Investment Office ANRS

Project Profile on the Establishment

of 3-Wheelers Assembly Plant

Development Studies
Associates (DSA)

September 2008
Addis Ababa

Table of Contents
1.Executive Summary...................................................................................3
2.Product Description and Application.......................................................3
3.Market Study, Plant Capacity and Production Program.......................3
3.1Market Study...............................................................................................................3
3.1.1Present Demand and Supply................................................................................3
3.1.2Projected Demand................................................................................................4
3.1.3Pricing and Distribution.......................................................................................5
3.2Plant Capacity.............................................................................................................5
3.3Production Program....................................................................................................5

4.Raw Materials and Utilities.......................................................................5

4.1Availability and Source of Raw Materials..................................................................5
4.2 Annual Requirement and Cost of Raw Materials and Utilities..................................6

5.Location and Site........................................................................................6

6.Technology and Engineering ....................................................................6
6.1Production Process......................................................................................................6
6.2Machinery and Equipment..........................................................................................7
6.3Civil Engineering Cost................................................................................................7

7.Human Resource and Training Requirement.........................................8

7.1Human Resource.........................................................................................................8
7.2Training Requirement.................................................................................................8

8.Financial Analysis......................................................................................9
8.1Underlying Assumption .............................................................................................9
8.2Investment.................................................................................................................10
8.3Production Costs.......................................................................................................11
8.4Financial Evaluation.................................................................................................11

9.Economic and Social Benefit and Justification.....................................12

ANNEXES....................................................................................................14

1. Executive Summary
This project envisages assembly 1000 3-Wheelers per annum. The total investment
requirement of the project including the working capital is estimated at about Birr 10.6
million; of which around Birr 10.2 million is the cost of the working capital while Birr 1
million is for machinery and equipments, and another Birr 1 million is for building and
construction. Based on the cash flow statement, the calculated internal rate of return
(IRR) and simple rate of return (SRR) of the project are 32.3 % and 24.6 %, respectively.
The net present value (NPV) at 18 % discounting rate is about Birr 3001 thousand. The
plant is expected to create employment opportunities for about 26 persons.

2. Product Description and Application

A 3-Wheeler is a motorized vehicle used to transport about four people at a time. The
vehicle is popular in India and other Southeast Asian countries and it is used as a taxi.
Recently the vehicle has been introduced to the Ethiopian market and it provides
transport services in Dire Daw, Harar, Awassa, Bahir Dar and in other urban centers

3. Market Study, Plant Capacity and Production

Program
3.1

Market Study
3.1.1 Present Demand and Supply

Although it increases instability, having one wheel in front and two in the rear for power
reduces the cost of the steering mechanism and fuel consumption significantly. In urban
transport market segmentation, a 3 wheeler is equivalent to a taxi. However, it is better
taxi because it is less expensive and less fuel consuming. With the current sky rocketing
price of petroleum substituting taxis with three wheelers (to the possible extent) is not an
option; rather it is a must.
Since they are introduced to the Ethiopian market, a clear demand pattern for the three
wheelers has been emerged. As it is mentioned above, they are providing transport
3

services in Dire Daw, Harar, Awassa, Bahir Dar and in other urban centers by
substituting small taxis and mini buses. In the past four and five years, around ten
thousand three wheelers were imported from India and China to Ethiopia. Most of the
imported brands are tested, and found out that strong enough for the taxi purpose and
highly efficient in terms of fuel consumption. The trend suggests the demand for these
vehicles will certainly increase in the future

3.1.2 Projected Demand

The demand for three wheelers in Ethiopia is mainly derived from the demand for city
transport services. The demand for city transport is mainly a function of the growth rate
of cities population. The Ethiopian cites population is increasing more than 5 % per
annum. Beside to this, however, three wheelers are notably substituting small taxis and
minibuses in many urban centers of Ethiopia. Leaving aside this substitution effect, the
future demand for three wheelers in Ethiopia is conservatively projected as follows by
taking the past five years average import three wheelers (i.e. 2000 units per annum) and
using the 5 % growth rate.
TABLE 3.1
DEMAND PROJECTION FOR THREE WHEELERS
IN ETHIOPIA
Year E.C.
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009

Number of Three Wheelers

2000
2100
2205
2315
2431
2553
2680
2814
2955
3103

3.1.3 Pricing and Distribution

Based on the cost of production, the prices of the three wheelers assembled by the
envisaged project will be Birr 23,000 per unit. Since there will be competition with other
international firms, it is necessary to assemble a good quality product. Moreover, media
advertisement will have a paramount importance to attract users. The products could be
sold both on wholesale and on retail basis.

