Investment Office ANRS

Project Profile on the Establishment

of Wheel Barrow Fabricating 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...........................................................................................2
3.2 Plant Capacity..................................................................................................................3
3.3 Production Program.........................................................................................................3
4. Raw Materials and Utilities..............................................................................3
4.1 Availability and Source of Raw Materials.......................................................................3
4.2 Annual Requirement and Cost of Raw Materials and Utilities.......................................3
5. Location and Site...............................................................................................4
6. Technology and Engineering............................................................................5
6.1 Production Process...........................................................................................................5
6.2 Machinery and Equipment...............................................................................................5
6.3 Civil Engineering Cost....................................................................................................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 10,000 wheel barrows having 4.5 cubic feet capacity per
annum. The total investment requirement of the project including the working capital is
estimated at about Birr 2.4 million; of which Birr 900,000 is for building and construction, nearly
Birr 734 thousand is the cost of the working capital and Birr 700 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) of the project are 23.8 % and 20.8 %, respectively. The net present
value (NPV) at 18 % discounting rate is about Birr 447 thousand. The plant is expected to create
employment opportunities for about 20 persons.

2. Product Description and Application

A wheel barrow is bucket with single wheel and two handles used for transporting loads of
smaller size. Wheel barrow is one of the essential tools in the construction industry. It is used to
move dirt, soil, sand and any solid material from one place to another. In construction works,
where heavy duty machines are not employed, earth moving and similar works are done using
spades, shovels and wheel barrows. The three hand tools improve the productivity of labor in
construction works.

3. Market Study, Plant Capacity and Production Program

3.1 Market Study

3.1.1 Present Demand and Supply

The current civil work activities such as construction of roads, buildings, small irrigation
schemes, soil conservation, and water and forestry development have been growing in the past
ten years, and will continue in the future. This requires the use of thousands of wheel barrows in
the whole country.

1
Currently, the demand for wheel barrow is met via domestic production. There are a few metal
factories and work shops in and around Addis Ababa that assemble wheel barrows and other
hand tools. Since the price of wheel barrow is relatively expensive people sometimes use
tiresome and time taking alternatives means such as “barilla”. The present and future need for
wheel barrows, however, will necessitate the establishment of a wheel barrow fabrication and
assembly plant viable.

Like most other construction hand tools, the ANRS uses wheel barrows produced in the other
parts of the country. But, if the ANRS has to accelerate its social and economic development, it
has to be capable of producing the basic construction hand tools like wheel barrow. Besides,
assembled wheel barrows take a lot of vehicle space to transport; as a result of this, they are
difficult and relatively expensive to transport. This alone necessitates the need to establish a
wheel barrow fabrication and assembly plant in ANRS. The ANRS should not go to bring some
essential hand tools -especially such simple capital good items as wheel barrow- out of the
region.

3.1.2 Projected Demand

Since there is no recorded data on the production of wheel barrow in Ethiopia and the product
has other close substitutes, it is not possible to make a reasonable future demand projection for
the product. However, given the hundred thousands of civil work activities being undertaken in
the ANRS, it is possible to be certain that some 10,000 of wheel barrow fabricating plant can sell
much of its out put easily in the ANRS.

3.1.3 Pricing and Distribution

At present the price of wheel-barrow ranges from Birr 390.00 to Birr 425.00.The prices of the
envisaged project will be Birr 375 per piece. Since there is a competition with other firms, it is
necessary to fabricate a good quality product, and to advertise through the media to attract all the
users, the retailers and wholesalers. The products could be sold on retail or wholesale basis. But,
attempt should be made to use the existing channels of distribution.

2
 3.2 Plant Capacity

A total of 10,000 pieces wheel-barrows having 4.5 cubic feet capacity are envisaged to be
fabricated annually. The workshop 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 and 10 days for unexpected work interruptions.

3.3 Production Program

The production program follows gradual capacity utilization due to marketing reasons. Since
there are other local producers of wheel barrow in Addis and the surrounding areas, the new
assembly plant needs some time to penetrate the market. 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

The raw materials required for the plant are mainly angle irons, mild steel deep drawing quality
sheet, mild steel sheet, mild steel round bars, mild steel tubes, flat iron, steel profiles, rubber
wheels, tubes and paints. Consumable are bolts, nuts, washers and welding electrodes. Most of
these materials are locally available in Addis while some of them are imported.

