Investment Office ANRS

Project Profile on the Establishment

of Chaff Cutter Fabrication 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......................................................................................................2
3.3
Production Program.............................................................................................2

4. Raw Materials and Utilities....................................................................3

4.1
4.2

Availability and Source of Raw Materials...........................................................3

Annual Requirement and Cost of Raw Materials and Utilities...........................3

5. Location and Site.....................................................................................4

6. Technology and Engineering..................................................................4
6.1
6.2
6.3

Production Process...............................................................................................4
Machinery and Equipment...................................................................................4
Civil Engineering Cost........................................................................................5

7. Human Resource and Training Requirement......................................5

7.1
7.2

Human Resource..................................................................................................5
Training Requirement..........................................................................................6

8. Financial Analysis...................................................................................6
8.1
8.2
8.3
8.4

Underlying Assumption.......................................................................................6
Investment............................................................................................................7
Production Costs..................................................................................................8
Financial Evaluation............................................................................................8

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

ANNEXES....................................................................................................11

1. Executive Summary
This project envisages fabrication of 10,000 pieces of manually operated Chaff Cutter per
annum. The total investment requirement of the project including the working capital is
estimated at about Birr 696 thousand; of which nearly Birr 243 thousand is the cost of the
working capital and Birr 120 thousand is for machinery and equipments. Based on the cash flow
statement, the calculated internal rate of return (IRR) and simple rate of return of the project are
35.3 % and 32.6 %; and, the net present value (NPV) at 18 % discounting rate is about Birr 397
thousand. The plant is expected to create employment opportunities for about 12 persons.

2. Product Description and Application

Chaff cutter is a small manually operated machine by which cattle fodder including straw is
chopped so as to make the fodder easy to be swallowed. Chopping the fodder using the cutter
enables the livestock to consume more feed which results in more milk or meat or drawing
power.

3. Market Study, Plant Capacity and Production Program

3.1

Market Study
3.1.1 Present Demand and Supply

Though the ANRS has more than 22 million heads of cattle, sheep, goats, donkeys, mules and
camels, the farmers do not use chaff cutters for feeding their animals. The reason is that the use
of this agricultural implement is not known in the region and the product is not available. With
3.4 million farming families in the region and with 22 million livestock, there will be a large
market for chaff cutters if the use of the product is demonstrated widely to farmers. Since
government is giving emphasis to agriculture and dairy farming there is a wide scope for
agricultural implements fabricating industries. It is expected that agricultural production along
with dairy farming to continue to grow in the future.

3.1.2 Projected Demand

If we conservatively assume that only one percent of farming families will buy the product at the
initial stage, the present demand for the item will be 34,000 units at ANRS level. If we further
assume that additional 1 % of the farming family in ANRS use chaff cutter for the coming 10
years, then the demand for the item will be more than 34,000 units per annum during the project
period considered for the financial analysis purpose. It should be noted that, however, there is
also demand for the item throughout of the country. This is much larger than the economic size
of a viable plant fabricating chaff cutter.

3.1.3 Pricing and Distribution

Since chaff cutter is not known in Ethiopia it is not possible to get the current market price of the
item in the domestic market. Based on the average production cost of the product, however, the
envisaged plant plans to sell the item at a factory get price of Birr 100 per piece. And this price is
believed to be reasonable as compared to the service that chaff cutter provides, and affordable by
most Ethiopian farmers.

3.2

Plant Capacity

The envisaged plant has a production capacity of 10,000 pieces of chaff cutter per annum; which
is a small fraction of the projected demand of the region. The plant will operate 275 days a year.
Sundays and national holidays, amounting to 65 days a year, are registered holidays for the plant.
For maintenance and repair work as well as for contingence of unexpected work interruption
additional 25 days are assigned.

3.3

Production Program

The production program follows gradual capacity utilization due to technical and market reasons.
Technical reasons refer to the relatively longer time that the technical staffs take to produce a
unit of the product during the early stage of production while the market problem is related with
the time requirement to introduce the product. Accordingly, 65 %, 75 % and 85 % capacity
utilization are assumed during the first, the second and the third years of the operation,
respectively. The fourth year onwards, 100% capacity utilization is assumed.
2

4. Raw Materials and Utilities

4.1

Availability and Source of Raw Materials

Chaff cutter is mainly made from high carbon steel; and this will be imported.

