39.

PROFILE ON THE PRODUCTION OF

DEXTRIN
 39-ii

TABLE OF CONTENTS

PAGE

I. SUMMARY 39-2

II. PRODUCT DESCRIPTION & APPLICATION 39-2

III. MARKET STUDY AND PLANT CAPACITY 39-3

A. MARKET STUDY 39-3
B. PLANT CAPACITY & PRODUCTION PROGRAM 39-5

IV. MATERIALS AND INPUTS 39-6

A. RAW & AUXILIARY MATERIALS 39-6
B. UTILITIES 39-6

V. TECHNOLOGY & ENGINEERING 39-7

A. TECHNOLOGY 39-7
B. ENGINEERING 39-7

VI. MANPOWER & TRAINING REQUIREMENT 39-11

A. MANPOWER REQUIREMENT 39-11
B. TRAINING REQUIREMENT 39-12

VII. FINANCIAL ANLYSIS 39-13

A. TOTAL INITIAL INVESTMENT COST 39-13
B. PRODUCTION COST 39-14
C. FINANCIAL EVALUATION 39-15
D. ECONOMIC & SOCIAL BENEFITS 39-17
 39-iii

I. SUMMARY

This profile envisages the establishment of a plant for the production of dextrin with a capacity
of 350 tons of per annum. Dextrin is used as adhesive, thickening agent, sizing in paper and
textiles, substitute for natural gum and substitute for lactose in penicillin manufacturing.

Since there are no local producers of dextrin, the demand for the product is entirely met through
import. The present (2012) demand for the products is estimated at 260 tons per annum. The
demand is projected to reach 412 tons and 606 tons by the year 2018 and year 2023, respectively.

The principal raw material required is starch which is available locally. A small amount of
activated carbon and hydrochloric acid are also required from import.

The total investment cost of the project including working capital is estimated at Birr 6.91
million. From the total investment cost the highest share (Birr 5.12 million or 74.11%) is
accounted by fixed investment cost followed by initial working capital ( Birr 1.03 million or
14.94%) and pre operation cost (Birr 757.57 thousand or 10.95%). From the total investment
cost, Birr 1.80 million or 26.02% is required in foreign currency.

The project is financially viable with an internal rate of return (IRR) of 30.62% and a net present
value (NPV) of Birr 7.45 million discounted at 10%.

The project can create employment opportunities for 25 persons. The establishment of such
factory will have a foreign exchange saving effect to the country by substituting the current
imports. The project will also create backward and forward linkage with the manufacturing
sector and also generates income for the Government in terms of tax revenue and payroll tax.

II. PRODUCT DESCRIPTION AND APPLICATION

Dextrin (starch gum) is a group of colloidal products formed by hydrolysis of starches of corn. It
is available in more than 100 different blends and types varying from pure white to light yellow
in color.
 39-iv

Dextrin is used as adhesive, thickening agent, sizing paper and textiles, substitute for natural
gum, food industry, printing ink, and substitute for lactose in penicillin manufacturing.

Dextrin forms a strongly adherent paste when mixed with water and it is used as adhesive in the
manufacture of gummed tapes, textiles and paper. It is used in producing nutritional products.

III. MARKET AND PLANT CAPACITY

A. MARKET STUDY

1. Past Supply and Present Demand

The present supply for dextrin adhesives is mainly met through import. The import statistics on
dextrin is presented in Table 3.1.

Table 3.1
IMPORT OF DEXTRIN

Year Quantity Value

(Tons) ( ‘000 Birr)
2000 117 619
2001 56 746
2002 131 1,333
2003 99 459
2004 13 938
2005 234 919
2006 425 2,248
2007 80 753
2008 382 2,789
2009 388 3,204
2010 154 140
2011 111 2,298

Source: - Ethiopian Revenue and Customs Authority.

 39-v

As could be observed from Table 3.1, the imported volume has been fluctuating from year to
year, although the general trend over the period considered is increasing. Yearly average import
volume, which was 101.3 tons during the initial three years of the data set (2000--2002), has
increased to a level of 182 tons during the years 2003-2005. Similarly, yearly average level of
import volume has increased to a level of 295.6 tones and 217 tones by the years 2006-2008 and
2009-2011, respectively. In the estimation of the current demand, the 2008-2011 average level
of import is considered. Accordingly, current (year 2012) effective demand is estimated at 260
tons.