4.2 Annual Requirement and Cost of Raw Materials and Utilities

The raw materials cost is estimated at Birr 2,647,938 out of which the foreign component will be
Birr 489,321 or 18.5 %. The list of raw materials and consumables are given in Table 4.1 below.

3
 TABLE 4.1
RAW MATERIAL LIST

Item Description
No.
Foreign
Rubber Wheels For Wheel Barrows
Local
Angle Iron
Steel Tube
Mild Steel Sheet
Mild Steel Bar
Nails And Fasteners
Welding Electrodes
Paint

The total cost of the above raw materials is estimated to reach at Birr 2,647,938; of which Birr
2,158,615 is in local currency while the balance Birr 489,323 is in foreign currency.

The utilities required for the plant are electricity and water. Water is required for human
consumption and general purpose. The annual consumption of electricity and water is 32,400
KWH and 100 m3 respectively. The total annual cost is estimated at Birr 18,085.

5. Location and Site

For its convenience for distribution to different parts of the region, Bahir-Dar is an appropriate
choice for the Wheel Barrow Assembling plant in the region.

4
 6. Technology and Engineering
6.1 Production Process

Wheel barrow consists of buckets, two legs, axle wheel, handles and brackets. The formation of
these parts is as follows:

Buckets - Mild Steel sheet cut to size, deep drawn or for small scale welded to shape,
grinding and hamming

Legs - Tubes cut to size, bent and welded to frame

Wheel - Flat iron cut to size, rolled, welded, connected to the hubs by welding. Note
that if rubber wheel is to be used it will be bought out

Handles - Tubes cut to size and bent

Brackets - Cut to size, bent and welded

Axle - The mild steel rod is cut to size, machined

The different parts of the wheel barrow are welded and assembled together, it is finally painted.
Other than the above mentioned process, however, there is no other alternative technology to
fabricate wheel barrow.

6.2 Machinery and Equipment

The machinery and equipment is estimated to cost Birr 700,000. The total price is Birr 583,000,
and freight and insurance are estimated to cost Birr 117,000. (See Table 6.1)

5
 TABLE 6.1
LIST OF MACHINERY AND EQUIPMENT
Item Description Qty. Price
No. (Birr)
1 Deep Drawing Press 150 Tons Capacity 1 90,000
2 Lathe Machine, Centre to Centre Distance 2 Meters 1 120,000
3 Surface Grinder 1 50,000
4 Pillar Type Drilling Machine 1 45,000
5 Double Ended Pedestal Grinder 1 8,500
6 Pipe Bending Machine 1 7,500
7 Power Sheering Machine 1 40,000
8 Power Hack Saw 1 32,500
9 Hand Angle Sheer 1 3,500
10 Portable Drilling Machine 2 4,500
11 Portable Grinding Machine 2 4,500
12 Compressor 1 12,000
13 Spraying Unit- (Set) 1 2,500
14 Arc Welding Machine 3 45,500
15 Gas Welding Unit (Set) 1 4,500
16 Wood Working Machine (Set) 1 112,500
Machinery & Equipment FOB cost 583,000
20% freight & insurance cost 117,000
Total Machinery & Equipment Cost 700,000

The total cost of machinery/equipment is estimated at Birr 700 thousand; of which Birr 500
thousand is in foreign currency.
Machinery Supplier’s 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 450 m 2, and it costs Birr 900,000. This
would include cost of land preparation and associated civil works. The total land area of the
plant, including the open space, is 1000 m2 , and its lease cost equals Birr 60,000. The cost of the
land lease is as per ANRS land lease rate for Bahir-Dar which is equal to Birr 60 per square
meter for industrial purpose. Of the total cost of the lease, 5 % is paid in the beginning while the
rest will be paid in 40years.

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 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 2000 24000
2. Skilled Workers 6 1000
( Welders, Fitters, Machine Operators) 72000
3.Seretary 1 800 9600
4.Slaesman 1 800 9600
5. Cashier 1 600 7200
6.. Storekeeper 1 600 7200
7. Semi-Skilled Workers 5 600 36000
8.Guards 4 300 14400
Sub-total 20 180,000
Benefits (20%) 36,000

Total 20 216,000

The total annual wages and salary, including 20 % benefits, amount to Birr 216,000.