3.2

Plant Capacity

Based on the minimum economic capacity, a total of 1000 units of three wheelers are
envisaged to be assembled annually. The plant is assumed to operate in a single shift
basis for 275 working days in a year. This schedule is set by deducting 52 Sundays, 13
public holidays, 15 days for annual maintenance purpose and 10 days for unexpected
work interruptions.

3.3

Production Program

The production program follows gradual capacity utilization due to technical and
marketing reasons. Accordingly, 60 %, 75 %and 90 % capacity utilization are assumed
for the first, the second and the third years of the operation, respectively. The fourth year
onwards, 100 % capacity utilization is assumed.

4. Raw Materials and Utilities

4.1

Availability and Source of Raw Materials

Three wheelers are assembled using hundreds of different components. Besides, some
components like cabin can be manufactured by the facilities. Nearly 80 % of the
components and the raw materials needed to assemble the product and to fabricate some
components of it are imported.

4.2

Annual Requirement and Cost of Raw Materials and

Utilities

It should be noted that, in this project profile, it is not possible to list down all the
necessary raw materials and the parts to be imported in order to assemble a three wheeler.
However, the cost of raw materials and components required to assemble 1000 units of
750 CC water cooling diesel three wheelers per annum is estimated to reach Birr 18
million while the associated cost of utilities is estimated to reach Birr 500 thousand per
annum.

5. Location and Site

For its convenience to procure raw materials and to distribute the product to different
parts of the country, Dessie is an appropriate choice for the establishment of a three
wheeler assembly plant in the Amhara region.

6. Technology and Engineering

6.1

Production Process

The important parts like the cylinder block, crank shaft, cylinder head, flywheel, cam
shaft, bearing cap and flywheel housing are cleaned. Crank shaft is assembled to cylinder
block. Water chamber cover and push rod chamber cover are assembled. Flywheel
housing and cam shaft are assembled to cylinder block. Flywheel is assembled. Timing
gear case is assembled. Injection pump is assembled. Cam shaft gear and idle gear are
assembled. Timing gear case is assembled. After assembling mounting bracket, the
engine is mounted on a truck. Engine number is engraved on cylinder block. Connecting
rod, piston and piston ring are assembled. The sub-assembled piston is assembled. The
injection time of injection pump is adjusted. Oil suction pipe in oil pan and oil pump are
assembled. Oil pan is assembled. Oil filter and oil cooler are assembled. Valve and valve
spring are assembled to cylinder head. The sub-assembled cylinder head is assembled.
Rocker arm and rocker arm shaft are assembled with valve clearance adjusted. Cylinder
head cover is assembled. Intake and exhaust manifold are assembled. Nozzle and
injection pipe are assembled. Water pump is assembled. Cooling fan is assembled. Fuel
6

filter is assembled. Alternator and starter are assembled. Air compressor is assembled.
Engine test is undertaken. Parts of the external body including the three rubber wheels,
the home made cabin, battery, brakes and others are assembled to with the engine.
Finally, the product is painted.

6.2

Machinery and Equipment

Manufacturing facilities are casting facility, forging facility, cutting facility, press
facility, welding facility, processing facility such as drilling, grinding and cutting, heat
treatment facility, plating facility, painting facility and inspection facility (See Table 6.1).
TABLE 6.1
LIST OF MACHINERY AND EQUIPMENT
Required Facilities
1.Machine Tool
2.Metal Working Machine
3.Inspection & Testing Equipments
4.Painting Line
5.Heat-Treatment Facility
The total cost of machinery/equipment including the utility facility is estimated at Birr 1
million; of which Birr 900 thousand is in foreign currency.
Machinery Suppliers Address:
Hyloc Hydrotechnic Private Limited
88, Machhe Industrial Estate, Machhe
Belgaum , Karnatakar- 590014,
India

6.3

Civil Engineering Cost

The building area required by the plant is estimated to be 500 m 2, and it costs Birr
1000,000. This would include cost of land preparation and associated civil works. The
total land area of the plant, including the open space, is 5,000 m 2 , and its lease cost
equals Birr 300,000. The cost of the land lease is as per ANRS land lease rate for Dessie
town 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 40years.