2. Demand Projection

Since dextrin adhesive is used in various manufacturing processes ,the demand is related with the
growth of the manufacturing sector. Therefore, the demand projection is made on a conservative
estimate of 8%, which is less than the predicted growth rate of the manufacturing sector. The
projected demand on dextrin is presented in Table 3.2.
Table 3.2
PROJECTED DEMAND FOR DEXTRIN (TONS)

Year Quantity
2013 281
2014 303
2015 327
2016 354
2017 382
2018 412
2019 445
2020 481
2021 520
2022 561
2023 606

The demand for dextrin will grow from281 tons in the year 2013 to 412 tons and 606 tons by the
year 2018 and year 2023, respectively.
 39-vi

3. Pricing and Distribution

Based on the average CIF value of imported dextrin and adding duty and other costs the ex
factory price is proposed to be Birr 24,842 per ton.

Since dextrin adhesive is an intermediate product, the distribution of the product is more
convenient if it is direct. Penetration of domestic market will be facilitated through
advertisement by creating awareness as well as sales promotional measures.

B. PLANT CAPACITY AND PRODUCTION PROGRAM

1. Plant Capacity

As per the market study, the demand for dextrin increases from 281 tons in the year 2013 to
606 tons in the year 2023. Considering the market demand and period required for
implementation and full capacity attainment, the envisaged plant capacity is proposed to be 350
tons per annum. This capacity is determined based on a three shifts of 8 hours per day and 300
working days per year.

2. Production Program

At the initial stage of the production period, the plant requires some years to penetrate the market
and develop technical skill. Therefore, in the first and second year of production, the capacity
utilization rate will be 70% and 90%, respectively. In the third year and then after, full capacity
production shall be attained. The production program is indicated in Table 3.3.
Table 3.3
PRODUCTION PROGRAM

Sr. Description Production Program

No. 1 2 3-10
1 Dextrin (tons) 245 315 350
2 Capacity utilization rate (%) 70 90 100
 39-vii

IV. RAW MATERIAL AND INPUTS

A. RAW AND AUXILIARY MATERIAL

In this profile, the major raw material required to produce dextrin is starch from corn, which is
available locally. The total annual cost of raw and auxiliary materials is estimated at Birr
4,884,000. Table 4.1 below indicates the annual raw and auxiliary materials requirement and cost
at full production capacity.
Table 4.1
ANNUAL RAW & AUXILIARY MATERIALS REQUIREMENT AND COST
Sr. Raw Material Qty Cost (‘000 Birr)
No. (tons) FC LC Total
1 Starch 290 - 3,480 3,480
2 Activated carbon 5 135 27 162
3 Hydrochloric acid (31%) 70 250 50 300
4 Packing materials (50kg - 70 70
plastic lined pp bag)
Grand Total 385 3,627 4,012

B. UTILITIES

The utilities of the project are electricity, furnace oil and water. Table 4.2 indicates the annual
utility requirement and cost at full capacity. The total annual cost of utilities is estimated at Birr
925,200.
Table 4.2
ANNUAL UTILITIES REQUIREMENT & COST

Sr.No. Utility Unit Qty Cost (‘000 Birr)

1 Electricity kWh 180,000 104.4
2 Furnace oil Lt. 35,000 520.8
3 Water m3 30,000 300.0
Total 925.2
 39-viii

V. TECHNOLOGY & ENGINEERING

A. TECHNOLOGY

1. Process Description

a) Dextrin Production Line

The raw starch is charged into the air suspended fluidizer. The starch is heated in the upper part
of the fluidizer where the temperature is 165-170 oC. Hydrochloric acid vapor is introduced into
the recirculation air stream and depolymerzation continue for 7-8 hours. The mass is then
cooled and dextrin is taken out from the bottom and analyzed. Dextrin is then packed in
moisture proof bags each containing 50 kg.

2. Environmental Impact Assessment

Dextrin is biodegradable and hydrochloric acid which is used in small amount during the
production of dextrin shall be used in a controlled manner. Hence, the production of dextrin does
not involve any adverse impact on environmental.

