCTION PRODUCTION
  Year 1 Year 2 1 2 3 4
TOTAL ASSETS 1173856 4335038 5482630 6176085 6829410 7393183
1. Total Current Assets 0 1987326 3329199 4216935 5064542 5822596
Inventory on Materials and Supplies 0 0 1076749 1220316 1435666 1435666
Work in Progress 0 0 123705.3 140199.4 164940.5 164940.5
Finished Products in Stock 0 0 247410.7 280398.8 329880.9 329880.9
Accounts Receivable 0 0 629836.4 713814.6 839781.8 839781.8
Cash in Hand 0 0 42629.42 48313.34 56839.24 56839.24
Cash Surplus, Finance Available 0 1987326 1208868 1813893 2237434 2995487
Securities 0 0 0 0 0 0
2. Total Fixed Assets, Net of Depreciation 1173856 2347712 2153431 1959150 1764868 1570587
Fixed Investment 0 1117958 2235916 2235916 2235916 2235916
Construction in Progress 1117958 1117958 0 0 0 0
Pre-Production Expenditure 55897.9 111795.8 111795.8 111795.8 111795.8 111795.8
Less Accumulated Depreciation 0 0 194281.2 388562.3 582843.5 777124.6
3. Accumulated Losses Brought Forward 0 0 0 0 0 0
4. Loss in Current Year 0 0 0 0 0 0
TOTAL LIABILITIES 1173856 4335038 5482630 6176085 6829410 7393183
5. Total Current Liabilities 0 0 629836.4 713814.6 839781.8 839781.8
Accounts Payable 0 0 629836.4 713814.6 839781.8 839781.8
Bank Overdraft 0 0 0 0 0 0
6. Total Long-term Debt 704313.6 2601023 2601023 2167519 1734015 1300512
Loan A 704313.6 2601023 2601023 2167519 1734015 1300512
Loan B 0 0 0 0 0 0
7. Total Equity Capital 469542.4 1734015 1734015 1734015 1734015 1734015
Ordinary Capital 469542.4 1734015 1734015 1734015 1734015 1734015
Preference Capital 0 0 0 0 0 0
Subsidies 0 0 0 0 0 0
8. Reserves, Retained Profits Brought Forward 0 0 0 517755.4 1560736 2521598
9.Net Profit After Tax 0 0 517755.4 1042980 960862.2 997276.5
Dividends Payable 0 0 0 0 0 0
Retained Profits 0 0 517755.4 1042980 960862.2 997276.5

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 Annex 5: Projected Balance Sheet (in Birr): Continued
PRODUCTION
  5 6 7 8 9 10
TOTAL ASSETS 7993370 8645623 9334290 10492875 11651460 12810045
1. Total Current Assets 6617064 7441238 8301827 9632335 10962842 12293349
Inventory on Materials and Supplies 1435666 1435666 1435666 1435666 1435666 1435666
Work in Progress 164940.5 164940.5 164940.5 164940.5 164940.5 164940.5
Finished Products in Stock 329880.9 329880.9 329880.9 329880.9 329880.9 329880.9
Accounts Receivable 839781.8 839781.8 839781.8 839781.8 839781.8 839781.8
Cash in Hand 56839.24 56839.24 56839.24 56839.24 56839.24 56839.24
Cash Surplus, Finance Available 3789956 4614130 5474719 6805226 8135734 9466241
Securities 0 0 0 0 0 0
2. Total Fixed Assets, Net of Depreciation 1376306 1204384 1032462 860540.2 688618.2 516696.2
Fixed Investment 2235916 2235916 2235916 2235916 2235916 2235916
Construction in Progress 0 0 0 0 0 0
Pre-Production Expenditure 111795.8 111795.8 111795.8 111795.8 111795.8 111795.8
Less Accumulated Depreciation 971405.8 1143328 1315250 1487172 1659094 1831016
3. Accumulated Losses Brought Forward 0 0 0 0 0 0
4. Loss in Current Year 0 0 0 0 0 0
TOTAL LIABILITIES 7993370 8645623 9334290 10492875 11651460 12810045
5. Total Current Liabilities 839781.8 839781.8 839781.8 839781.8 839781.8 839781.8
Accounts Payable 839781.8 839781.8 839781.8 839781.8 839781.8 839781.8
Bank Overdraft 0 0 0 0 0 0
6. Total Long-term Debt 867007.7 433503.8 0 0 0 0
Loan A 867007.7 433503.8 0 0 0 0
Loan B 0 0 0 0 0 0
7. Total Equity Capital 1734015 1734015 1734015 1734015 1734015 1734015
Ordinary Capital 1734015 1734015 1734015 1734015 1734015 1734015
Preference Capital 0 0 0 0 0 0
Subsidies 0 0 0 0 0 0
8. Reserves, Retained Profits Brought
Forward 3518874 4552565 5638322 6760492 7919078 9077663
9. Net Profit After Tax 1033691 1085757 1122171 1158585 1158585 1158585
Dividends Payable 0 0 0 0 0 0
Retained Profits 1033691 1085757 1122171 1158585 1158585 1158585

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