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
A. Administration
1. General Manager
2. Engineers
3. Personnel Officer
4. Accountant
5. Salesmen
6. Highly Skilled Workers
7. Skilled Workers
8. Semi-Skilled Workers
9. Secretaries
10. Guards
11. Office Clerks
Sub-Total
Benefits 20 % of Basic Salary
Total

No

1
1
1
1
2
6
6
4
2
6
2
26
26

Monthly
Salary (Birr)
4000
2500
1500
1500
1500
2000
1000
600
800
300
300

Annual
Salary (Birr)
48000
30000
18000
18000
36000
144000
72000
28800
19200
21600
7200
442,800
88,560
531,360

The total annual wages and salary, including 20 % benefits, amount to Birr 531,360.

7.2

Training Requirement

Six months on job training is required for the technical personnel. And this can be
managed by hiring experts in the area as required from the technology supplier.

8. Financial Analysis
8.1

Underlying Assumption

The financial analysis of Three Wheelers Assembly 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

40% Equity and 60% 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%

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
Finished Products
Accounts Receivable
Cash In Hand
Accounts Payable

10 Days
15 Days
30 Days
30 Days
30 Days

8.2

Investment

The total investment cost of the project including working capital is estimated at Birr
10.6 million as shown in Table 8.1 below. The owner shall contribute 40 % of the finance
in the form of equity while the remaining 60 % is to be financed by bank loan.
TABLE 8.1
TOTAL INITIAL INVESTMENT
Items
Land
Building and Civil Works
Office Equipment
Vehicles
Plant Machinery & Equipment
Total Fixed Investment Cost
Pre Production Capital
Expenditure*
Total Initial Investment
Working Capital at Full Capacity
Total

L.C

F.C

Total

15,000

15,000

1,000,000

1,000,000

100,000

100,000

100,000

900,000

1,000,000

1,215,000

900,000

2,115,000

60,750

45,000

105,750

1,275,750

945,000

2,220,750

2,110,313
3,386,063

6,283,636
7,228,636

8,393,950
10,614,700

*Pre-production capital expenditure includes - all expenses for pre-investment studies, consultancy fee
during construction and expenses for companys establishment, project administration expenses,
commission expenses, preproduction marketing and interest expenses during construction.

10

The foreign component of the project accounts for Birr 7.2 million or 68.1% of the total
investment cost.

8.3

Production Costs

The total production cost at full capacity operation is estimated at Birr 20 million (See
Table 8.2). Raw materials and utilities account for 92.3 %.

TABLE 8.2
PRODUCTION COST AT FULL CAPACITY
Raw Material
Requirement
1. Local Raw Materials
2. Foreign Raw Materials

Cost
3,600,000
14,400,000

Total Production Cost at full Capacity

Items
Cost
1. Raw materials
2. Utilities

500,000

3. Wages and Salaries

531,360

4. Spares and Maintenance

Factory Costs
5. Depreciation
6. Financial Costs

Total Production Cost

8.4

18,000,000

63,450
19,094,810
181,150
764,258
20,040,218

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.
11

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 10.6 % 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 three years.
IV.

Simple Rate of Return

The projects 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 24.6 % 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 32.3 % and the net present value (NPV) at 18 % discount is Birr 3001
thousand.
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:
12

A. Profit Generation
The project is found to be financially viable and earns on average a profit of Birr 2.1
million per year and Birr 20.9 million within the project life. Such result induces the
project promoters to reinvest the profit which, therefore, increases the investment
magnitude in the region.

B. Tax Revenue
In the project life under consideration, the region will collect about Birr 7.9 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 production of three-wheeler in Ethiopia, 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 21.3 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 26 professionals as well as
support stuffs. Consequently the project creates income of Birr 531 thousand per year.
This would be one of the commendable accomplishments of the project.
E. Pro Environment Project
The proposed production process is environment friendly.