7.2 Training Requirement

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

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 8. Financial Analysis
8.1 Underlying Assumption

The financial analysis of Wheel Barrow Fabricating 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%

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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 2.4 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 L.C F.C Total

Land
3,000 3,000
Building and Civil Works
900,000 900,000
Office Equipment
20,000 20,000
Vehicles
0 0
Plant Machinery & Equipment
200,000 500,000 700,000
Total Fixed Investment Cost
1,123,000 500,000 1,623,000
Pre Production Capital Expenditure*
56,150 81,150
Total Initial Investment
1,179,150 500,000 1,704,150
Working Capital at Full Capacity
520,362 213,523 733,885
Total 1,699,512 713,523 2,438,035
*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 500,000 or 29.3 % of the total investment
cost.

9
 8.3 Production Costs
The total production cost at full capacity operation is estimated at Birr 3.2 million (See Table
8.2). Raw materials and utilities account for 83 %.
TABLE 8.2
PRODUCTION COST AT FULL CAPACITY
Raw Material
Requirement Cost
1. Local Raw Materials 2,158,615
2. Foreign Raw Materials 489,323

Total Production Cost at full Capacity

Items Cost
1. Raw Materials 2,647,938
2. Utilities 18,085
3. Wages and Salaries 216,000
4. Spares and Maintenance 48,690
Factory Costs 2,930,713
5. Depreciation 133,230
6. Financial Costs
146,282
Total Production Cost 3,210,225

8.4 Financial Evaluation

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

II. Breakeven Analysis

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

BEP = Fixed Cost

Sale –Variable Cost at full capacity.

10
The project will break even at 25.7 % 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 project’s simple rate of return (SRR) is given by the formula:

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

The SRR would be 20.8 % at full capacity utilization.

V. Internal Rate of Return and Net Present Value

Based on cash flow statement (See Annex 2) the calculated internal rate of return (IRR) of the
project is 23.8 % and the net present value (NPV) at 18 % discount is Birr 447 thousands.

VI. Sensitivity Analysis

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

9. Economic and Social Benefit and Justification

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

A. Profit Generation

The project is found to be financially viable and earns on average a profit of Birr 408 thousand
per year and Birr 4.1 million within the project life. Such result induces the project promoters to
reinvest the profit which, therefore, increases the investment magnitude in the region.

11
 B. Tax Revenue

In the project life under consideration, the region will collect about Birr 1.5 million from
corporate tax payment alone (i.e. excluding income tax, sales tax and VAT). Such result create
additional fund for the regional government that will be used in expanding social and other basic
services in the region.

C. Employment and Income Generation

The proposed project is expected to create employment opportunity to several citizens of the
country. That is, it will provide permanent employment to 20 professionals as well as support
stuffs. Consequently the project creates income of Birr 216 thousands per year. This would be
one of the commendable accomplishments of the project.

D. Pro Environment Project

The proposed production process is environment friendly.

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ANNEXES

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 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 868017.33 983752.97 1157356.44 1157356.44

Raw Materials in Stock- Total 0.00 0.00 336756.03 381656.83 449008.04 449008.04

Raw Material-Local 0.00 0.00 176613.95 200162.48 235485.27 235485.27

Raw Material-Foreign 0.00 0.00 160142.07 181494.35 213522.76 213522.76

Factory Supplies in Stock 0.00 0.00 2506.86 2841.11 3342.48 3342.48

Spare Parts in Stock and Maintenance 0.00 0.00 3983.73 4514.89 5311.64 5311.64

Work in Progress 0.00 0.00 62671.56 71027.77 83562.08 83562.08

Finished Products 0.00 0.00 125343.12 142055.54 167124.16 167124.16

2. Accounts Receivable 0.00 0.00 306818.18 347727.27 409090.91 409090.91

3. Cash in Hand 0.00 0.00 19152.41 21706.06 25536.55 25536.55

CURRENT ASSETS 0.00 0.00 857231.89 971529.48 1142975.86 1142975.86

4. Current Liabilities 0.00 0.00 306818.18 347727.27 409090.91 409090.91

Accounts Payable 0.00 0.00 306818.18 347727.27 409090.91 409090.91

TOTAL NET WORKING CAPITAL REQUIRMENTS 0.00 0.00 550413.71 623802.20 733884.95 733884.95

INCREASE IN NET WORKING CAPITAL 0.00 0.00 550413.71 73388.49 110082.74 0.00

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 1157356.44 1157356.44 1157356.44 1157356.44 1157356.44 1157356.44

Raw Materials in Stock-Total 449008.04 449008.04 449008.04 449008.04 449008.04 449008.04