B. ENGINEERING

1. Machinery and Equipment

The total cost of machinery is estimated at Birr 2,400,000 of which Birr 1,800,000 is required in
foreign currency. The list of machinery and equipment is indicated in Table 5.1.
 39-ix

Table 5.1
LIST OF MACHINERY & EQUIPMENT

Sr. Description Qty.

No. No.
1 Fluidizer 1
2 Hydrochloric gas Spurger (with steam heater) 1
3 Boiler 1
4 Storage tanks 4
5 Miscellaneous Lump sum

2. Land, Building & Civil Works

The total area of the project is 1,000 m 2, of which the built-up are is 300 m2. At a rate of Birr
5,000 per m2 the cost of building and civil works is estimated to be Birr 1,500,000.

According to the Federal Legislation on the Lease Holding of Urban Land (Proclamation No
721/2004) in principle, urban land permit by lease is on auction or negotiation basis, however,
the time and condition of applying the proclamation shall be determined by the concerned
regional or city government depending on the level of development.

The legislation has also set the maximum on lease period and the payment of lease prices. The
lease period ranges from 99 years for education, cultural research health, sport, NGO , religious
and residential area to 80 years for industry and 70 years for trade while the lease payment
period ranges from 10 years to 60 years based on the towns grade and type of investment.

Moreover, advance payment of lease based on the type of investment ranges from 5% to
10%.The lease price is payable after the grace period annually. For those that pay the entire
amount of the lease will receive 0.5% discount from the total lease value and those that pay in
installments will be charged interest based on the prevailing interest rate of banks. Moreover,
based on the type of investment, two to seven years grace period shall also be provided.
 39-x

However, the Federal Legislation on the Lease Holding of Urban Land, apart from setting the
maximum, has conferred on regional and city governments the power to issue regulations on the
exact terms based on the development level of each region.

In Addis Ababa, the City’s Land Administration and Development Authority is directly
responsible in dealing with matters concerning land. However, regarding the manufacturing
sector, industrial zone preparation is one of the strategic intervention measures adopted by the
City Administration for the promotion of the sector and all manufacturing projects are assumed
to be located in the developed industrial zones.

Regarding land allocation of industrial zones if the land requirement of the project is below
5,000 m2 ,
the land lease request is evaluated and decided upon by the Industrial Zone
Development and Coordination Committee of the City’s Investment Authority. However, if the
land request is above 5,000 m 2 , the request is evaluated by the City’s Investment Authority and
passed with recommendation to the Land Development and Administration Authority for
decision, while the lease price is the same for both cases.

Moreover, the Addis Ababa City Administration has recently adopted a new land lease floor
price for plots in the city. The new prices will be used as a benchmark for plots that are going to
be auctioned by the city government or transferred under the new “Urban Lands Lease Holding
Proclamation.”

The new regulation classified the city into three zones. The first Zone is Central Market District
Zone, which is classified in five levels and the floor land lease price ranges from Birr 1,686 to
Birr 894 per m2. The rate for Central Market District Zone will be applicable in most areas of the
city that are considered to be main business areas that entertain high level of business activities.
[

The second zone, Transitional Zone, will also have five levels and the floor land lease price
ranges from Birr 1,035 to Birr 555 per m2 .This zone includes places that are surrounding the city
and are occupied by mainly residential units and industries.

The last and the third zone, Expansion Zone, is classified into four levels and covers areas that
are considered to be in the outskirts of the city, where the city is expected to expand in the future.
 39-xi

The floor land lease price in the Expansion Zone ranges from Birr 355 to Birr 191 per m 2 (see
Table 5.2).
Table 5.2
NEW LAND LEASE FLOOR PRICE FOR PLOTS IN ADDIS ABABA

Floor
Zone Level Price/m2
1st 1686
2nd 1535
Central Market
3rd 1323
District
4th 1085
5th 894
1st 1035
2nd 935
Transitional zone 3rd 809
4th 685
5th 555
1st 355
2nd 299
Expansion zone
3rd 217
4th 191

Accordingly, in order to estimate the land lease cost of the project profiles it is assumed that all
new manufacturing projects will be located in industrial zones located in expansion zones.
Therefore, for the profile a land lease rate of Birr 266 per m 2 which is equivalent to the average
floor price of plots located in expansion zone is adopted.