13

ANNEXES

14

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

CONSTRUCTION

PRODUCTION

Year 1

Year 2

60%

75%

90%

100%

0.00

0.00

8974680.85

11218351.06

13462021.27

14957801.41

0.00

0.00

4005818.18

5007272.73

6008727.27

6676363.64

Raw Material-Local

0.00

0.00

235636.36

294545.45

353454.55

392727.27

Raw Material-Foreign

0.00

0.00

3770181.82

4712727.27

5655272.73

6283636.36

Factory Supplies in Stock

0.00

0.00

12616.99

15771.24

18925.49

21028.32

Spare Parts in Stock and Maintenance

0.00

0.00

4153.09

5191.36

6229.64

6921.82

Work in Progress

0.00

0.00

315424.80

394281.00

473137.20

525708.00

Finished Products

0.00

0.00

630849.60

788562.00

946274.40

1051416.00

2. Accounts Receivable

0.00

0.00

1505454.55

1881818.18

2258181.82

2509090.91

3. Cash in Hand

0.00

0.00

67507.20

84384.00

101260.80

112512.00

0.00

0.00

6541824.41

8177280.51

9812736.62

10903040.68

4. Current Liabilities

0.00

0.00

1505454.55

1881818.18

2258181.82

2509090.91

Accounts Payable

0.00

0.00

1505454.55

1881818.18

2258181.82

2509090.91

TOTAL NET WORKING CAPITAL REQUIRMENTS

0.00

0.00

5036369.86

6295462.33

7554554.80

8393949.77

INCREASE IN NET WORKING CAPITAL

0.00

0.00

5036369.86

1259092.47

1259092.47

839394.98

Capacity Utilization (%)

1. Total Inventory
Raw Materials in Stock- Total

CURRENT ASSETS

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

(continued)

PRODUCTION
5

10

100%

100%

100%

100%

100%

100%

14957801.41

14957801.41

14957801.41

14957801.41

14957801.41

14957801.41

6676363.64

6676363.64

6676363.64

6676363.64

6676363.64

6676363.64

Raw Material-Local

392727.27

392727.27

392727.27

392727.27

392727.27

392727.27

Raw Material-Foreign

6283636.36

6283636.36

6283636.36

6283636.36

6283636.36

6283636.36

Factory Supplies in Stock

21028.32

21028.32

21028.32

21028.32

21028.32

21028.32

Spare Parts in Stock and Maintenance

6921.82

6921.82

6921.82

6921.82

6921.82

6921.82

Work in Progress

525708.00

525708.00

525708.00

525708.00

525708.00

525708.00

Finished Products

1051416.00

1051416.00

1051416.00

1051416.00

1051416.00

1051416.00

2. Accounts Receivable

2509090.91

2509090.91

2509090.91

2509090.91

2509090.91

2509090.91

3. Cash in Hand

112512.00

112512.00

112512.00

112512.00

112512.00

112512.00

10903040.68

10903040.68

10903040.68

10903040.68

10903040.68

10903040.68

4. Current Liabilities

2509090.91

2509090.91

2509090.91

2509090.91

2509090.91

2509090.91

Accounts Payable

2509090.91

2509090.91

2509090.91

2509090.91

2509090.91

2509090.91

TOTAL NET WORKING CAPITAL REQUIRMENTS

8393949.77

8393949.77

8393949.77

8393949.77

8393949.77

8393949.77

0.00

0.00

0.00

0.00

0.00

0.00

Capacity Utilization (%)

1. Total Inventory
Raw Materials in Stock-Total

CURRENT ASSETS

INCREASE IN NET WORKING CAPITAL

Annex 2: Cash Flow Statement (in Birr)