Raw Material-Local 235485.27 235485.27 235485.27 235485.27 235485.27 235485.27

Raw Material-Foreign 213522.76 213522.76 213522.76 213522.76 213522.76 213522.76

Factory Supplies in Stock 3342.48 3342.48 3342.48 3342.48 3342.48 3342.48

Spare Parts in Stock and Maintenance 5311.64 5311.64 5311.64 5311.64 5311.64 5311.64

Work in Progress 83562.08 83562.08 83562.08 83562.08 83562.08 83562.08

Finished Products 167124.16 167124.16 167124.16 167124.16 167124.16 167124.16

2. Accounts Receivable 409090.91 409090.91 409090.91 409090.91 409090.91 409090.91

3. Cash in Hand 25536.55 25536.55 25536.55 25536.55 25536.55 25536.55

CURRENT ASSETS 1142975.86 1142975.86 1142975.86 1142975.86 1142975.86 1142975.86

4. Current Liabilities 409090.91 409090.91 409090.91 409090.91 409090.91 409090.91

Accounts Payable 409090.91 409090.91 409090.91 409090.91 409090.91 409090.91

TOTAL NET WORKING CAPITAL REQUIRMENTS 733884.95 733884.95 733884.95 733884.95 733884.95 733884.95

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 852075.00 1585959.95 3119318.18 3228409.09 3811363.64 3750000.00
1. Inflow Funds 852075.00 1585959.95 306818.18 40909.09 61363.64 0.00
Total Equity 340830.00 634383.98 0.00 0.00 0.00 0.00
Total Long Term Loan 511245.00 951575.97 0.00 0.00 0.00 0.00
Total Short Term Finances 0.00 0.00 306818.18 40909.09 61363.64 0.00
2. Inflow Operation 0.00 0.00 2812500.00 3187500.00 3750000.00 3750000.00
Sales Revenue 0.00 0.00 2812500.00 3187500.00 3750000.00 3750000.00
Interest on Securities 0.00 0.00 0.00 0.00 0.00 0.00
3. Other Income 0.00 0.00 0.00 0.00 0.00 0.00
TOTAL CASH OUTFLOW 852075.00 852075.00 3436905.10 3027057.66 3653900.54 3461974.67
4. Increase In Fixed Assets 852075.00 852075.00 0.00 0.00 0.00 0.00
Fixed Investments 811500.00 811500.00 0.00 0.00 0.00 0.00
Pre-production Expenditures 40575.00 40575.00 0.00 0.00 0.00 0.00
5. Increase in Current Assets 0.00 0.00 857231.89 114297.59 171446.38 0.00
6. Operating Costs 0.00 0.00 2202151.82 2493418.07 2930317.43 2930317.43
7. Corporate Tax Paid 0.00 0.00 0.00 0.00 162051.14 170828.07
8. Interest Paid 0.00 0.00 377521.39 175538.52 146282.10 117025.68
9. Loan Repayments 0.00 0.00 0.00 243803.49 243803.49 243803.49
10. Dividends Paid 0.00 0.00 0.00 0.00 0.00 0.00
Surplus(Deficit) 0.00 733884.95 -317586.92 201351.43 157463.09 288025.33
Cumulative Cash Balance 0.00 733884.95 416298.03 617649.46 775112.55 1063137.88

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 Annex 2: Cash Flow Statement (in Birr): Continued
PRODUCTION
5 6 7 8 9 10
TOTAL CASH INFLOW 3750000.00 3750000.00 3750000.00 3750000.00 3750000.00 3750000.00
1. Inflow Funds 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 3750000.00 3750000.00 3750000.00 3750000.00 3750000.00 3750000.00
Sales Revenue 3750000.00 3750000.00 3750000.00 3750000.00 3750000.00 3750000.00
Interest on Securities 0.00 0.00 0.00 0.00 0.00 0.00
3. Other Income 0.00 0.00 0.00 0.00 0.00 0.00
TOTAL CASH OUTFLOW 3441495.18 3425884.68 3405405.19 3141122.20 3141122.20 3141122.20
4. 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
5. Increase in Current Assets 0.00 0.00 0.00 0.00 0.00 0.00
6. Operating Costs 2930317.43 2930317.43 2930317.43 2930317.43 2930317.43 2930317.43
7. Corporate Tax Paid 179604.99 193250.92 202027.85 210804.77 210804.77 210804.77
8. Interest Paid 87769.26 58512.84 29256.42 0.00 0.00 0.00
9. Loan Repayments 243803.49 243803.49 243803.49 0.00 0.00 0.00
10.Dividends Paid 0.00 0.00 0.00 0.00 0.00 0.00
Surplus(Deficit) 308504.82 324115.32 344594.81 608877.80 608877.80 608877.80
Cumulative Cash Balance 1371642.71 1695758.02 2040352.83 2649230.63 3258108.43 3866986.23