On the other hand, some of the investment incentives arranged by the Addis Ababa City
Administration on lease payment for industrial projects are granting longer grace period and
extending the lease payment period. The criterions are creation of job opportunity, foreign
exchange saving, investment capital and land utilization tendency etc. Accordingly, Table 5.3
shows incentives for lease payment.
 39-xii

Table 5.3
INCENTIVES FOR LEASE PAYMENT OF INDUSTRIAL PROJECTS

Payment Down
Grace Completion Paymen
Scored Point Period Period t
Above 75% 5 Years 30 Years 10%
From 50 - 75% 5 Years 28 Years 10%
From 25 - 49% 4 Years 25 Years 10%

For the purpose of this project profile, the average i.e. five years grace period, 28 years payment
completion period and 10% down payment is used. The land lease period for industry is 60
years.

Accordingly, the total land lease cost at a rate of Birr 266 per m 2 is estimated at Birr 266,000 of
which 10% or Birr 26,600 will be paid in advance. The remaining Birr 239,400 will be paid in
equal installments with in 28 years i.e. Birr 8,550 annually.

VI. HUMAN RESOURCE AND TRAINING REQUIREMENT

A. HUMAN RESOURCE REQUIREMENT

The project will create job opportunities for 25 persons. The total annual cost of labor is
estimated at Birr 531,000. The list of human resource and annual labor cost are indicated in
Table 6.1.
 39-xiii

Table 6.1
HUMAN RESOURCE REQUIREMENT & LABOR COST

Sr. Manpower Req. Monthly Annual Salary

No. No. Salary (Birr) (Birr)
1 General manager 1 6,000 72,000
2 Secretary 1 1,500 18,000
3 Sales officer 1 2,500 30,000
4 Accountant 1 2,500 30,000
5 Personnel 1 2,000 24,000
6 Chemists 2 4,000 48,000
7 Mechanic 2 3,000 36,000
8 Production head 1 4,500 54,000
9 Operators 2 3,000 36,000
10 Assistant operator 2 2,000 24,000
11 Laborers 6 2,400 28,800
12 General service 5 2,000 24,000
Sub-total 25 35,400 424,800
Benefits (25% BS) 8,850 106,200
Total 44,250 531,000

B. TRAINING REQUIREMENT

Training of the operative and technical workforce will take place during plant erection and
commissioning by the experts of machinery supplier. The cost of training is estimated at Birr
35,000.
 39-xiv

VII. FINANCIAL ANALYSIS

The financial analysis of the dextrin project is based on the data presented in the previous
chapters and the following assumptions:-

Construction period 1 year

Source of finance 30 % equity
70 % loan
Tax holidays 3 years
Bank interest 10%
Discount cash flow 10%
Accounts receivable 30 days
Raw material imported 120 days
Raw Material Local 60 days
Work in progress 1 day
Finished products 30 days
Cash in hand 5 days
Accounts payable 30 days
Repair and maintenance 5% of machinery cost

A. TOTAL INITIAL INVESTMENT COST

The total investment cost of the project including working capital is estimated at Birr 6.91
million (see Table 7.1). From the total investment cost the highest share (Birr 5.12 million or
74.11%) is accounted by fixed investment cost followed by initial working capital ( Birr 1.03
million or 14.94%) and pre operation cost (Birr 757.57 thousand or 10.95%). From the total
investment cost, Birr 1.80 million or 26.02% is required in foreign currency.
 39-xv

Table 7.1
INITIAL INVESTMENT COST ( ‘000 Birr)

Sr. Local Foreign Total %

No. Cost Items Cost Cost Cost Share
1 Fixed investment
1.1 Land Lease 26.60 26.60 0.38
1.2 Building and civil work 1,500.00 1,500.00 21.68
1.3 Machinery and equipment 600.00 1,800.00 2,400.00 34.69
1.4 Vehicles 900.00 900.00 13.01
1.5 Office furniture and equipment 300.00 300.00 4.34
Sub- total 3,326.60 1,800.00 5,126.60 74.11
2 Pre operating cost *
2.1 Pre operating cost 305.00 305.00 4.41
2.2 Interest during construction 452.57 452.57 6.54
Sub- total 757.57 757.57 10.95
3 Working capital 1,033.67 1,033.67 14.94
Grand Total 5,117.84 1,800.00 6,917.84 100

* N.B Pre operating cost include project implementation cost such as installation, startup,
commissioning, project engineering, project management etc and capitalized interest during
construction.