CONSTRUCTION

PRODUCTION

Year 1

Year 2

1110375.00

9504324.77

15305454.55

17626363.64

21076363.64

23250909.09

1110375.00

9504324.77

1505454.55

376363.64

376363.64

250909.09

Total Equity

444150.00

3801729.91

0.00

0.00

0.00

0.00

Total Long Term Loan

666225.00

5702594.86

0.00

0.00

0.00

0.00

0.00

0.00

1505454.55

376363.64

376363.64

250909.09

2. Inflow Operation

0.00

0.00

13800000.00

17250000.00

20700000.00

23000000.00

Sales Revenue

0.00

0.00

13800000.00

17250000.00

20700000.00

23000000.00

Interest on Securities

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

TOTAL CASH OUTFLOW

1110375.00

1110375.00

19603287.89

17907549.16

21429386.32

22830759.18

4. Increase In Fixed Assets

1110375.00

1110375.00

0.00

0.00

0.00

0.00

1057500.00

1057500.00

0.00

0.00

0.00

0.00

52875.00

52875.00

0.00

0.00

0.00

0.00

5. Increase in Current Assets

0.00

0.00

6541824.41

1635456.10

1635456.10

1090304.07

6. Operating Costs

0.00

0.00

11562746.76

14446364.70

17329982.64

19252394.60

7. Corporate Tax Paid

0.00

0.00

0.00

0.00

765595.61

917084.94

8. Interest Paid

0.00

0.00

1498716.72

764258.38

636881.99

509505.59

9.Loan Repayments

0.00

0.00

0.00

1061469.98

1061469.98

1061469.98

10.Dividends Paid

0.00

0.00

0.00

0.00

0.00

0.00

Surplus(Deficit)

0.00

8393949.77

-4297833.34

-281185.53

-353022.68

420149.91

Cumulative Cash Balance

0.00

8393949.77

4096116.43

3814930.90

3461908.22

3882058.13

TOTAL CASH INFLOW

1. Inflow Funds

Total Short Term Finances

3. Other Income

Fixed Investments
Pre-production Expenditures

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

3

PRODUCTION
5
23000000.00

6
23000000.00

7
23000000.00

8
23000000.00

9
23000000.00

10
23000000.00

0.00

0.00

0.00

0.00

0.00

0.00

Total Equity

0.00

0.00

0.00

0.00

0.00

0.00

Total Long Term Loan

0.00

0.00

0.00

0.00

0.00

0.00

Total Short Term Finances

0.00

0.00

0.00

0.00

0.00

0.00

2. Inflow Operation

23000000.00

23000000.00

23000000.00

23000000.00

23000000.00

23000000.00

Sales Revenue

23000000.00

23000000.00

23000000.00

23000000.00

23000000.00

23000000.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

21651291.63

21568473.15

21479309.68

20328676.22

20328676.22

20328676.22

0.00

0.00

0.00

0.00

0.00

0.00

Fixed Investments

0.00

0.00

0.00

0.00

0.00

0.00

Pre-production Expenditures

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

19252394.60

19252394.60

19252394.60

19252394.60

19252394.60

19252394.60

7. Corporate Tax Paid

955297.86

999855.78

1038068.70

1076281.62

1076281.62

1076281.62

8. Interest Paid

382129.19

254752.79

127376.40

0.00

0.00

0.00

9. Loan Repayments

1061469.98

1061469.98

1061469.98

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

Surplus(Deficit)

1348708.37

1431526.85

1520690.32

2671323.78

2671323.78

2671323.78

Cumulative Cash Balance

5230766.50

6662293.35

8182983.67

10854307.45

13525631.23

16196955.01

TOTAL CASH INFLOW

1. Inflow Funds

Interest on Securities
3. Other Income
TOTAL CASH OUTFLOW
4. Increase In Fixed Assets

5. Increase in Current Assets

6. Operating Costs

10.Dividends Paid

Annex 3: DISCOUNTED CASH FLOW-TOTAL CAPITAL INVESTED

CONSTRUCTION

PRODUCTION

Year 1

Year 2

TOTAL CASH INFLOW

0.00

0.00

13800000.00

17250000.00

20700000.00

23000000.00

1. Inflow Operation

0.00

0.00

13800000.00

17250000.00

20700000.00

23000000.00

Sales Revenue

0.00

0.00

13800000.00

17250000.00

20700000.00

23000000.00

Interest on Securities

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

TOTAL CASH OUTFLOW

1110375.00

1110375.00

16599116.62

15705457.17

18589075.11

21008874.52

3. Increase in Fixed Assets

1110375.00

1110375.00

0.00

0.00

0.00

0.00

Fixed Investments

1057500.00

1057500.00

0.00

0.00

0.00

0.00

52875.00

52875.00

0.00

0.00

0.00

0.00

4. Increase in Net Working Capital

0.00

0.00

5036369.86

1259092.47

1259092.47

839394.98

5. Operating Costs

0.00

0.00

11562746.76

14446364.70

17329982.64

19252394.60

6. Corporate Tax Paid

0.00

0.00

0.00

0.00

0.00

917084.94

NET CASH FLOW

-1110375.00

-1110375.00

-2799116.62

1544542.83

2110924.89

1991125.48

CUMMULATIVE NET CASH FLOW

-1110375.00

-2220750.00

-5019866.62

-3475323.79

-1364398.90

626726.58

Net Present Value (at 18%)