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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 0.00 0.00 2812500.00 3187500.00 3750000.00 3750000.00

1. Inflow Operation 0.00 0.00 2812500.00 3187500.00 3750000.00 3750000.00

Sales Revenue 0.00 0.00 2812500.00 3187500.00 3750000.00 3750000.00

Interest on Securities 0.00 0.00 0.00 0.00 0.00 0.00

2. Other Income 0.00 0.00 0.00 0.00 0.00 0.00

TOTAL CASH OUTFLOW 852075.00 852075.00 2752565.53 2566806.56 3040400.17 3101145.50

3. Increase in Fixed Assets 852075.00 852075.00 0.00 0.00 0.00 0.00

Fixed Investments 811500.00 811500.00 0.00 0.00 0.00 0.00

Pre-production Expenditures 40575.00 40575.00 0.00 0.00 0.00 0.00

4. Increase in Net Working Capital 0.00 0.00 550413.71 73388.49 110082.74 0.00

5. Operating Costs 0.00 0.00 2202151.82 2493418.07 2930317.43 2930317.43

6. Corporate Tax Paid 0.00 0.00 0.00 0.00 0.00 170828.07

NET CASH FLOW -852075.00 -852075.00 59934.47 620693.44 709599.83 648854.50

CUMMULATIVE NET CASH FLOW -852075.00 -1704150.00 -1644215.53 -1023522.09 -313922.26 334932.24

Net Present Value (at 18%) -852075.00 -722097.46 43044.00 377773.19 366003.70 283620.28

Cumulative Net present Value -852075.00 -1574172.46 -1531128.46 -1153355.27 -787351.57 -503731.29

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 Annex 3: DISCOUNTED CASH FLOW-TOTAL CAPITAL INVESTED (Continued)
PRODUCTION
5 6 7 8 9 10
TOTAL CASH INFLOW 3750000.00 3750000.00 3750000.00 3750000.00 3750000.00 3750000.00

1. Inflow Operation 3750000.00 3750000.00 3750000.00 3750000.00 3750000.00 3750000.00

Sales Revenue 3750000.00 3750000.00 3750000.00 3750000.00 3750000.00 3750000.00

Interest on Securities 0.00 0.00 0.00 0.00 0.00 0.00

2. Other Income 0.00 0.00 0.00 0.00 0.00 0.00

TOTAL CASH OUTFLOW 3109922.42 3123568.35 3132345.28 3141122.20 3141122.20 3141122.20

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

4. Increase in Net Working Capital 0.00 0.00 0.00 0.00 0.00 0.00

5. Operating Costs 2930317.43 2930317.43 2930317.43 2930317.43 2930317.43 2930317.43

6. Corporate Tax Paid 179604.99 193250.92 202027.85 210804.77 210804.77 210804.77

NET CASH FLOW 640077.58 626431.65 617654.72 608877.80 608877.80 608877.80

CUMMULATIVE NET CASH FLOW 975009.81 1601441.46 2219096.19 2827973.99 3436851.79 4045729.59

Net Present Value (at 18%) 237104.92 196652.58 164319.73 137275.20 116334.91 98588.91

Cumulative Net present Value -266626.36 -69973.79 94345.94 231621.14 347956.05 446544.96

Net Present Value (at 18%) 446,544.96

Internal Rate of Return 23.8%

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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 2812500.00 3187500.00 3750000.00 3750000.00 3750000.00