** The total working capital required at full capacity operation is Birr 1.46 million. However,
only the initial working capital of Birr 1.03 million during the first year of production is
assumed to be funded through external sources. During the remaining years the working
capital requirement will be financed by funds to be generated internally (for detail working
capital requirement see Appendix 7.A.1).

B. PRODUCTION COST

The annual production cost at full operation capacity is estimated at Birr 7.23 million (see Table
7.2). The cost of raw material account for 55.45% of the production cost. The other major
components of the production cost are utilities, depreciation and financial cost which account for
12.79%, 11.21% and 6.02%, respectively. The remaining 14.53% is the share of direct labor,
repair and maintenance, labor overhead and administration cost. For detail production cost see
Appendix 7.A.2.
 39-xvi

Table 7.2
ANNUAL PRODUCTION COST AT FULL CAPACITY (YEAR THREE)

Items Cost
(in 000 Birr) %
Raw Material and Inputs 4,012.00 55.45
Utilities 925.20 12.79
Maintenance and repair 120.00 1.66
Labor direct 424.80 5.87
Labor overheads 106.20 1.47
Administration Costs 150.00 2.07
Land lease cost - -
Cost of marketing and distribution 250.00 3.46
Total Operating Costs 5,988.20 82.77
Depreciation 811.00 11.21
Cost of Finance 435.60 6.02
Total Production Cost 7,234.80 100

C. FINANCIAL EVALUATION

1. Profitability

Based on the projected profit and loss statement, the project will generate a profit through out its
operation life. Annual net profit after tax ranges from Birr 1 million to Birr 1.82 million during
the life of the project. Moreover, at the end of the project life the accumulated net cash flow
amounts to Birr 16.37 million. For profit and loss statement and cash flow projection see
Appendix 7.A.3 and 7.A.4, respectively.

2. Ratios

In financial analysis financial ratios and efficiency ratios are used as an index or yardstick for
evaluating the financial position of a firm. It is also an indicator for the strength and weakness of
the firm or a project. Using the year-end balance sheet figures and other relevant data, the most
important ratios such as return on sales which is computed by dividing net income by revenue,
 39-xvii

return on assets (operating income divided by assets), return on equity (net profit divided by
equity) and return on total investment (net profit plus interest divided by total investment) has
been carried out over the period of the project life and all the results are found to be satisfactory.

3. Break-even Analysis

The break-even analysis establishes a relationship between operation costs and revenues. It
indicates the level at which costs and revenue are in equilibrium. To this end, the break-even
point for capacity utilization and sales value estimated by using income statement projection are
computed as followed.

Break -Even Sales Value = Fixed Cost + Financial Cost = Birr 3,120,060
Variable Margin ratio (%)

Break- Even Capacity utilization = Break- even Sales Value X 100 = 36%
Sales revenue
4. Pay-back Period

The pay -back period, also called pay – off period is defined as the period required for recovering
the original investment outlay through the accumulated net cash flows earned by the project.
Accordingly, based on the projected cash flow it is estimated that the project’s initial investment
will be fully recovered within 3 years.

5. Internal Rate of Return

The internal rate of return (IRR) is the annualized effective compounded return rate that can be
earned on the invested capital, i.e., the yield on the investment. Put another way, the internal rate
of return for an investment is the discount rate that makes the net present value of the
investment's income stream total to zero. It is an indicator of the efficiency or quality of an
investment. A project is a good investment proposition if its IRR is greater than the rate of return
that could be earned by alternate investments or putting the money in a bank account.
 39-xviii

Accordingly, the IRR of this project is computed to be 30.62 % indicating the viability of the
project.

6. Net Present Value

Net present value (NPV) is defined as the total present (discounted) value of a time series of cash
flows. NPV aggregates cash flows that occur during different periods of time during the life of a
project in to a common measuring unit i.e. present value. It is a standard method for using the
time value of money to appraise long-term projects. NPV is an indicator of how much value an
investment or project adds to the capital invested. In principle, a project is accepted if the NPV is
non-negative.