-1110375.00

-940995.76

-2010281.98

940056.45

1088791.58

870339.30

Cumulative Net present Value

-1110375.00

-2051370.76

-4061652.74

-3121596.29

-2032804.71

-1162465.41

2. Other Income

Pre-production Expenditures

Annex 3: DISCOUNTED CASH FLOW-TOTAL CAPITAL INVESTED

(Continued)

PRODUCTION
5

10

TOTAL CASH INFLOW

23000000.00

23000000.00

23000000.00

23000000.00

23000000.00

23000000.00

1. Inflow Operation

23000000.00

23000000.00

23000000.00

23000000.00

23000000.00

23000000.00

Sales Revenue

23000000.00

23000000.00

23000000.00

23000000.00

23000000.00

23000000.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

20207692.46

20252250.38

20290463.30

20328676.22

20328676.22

20328676.22

3. Increase in Fixed Assets

0.00

0.00

0.00

0.00

0.00

0.00

Fixed Investments

0.00

0.00

0.00

0.00

0.00

0.00

Pre-production Expenditures

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

19252394.60

19252394.60

19252394.60

19252394.60

19252394.60

19252394.60

6. Corporate Tax Paid

955297.86

999855.78

1038068.70

1076281.62

1076281.62

1076281.62

NET CASH FLOW

2792307.54

2747749.62

2709536.70

2671323.78

2671323.78

2671323.78

CUMMULATIVE NET CASH FLOW

3419034.12

6166783.74

8876320.44

11547644.22

14218968.00

16890291.78

Net Present Value (at 18%)

1034358.78

862587.39

720840.17

602266.16

510395.05

432538.18

Cumulative Net present Value

-128106.63

734480.76

1455320.92

2057587.09

2567982.14

3000520.32

Interest on Securities
2. Other Income
TOTAL CASH OUTFLOW

4. Increase in Net Working Capital

5. Operating Costs

Net Present Value (at 18%)

Internal Rate of Return

3,000,520.32

32.3%

Annex 4: NET INCOME STATEMENT ( in Birr)

PRODUCTION
1

60%

75%

90%

100%

100%

13800000.00

17250000.00

20700000.00

23000000.00

23000000.00

13800000.00

17250000.00

20700000.00

23000000.00

23000000.00

Other Income

0.00

0.00

0.00

0.00

0.00

2. Less Variable Cost

11406945.36

14258681.70

17110418.04

19011575.60

19011575.60

2393054.64

2991318.30

3589581.96

3988424.40

3988424.40

17.34

17.34

17.34

17.34

17.34

336951.40

368833.00

400714.60

421969.00

421969.00

2056103.24

2622485.30

3188867.36

3566455.40

3566455.40

14.90

15.20

15.41

15.51

15.51

4. Less Cost of Finance

1498716.72

764258.38

636881.99

509505.59

382129.19

5. GROSS PROFIT

557386.52

1858226.92

2551985.37

3056949.81

3184326.21

0.00

0.00

765595.61

917084.94

955297.86

557386.52

1858226.92

1786389.76

2139864.87

2229028.35

Gross Profit/Sales

4.04%

10.77%

12.33%

13.29%

13.84%

Net Profit After Tax/Sales

4.04%

10.77%

8.63%

9.30%

9.69%

Return on Investment

28.33%

30.79%

24.79%

24.96%

24.60%

Return on Equity

13.13%

43.77%

42.07%

50.40%

52.50%

Capacity Utilization (%)

1. Total Income
Sales Revenue

VARIABLE MARGIN
(In % of Total Income)
3. Less Fixed Costs
OPERATIONAL MARGIN
(In % of Total Income)