Sales Revenue 2812500.00 3187500.00 3750000.00 3750000.00 3750000.00
Other Income 0.00 0.00 0.00 0.00 0.00
2. Less Variable Cost 2119696.82 2402323.07 2826262.43 2826262.43 2826262.43
VARIABLE MARGIN 692803.18 785176.93 923737.57 923737.57 923737.57
(In % of Total Income) 24.63 24.63 24.63 24.63 24.63
3. Less Fixed Costs 215685.00 224325.00 237285.00 237285.00 237285.00
OPERATIONAL MARGIN 477118.18 560851.93 686452.57 686452.57 686452.57
(In % of Total Income) 16.96 17.60 18.31 18.31 18.31
4. Less Cost of Finance 377521.39 175538.52 146282.10 117025.68 87769.26
5. GROSS PROFIT 99596.79 385313.42 540170.47 569426.89 598683.31
6. Income (Corporate) Tax 0.00 0.00 162051.14 170828.07 179604.99
7. NET PROFIT 99596.79 385313.42 378119.33 398598.82 419078.32
RATIOS (%)
Gross Profit/Sales 3.54% 12.09% 14.40% 15.18% 15.96%
Net Profit After Tax/Sales 3.54% 12.09% 10.08% 10.63% 11.18%
Return on Investment 21.16% 24.09% 21.51% 21.15% 20.79%
Return on Equity 10.21% 39.51% 38.77% 40.87% 42.97%

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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 3750000.00 3750000.00 3750000.00 3750000.00 3750000.00

Sales Revenue 3750000.00 3750000.00 3750000.00 3750000.00 3750000.00
Other Income 0.00 0.00 0.00 0.00 0.00
2. Less Variable Cost 2826262.43 2826262.43 2826262.43 2826262.43 2826262.43
VARIABLE MARGIN 923737.57 923737.57 923737.57 923737.57 923737.57
(In % of Total Income) 24.63 24.63 24.63 24.63 24.63
3. Less Fixed Costs 221055.00 221055.00 221055.00 221055.00 221055.00
OPERATIONAL MARGIN 702682.57 702682.57 702682.57 702682.57 702682.57
(In % of Total Income) 18.74 18.74 18.74 18.74 18.74
4. Less Cost of Finance 58512.84 29256.42 0.00 0.00 0.00
5. GROSS PROFIT 644169.73 673426.15 702682.57 702682.57 702682.57
6. Income (Corporate) Tax 193250.92 202027.85 210804.77 210804.77 210804.77
7. NET PROFIT 450918.81 471398.31 491877.80 491877.80 491877.80
RATIOS (%)
Gross Profit/Sales 17.18% 17.96% 18.74% 18.74% 18.74%
Net Profit After Tax/Sales 12.02% 12.57% 13.12% 13.12% 13.12%
Return on Investment 20.90% 20.54% 20.18% 20.18% 20.18%
Return on Equity 46.24% 48.34% 50.44% 50.44% 50.44%

8
 Annex 5: Projected Balance Sheet (in Birr)
CONSTRUCTION PRODUCTION
Year 1 Year 2 1 2 3 4
TOTAL ASSETS 852075.00 2438034.95 2844449.92 3026868.93 3222548.41 3377343.74
1. Total Current Assets 0.00 733884.95 1273529.92 1589178.93 1918088.41 2206113.74
Inventory on Materials and Supplies 0.00 0.00 343246.62 389012.83 457662.16 457662.16
Work in Progress 0.00 0.00 62671.56 71027.77 83562.08 83562.08
Finished Products in Stock 0.00 0.00 125343.12 142055.54 167124.16 167124.16
Accounts Receivable 0.00 0.00 306818.18 347727.27 409090.91 409090.91
Cash in Hand 0.00 0.00 19152.41 21706.06 25536.55 25536.55
Cash Surplus, Finance Available 0.00 733884.95 416298.03 617649.46 775112.55 1063137.88
Securities 0.00 0.00 0.00 0.00 0.00 0.00
2. Total Fixed Assets, Net of Depreciation 852075.00 1704150.00 1570920.00 1437690.00 1304460.00 1171230.00
Fixed Investment 0.00 811500.00 1623000.00 1623000.00 1623000.00 1623000.00
Construction in Progress 811500.00 811500.00 0.00 0.00 0.00 0.00
Pre-Production Expenditure 40575.00 81150.00 81150.00 81150.00 81150.00 81150.00
Less Accumulated Depreciation 0.00 0.00 133230.00 266460.00 399690.00 532920.00
3. Accumulated Losses Brought Forward 0.00 0.00 0.00 0.00 0.00 0.00
4. Loss in Current Year 0.00 0.00 0.00 0.00 0.00 0.00
TOTAL LIABILITIES 852075.00 2438034.95 2844449.92 3026868.93 3222548.41 3377343.74
5. Total Current Liabilities 0.00 0.00 306818.18 347727.27 409090.91 409090.91
Accounts Payable 0.00 0.00 306818.18 347727.27 409090.91 409090.91
Bank Overdraft 0.00 0.00 0.00 0.00 0.00 0.00
6. Total Long-term Debt 511245.00 1462820.97 1462820.97 1219017.47 975213.98 731410.48
Loan A 511245.00 1462820.97 1462820.97 1219017.47 975213.98 731410.48
Loan B 0.00 0.00 0.00 0.00 0.00 0.00
7. Total Equity Capital 340830.00 975213.98 975213.98 975213.98 975213.98 975213.98
Ordinary Capital 340830.00 975213.98 975213.98 975213.98 975213.98 975213.98
Preference Capital 0.00 0.00 0.00 0.00 0.00 0.00
Subsidies 0.00 0.00 0.00 0.00 0.00 0.00
8. Reserves, Retained Profits Brought Forward 0.00 0.00 0.00 99596.79 484910.21 863029.54
9.Net Profit After Tax 0.00 0.00 99596.79 385313.42 378119.33 398598.82
Dividends Payable 0.00 0.00 0.00 0.00 0.00 0.00
Retained Profits 0.00 0.00 99596.79 385313.42 378119.33 398598.82