Accordingly, the net present value of the project at 10% discount rate is found to be Birr 7.45
million which is acceptable. For detail discounted cash flow see Appendix 7.A.5.

D. ECONOMIC AND SOCIAL BENEFITS

The project can create employment opportunities for 25 persons. The project will generate Birr
4.65 million in terms of tax revenue and also generates income for the Government in terms
payroll tax. The establishment of such factory will have a foreign exchange saving effect to the
country by substituting the current imports. The project will also create backward and forward
linkage with the manufacturing sector.
 39-xix

Appendix 7.A

FINANCIAL ANALYSES SUPPORTING TABLES

 39-19

Appendix 7.A.1
NET WORKING CAPITAL ( in 000 Birr)

Items Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Year 11
1,003.0 1,003.0
Total inventory 702.10 902.70 1,003.00 1,003.00 0 1,003.00 1,003.00 1,003.00 0 1,003.00

Accounts receivable 355.56 451.20 499.02 499.02 499.73 499.73 499.73 499.73 499.73 499.73

Cash-in-hand 7.79 10.01 11.13 11.13 11.24 11.24 11.24 11.24 11.24 11.24
1,363.9 1,513.9 1,513.9
CURRENT ASSETS 1,065.45 1 1,513.14 1,513.14 7 1,513.97 1,513.97 1,513.97 7 1,513.97

Accounts payable 31.78 40.86 45.40 45.40 45.40 45.40 45.40 45.40 45.40 45.40

CURRENT LIABILITIES 31.78 40.86 45.40 45.40 45.40 45.40 45.40 45.40 45.40 45.40
TOTAL WORKING 1,323.0 1,468.5 1,468.5
CAPITAL 1,033.67 5 1,467.74 1,467.74 7 1,468.57 1,468.57 1,468.57 7 1,468.57
 39-20

Appendix 7.A.2
PRODUCTION COST ( in 000 Birr)

Item Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Year 11

Raw Material and Inputs 2,808 3,611 4,012 4,012 4,012 4,012 4,012 4,012 4,012 4,012
Utilities 648 833 925 925 925 925 925 925 925 925
Maintenance and repair 84 108 120 120 120 120 120 120 120 120

Labour direct 297 382 425 425 425 425 425 425 425 425

Labour overheads 74 96 106 106 106 106 106 106 106 106

Administration Costs 105 135 150 150 150 150 150 150 150 150

Land lease cost 0 0 0 0 9 9 9 9 9 9

Cost of marketing
and distribution 250 250 250 250 250 250 250 250 250 250

Total Operating Costs 4,267 5,414 5,988 5,988 5,997 5,997 5,997 5,997 5,997 5,997
Depreciation 811 811 811 811 811 90 90 90 90 90

Cost of Finance 0 498 436 373 311 249 187 124 62 0

Total Production Cost 5,078 6,723 7,235 7,173 7,119 6,336 6,273 6,211 6,149 6,087
 39-21

Appendix 7.A.3
INCOME STATEMENT ( in 000 Birr)

Item Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10
Sales revenue 6,086 7,825 8,695 8,695 8,695 8,695 8,695 8,695 8,695 8,695
Less variable costs 4,017 5,164 5,738 5,738 5,738 5,738 5,738 5,738 5,738 5,738
VARIABLE MARGIN 2,069 2,661 2,957 2,957 2,957 2,957 2,957 2,957 2,957 2,957
in % of sales revenue 34.00 34.00 34.01 34.01 34.01 34.01 34.01 34.01 34.01 34.01
Less fixed costs 1,061 1,061 1,061 1,061 1,070 349 349 349 349 349
OPERATIONAL
MARGIN 1,008 1,600 1,896 1,896 1,887 2,608 2,608 2,608 2,608 2,608
in % of sales revenue 16.57 20.44 21.80 21.80 21.71 30.00 30.00 30.00 30.00 30.00
Financial costs 498 436 373 311 249 187 124 62 0
GROSS PROFIT 1,008 1,102 1,460 1,522 1,576 2,359 2,422 2,484 2,546 2,608
in % of sales revenue 16.57 14.08 16.79 17.51 18.13 27.13 27.85 28.57 29.28 30.00
Income tax 0 0 0 457 473 708 726 745 764 782
NET PROFIT 1,008 1,102 1,460 1,066 1,103 1,652 1,695 1,739 1,782 1,826
in % of sales revenue 16.57 14.08 16.79 12.26 12.69 18.99 19.50 20.00 20.50 21.00
 39-22