6. Income (Corporate) Tax

7. NET PROFIT
RATIOS (%)

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

PRODUCTION
6

10

100%

100%

100%

100%

100%

23000000.00

23000000.00

23000000.00

23000000.00

23000000.00

23000000.00

23000000.00

23000000.00

23000000.00

23000000.00

Other Income

0.00

0.00

0.00

0.00

0.00

2. Less Variable Cost

19011575.60

19011575.60

19011575.60

19011575.60

19011575.60

3988424.40

3988424.40

3988424.40

3988424.40

3988424.40

17.34

17.34

17.34

17.34

17.34

400819.00

400819.00

400819.00

400819.00

400819.00

3587605.40

3587605.40

3587605.40

3587605.40

3587605.40

15.60

15.60

15.60

15.60

15.60

4. Less Cost of Finance

254752.79

127376.40

0.00

0.00

0.00

5. GROSS PROFIT

3332852.61

3460229.00

3587605.40

3587605.40

3587605.40

6. Income (Corporate) Tax

999855.78

1038068.70

1076281.62

1076281.62

1076281.62

7. NET PROFIT

2332996.82

2422160.30

2511323.78

2511323.78

2511323.78

Gross Profit/Sales

14.49%

15.04%

15.60%

15.60%

15.60%

Net Profit After Tax/Sales

10.14%

10.53%

10.92%

10.92%

10.92%

Return on Investment

24.38%

24.02%

23.66%

23.66%

23.66%

Return on Equity

54.95%

57.05%

59.15%

59.15%

59.15%

Capacity Utilization (%)

1. Total Income
Sales Revenue

VARIABLE MARGIN
(In % of Total Income)
3. Less Fixed Costs
OPERATIONAL MARGIN
(In % of Total Income)

RATIOS (%)

Annex 5: Projected Balance Sheet (in Birr)

CONSTRUCTION
TOTAL ASSETS
1. Total Current Assets
Inventory on Materials and Supplies
Work in Progress
Finished Products in Stock
Accounts Receivable
Cash in Hand
Cash Surplus, Finance Available
Securities
2. Total Fixed Assets, Net of Depreciation
Fixed Investment
Construction in Progress
Pre-Production Expenditure
Less Accumulated Depreciation
3. Accumulated Losses Brought Forward
4. Loss in Current Year
TOTAL LIABILITIES
5. Total Current Liabilities
Accounts Payable
Bank Overdraft
6. Total Long-term Debt
Loan A
Loan B
7. Total Equity Capital
Ordinary Capital
Preference Capital
Subsidies
8. Reserves, Retained Profits Brought Forward
9.Net Profit After Tax
Dividends Payable
Retained Profits

Year 1
1110375.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
1110375.00
0.00
1057500.00
52875.00
0.00
0.00
0.00
1110375.00
0.00
0.00
0.00
666225.00
666225.00
0.00
444150.00
444150.00
0.00
0.00
0.00
0.00
0.00
0.00

Year 2
10614699.77
8393949.77
0.00
0.00
0.00
0.00
0.00
8393949.77
0.00
2220750.00
1057500.00
1057500.00
105750.00
0.00
0.00
0.00
10614699.77
0.00
0.00
0.00
6368819.86
6368819.86
0.00
4245879.91
4245879.91
0.00
0.00
0.00
0.00
0.00
0.00

PRODUCTION
1
12677540.84
10637940.84
4022588.26
315424.80
630849.60
1505454.55
67507.20
4096116.43
0.00
2039600.00
2115000.00
0.00
105750.00
181150.00
0.00
0.00
12677540.84
1505454.55
1505454.55
0.00
6368819.86
6368819.86
0.00
4245879.91
4245879.91
0.00
0.00
0.00
557386.52
0.00
557386.52

2
13850661.42
11992211.42
5028235.33
394281.00
788562.00
1881818.18
84384.00
3814930.90
0.00
1858450.00
2115000.00
0.00
105750.00
362300.00
0.00
0.00
13850661.42
1881818.18
1881818.18
0.00
5307349.89
5307349.89
0.00
4245879.91
4245879.91
0.00
0.00
557386.52
1858226.92
0.00
1858226.92