9
 Annex 5: Projected Balance Sheet (in Birr): Continued
PRODUCTION
5 6 7 8 9 10
TOTAL ASSETS 3552618.56 3759733.88 3987328.69 4479206.49 4971084.29 5462962.09
1. Total Current Assets 2514618.56 2838733.88 3183328.69 3792206.49 4401084.29 5009962.09
Inventory on Materials and Supplies 457662.16 457662.16 457662.16 457662.16 457662.16 457662.16
Work in Progress 83562.08 83562.08 83562.08 83562.08 83562.08 83562.08
Finished Products in Stock 167124.16 167124.16 167124.16 167124.16 167124.16 167124.16
Accounts Receivable 409090.91 409090.91 409090.91 409090.91 409090.91 409090.91
Cash in Hand 25536.55 25536.55 25536.55 25536.55 25536.55 25536.55
Cash Surplus, Finance Available 1371642.71 1695758.02 2040352.83 2649230.63 3258108.43 3866986.23
Securities 0.00 0.00 0.00 0.00 0.00 0.00
2. Total Fixed Assets, Net of Depreciation 1038000.00 921000.00 804000.00 687000.00 570000.00 453000.00
Fixed Investment 1623000.00 1623000.00 1623000.00 1623000.00 1623000.00 1623000.00
Construction in Progress 0.00 0.00 0.00 0.00 0.00 0.00
Pre-Production Expenditure 81150.00 81150.00 81150.00 81150.00 81150.00 81150.00
Less Accumulated Depreciation 666150.00 783150.00 900150.00 1017150.00 1134150.00 1251150.00
3. Accumulated Losses Brought Forward 0.00 0.00 0.00 0.00 0.00 0.00
4. Loss in Current Year 0.00 0.00 0.00 0.00 0.00 0.00
TOTAL LIABILITIES 3552618.56 3759733.88 3987328.69 4479206.49 4971084.29 5462962.09
5. Total Current Liabilities 409090.91 409090.91 409090.91 409090.91 409090.91 409090.91
Accounts Payable 409090.91 409090.91 409090.91 409090.91 409090.91 409090.91
Bank Overdraft 0.00 0.00 0.00 0.00 0.00 0.00
6. Total Long-term Debt 487606.99 243803.49 0.00 0.00 0.00 0.00
Loan A 487606.99 243803.49 0.00 0.00 0.00 0.00
Loan B 0.00 0.00 0.00 0.00 0.00 0.00
7. Total Equity Capital 975213.98 975213.98 975213.98 975213.98 975213.98 975213.98
Ordinary Capital 975213.98 975213.98 975213.98 975213.98 975213.98 975213.98
Preference Capital 0.00 0.00 0.00 0.00 0.00 0.00
Subsidies 0.00 0.00 0.00 0.00 0.00 0.00
8. Reserves, Retained Profits Brought
Forward 1261628.37 1680706.68 2131625.50 2603023.80 3094901.60 3586779.40
9. Net Profit After Tax 419078.32 450918.81 471398.31 491877.80 491877.80 491877.80
Dividends Payable 0.00 0.00 0.00 0.00 0.00 0.00
Retained Profits 419078.32 450918.81 471398.31 491877.80 491877.80 491877.80

10