Appendix 7.A.4
CASH FLOW FOR FINANCIAL MANAGEMENT ( in 000 Birr)

Year Year Year Year Year Year Year Year Year Year
Item 1 2 3 4 5 6 7 8 Year 9 10 11 Scrap
TOTAL CASH 5,43 7,83 8,70 8,69 8,69
INFLOW 2 7,604 4 0 8,695 5 5 8,695 8,695 8,695 8,695 2,848
5,43
Inflow funds 2 1,518 9 5 0 0 0 0 0 0 0 0
7,82 8,69 8,69 8,69
Inflow operation 0 6,086 5 5 8,695 5 5 8,695 8,695 8,695 8,695 0
Other income 0 0 0 0 0 0 0 0 0 0 0 2,848
TOTAL CASH 5,43 6,83 7,19 7,40 7,57
OUTFLOW 2 5,785 3 5 7,441 4 6 7,532 7,489 7,445 6,779 0
Increase in fixed 5,43
assets 2 0 0 0 0 0 0 0 0 0 0 0
Increase in current
assets 0 1,065 298 149 0 1 0 0 0 0 0 0
5,16 5,73 5,74 5,74
Operating costs 0 4,017 4 8 5,738 7 7 5,747 5,747 5,747 5,747 0
Marketing cost 0 250 250 250 250 250 250 250 250 250 250 0
Income tax 0 0 0 0 457 473 708 726 745 764 782 0
Financial costs 0 453 498 436 373 311 249 187 124 62 0 0
Loan repayment 0 0 622 622 622 622 622 622 622 622 0 0
SURPLUS 1,00 1,50 1,29 1,11
(DEFICIT) 0 1,819 1 4 1,254 1 9 1,163 1,206 1,250 1,916 2,848

CUMULATIVE 2,82 4,32 6,87 7,98 10,35

CASH BALANCE 0 1,819 0 5 5,579 0 9 9,152 9 11,609 13,524 16,372
 39-23

Appendix 7.A.5
DISCOUNTED CASH FLOW ( in 000 Birr)
Item Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Year 11 Scrap
TOTAL CASH INFLOW 0 6,086 7,825 8,695 8,695 8,695 8,695 8,695 8,695 8,695 8,695 2,848
Inflow operation 0 6,086 7,825 8,695 8,695 8,695 8,695 8,695 8,695 8,695 8,695 0
Other income 0 0 0 0 0 0 0 0 0 0 0 2,848
TOTAL CASH OUTFLOW 6,465 4,556 5,559 5,988 6,446 6,470 6,705 6,723 6,742 6,761 6,779 0
Increase in fixed assets 5,432 0 0 0 0 0 0 0 0 0 0 0
Increase in net working
capital 1,034 289 145 0 1 0 0 0 0 0 0 0
Operating costs 0 4,017 5,164 5,738 5,738 5,747 5,747 5,747 5,747 5,747 5,747 0
Marketing cost 0 250 250 250 250 250 250 250 250 250 250 0
Income tax 0 0 0 457 473 708 726 745 764 782 0
NET CASH FLOW -6,465 1,530 2,266 2,707 2,249 2,225 1,990 1,972 1,953 1,934 1,916 2,848
CUMULATIVE NET CASH
FLOW -6,465 -4,935 -2,669 37 2,287 4,512 6,502 8,474 10,427 12,362 14,278 17,125
Net present value -6,465 1,391 1,873 2,034 1,536 1,382 1,124 1,012 911 820 739 1,098
Cumulative net present value -6,465 -5,074 -3,202 -1,168 368 1,750 2,873 3,885 4,796 5,617 6,355 7,453

NET PRESENT VALUE 7,453

INTERNAL RATE OF
RETURN 30.62%
PAYBACK 3 years
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