3
14951944.84
13274644.84
6033882.40
473137.20
946274.40
2258181.82
101260.80
3461908.22
0.00
1677300.00
2115000.00
0.00
105750.00
543450.00
0.00
0.00
14951944.84
2258181.82
2258181.82
0.00
4245879.91
4245879.91
0.00
4245879.91
4245879.91
0.00
0.00
2415613.44
1786389.76
0.00
1786389.76

4
16281248.82
14785098.82
6704313.77
525708.00
1051416.00
2509090.91
112512.00
3882058.13
0.00
1496150.00
2115000.00
0.00
105750.00
724600.00
0.00
0.00
16281248.82
2509090.91
2509090.91
0.00
3184409.93
3184409.93
0.00
4245879.91
4245879.91
0.00
0.00
4202003.20
2139864.87
0.00
2139864.87

Annex 5: Projected Balance Sheet (in Birr):

Continued

10

PRODUCTION
TOTAL ASSETS
1. Total Current Assets
Inventory on Materials and Supplies
Work in Progress
Finished Products in Stock
Accounts Receivable
Cash in Hand
Cash Surplus, Finance Available
Securities
2. Total Fixed Assets, Net of Depreciation
Fixed Investment
Construction in Progress
Pre-Production Expenditure
Less Accumulated Depreciation
3. Accumulated Losses Brought Forward
4. Loss in Current Year
TOTAL LIABILITIES
5. Total Current Liabilities
Accounts Payable
Bank Overdraft
6. Total Long-term Debt
Loan A
Loan B
7. Total Equity Capital
Ordinary Capital
Preference Capital
Subsidies
8. Reserves, Retained Profits Brought
Forward
9. Net Profit After Tax
Dividends Payable
Retained Profits

5
17448807.19
16133807.19
6704313.77
525708.00
1051416.00
2509090.91
112512.00
5230766.50
0.00
1315000.00
2115000.00
0.00
105750.00
905750.00
0.00
0.00
17448807.19
2509090.91
2509090.91
0.00
2122939.95
2122939.95
0.00
4245879.91
4245879.91
0.00
0.00

6
18720334.03
17565334.03
6704313.77
525708.00
1051416.00
2509090.91
112512.00
6662293.35
0.00
1155000.00
2115000.00
0.00
105750.00
1065750.00
0.00
0.00
18720334.03
2509090.91
2509090.91
0.00
1061469.98
1061469.98
0.00
4245879.91
4245879.91
0.00
0.00

7
20081024.36
19086024.36
6704313.77
525708.00
1051416.00
2509090.91
112512.00
8182983.67
0.00
995000.00
2115000.00
0.00
105750.00
1225750.00
0.00
0.00
20081024.36
2509090.91
2509090.91
0.00
0.00
0.00
0.00
4245879.91
4245879.91
0.00
0.00

8
22592348.14
21757348.14
6704313.77
525708.00
1051416.00
2509090.91
112512.00
10854307.45
0.00
835000.00
2115000.00
0.00
105750.00
1385750.00
0.00
0.00
22592348.14
2509090.91
2509090.91
0.00
0.00
0.00
0.00
4245879.91
4245879.91
0.00
0.00

9
25103671.92
24428671.92
6704313.77
525708.00
1051416.00
2509090.91
112512.00
13525631.23
0.00
675000.00
2115000.00
0.00
105750.00
1545750.00
0.00
0.00
25103671.92
2509090.91
2509090.91
0.00
0.00
0.00
0.00
4245879.91
4245879.91
0.00
0.00

10
27614995.70
27099995.70
6704313.77
525708.00
1051416.00
2509090.91
112512.00
16196955.01
0.00
515000.00
2115000.00
0.00
105750.00
1705750.00
0.00
0.00
27614995.70
2509090.91
2509090.91
0.00
0.00
0.00
0.00
4245879.91
4245879.91
0.00
0.00

6341868.07
2229028.35
0.00
2229028.35

8570896.41
2332996.82
0.00
2332996.82

10903893.24
2422160.30
0.00
2422160.30

13326053.54
2511323.78
0.00
2511323.78

15837377.32
2511323.78
0.00
2511323.78

18348701.10
2511323.78
0.00
2511323.78

11