4.2

Annual Requirement and Cost of Raw Materials and Utilities

Full capacity raw materials requirement of the plant and the corresponding cost estimates are
given in Table 4.1.
Table 4.1
RAW MATERIALS REQUIREMENT
Cost In Birr
Foreign
Local
1
Cast Iron
350,000
2
Steel for Blades
75,000
3
Steel For Handles
50,000
4
Miscellaneous
25,000
Total
350,000 150,000
Annual electric consumption at 100% capacity utilization in a single shift operation
NO

Qty.
Ton

Material

Total
350,000
75,000
50,000
25,000
500,000
of the plant

shall be 60 MWH. Total cost of electricity is estimated at Birr 33,000 per annum. The plant does
not need water for the purpose of production but it is normally needed for general cleaning.
Based on this, yearly water consumption is estimated to be1000 m 3, and its cost amounts Birr
2,650.

Table 4.2
UTILITIES REQUIREMENT
No.
1.
2.

Utility
Electricity
Water
Total

Requirement
(Annual)
60 MWH
1000 m3

Unit Price
Birr 0.55 /KWH
Birr 2.65 /m3

Cost
(Birr)
33,000
2,650
35,650

5. Location and Site

For its convenience for distribution to different parts of the ANRS, Debre-Markos is an
appropriate choice for the Chaff Cutter Fabrication plant in the region.

6. Technology and Engineering

6.1

Production Process

The frame is cast in green sand moulds by cast iron, and the blades and handles are made of
steel. The mould is made in sand and clay, and molten CI is poured into it to make the main body
of the tool. The axle and handle are separately made mostly from steel, and assembled. They can
be made in the unit or purchased from outside by order. For the purpose of this project the later
option is taken.
[

Alternatively, it is possible to fabricate a chaff cutter that operates with electric power. This
increases both the initial investment requirement and the cost of production, and hence, the price.

6.2

Machinery and Equipment

Table 6.1
MACHINERY & EQUIPMENT

Item
1. Small Cupola
2. Motorized Sand Muffler
3. C.I. Molding Boxes
4. Bricks Constructed Oven
5. Foundry Tools
6. C.I. and Aluminum Metal Patterns
The total cost of machinery/equipment is estimated at Birr 120,000 of which Birr 100,000 is in
foreign currency.
Suppliers Address:
Company Name:

Nan'An Southeast Mechanical Muffler Co., Ltd.

Company Address: Qinglinge, Jintao, Nanancity, Quanzhou, Fujian, China

City/Province:

Xiamen/Fujian

Country/Region:

China

Zip/Postal Code:

362314

6.3

Civil Engineering Cost

The building area required by the plant is estimated to be 150m 2, and it costs Birr 300,000. This
would include cost of land preparation and associated civil works. The total land area of the
plant, including the open space, is 500 m2 and its lease cost equals Birr 27,250. The cost of the
land lease is as per ANRS land lease rate for Debre-Markos which is equal to Birr 54.50 per sq m
for industrial purpose. Of the total cost of the lease 5 % is paid in the beginning while the rest
will be paid in 40 years.

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
Description

MANPOWER REQUIREMENT
No
Monthly Salary
Annual
(Birr)
Salary (Birr)

A. Administration
1. Supervisors
2. Salesman
3. Secretary and Cashier
4.Guards
Sub-total
B. Production
1. Skilled workers (operators)
2. Unskilled Workers (laborers)

1
1
1
2

1000
800
600
300

12,000
9,600
7,200
7,200
36,000

4
3

800
400

38,400

Benefits (20%)
12

14,400
17,760
106,560

The total annual wages and salary, including 20 % benefits, amount to Birr 106,560.

7.2

Training Requirement

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

8. Financial Analysis
8.1

Underlying Assumption

The financial analysis of Chaff Cutter Fabrication 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 696
thousand 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

1,363

1,363

300,000

300,000

10,000

10,000

20,000

100,000

120,000

331,363

100,000

431,363

16,568

21,568

347,931

100,000

452,931

90,286
438,217

152,727
252,727

243,014
695,944

*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.

The foreign component of the project accounts for Birr 253 thousand or 36.3 % of the total
investment cost.

8.3

Production Costs

The total production cost at full capacity operation is estimated at Birr 729 thousand (See Table
8.2). Raw materials and utilities account for 73.5 %.

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

Cost
150,000
350,000

Total Production Cost at full Capacity

Items
Cost
1. Raw materials

500,000

2. Utilities

35,650

3. Wages and Salaries

106,560

4. Spares and Maintenance

12,941

Factory costs
5. Depreciation
6. Financial costs

Total Production Cost

8.4

655,151
32,314
41,757
729,221

Financial Evaluation
I.

Profitability

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

II.

Breakeven Analysis

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

BEP =

Fixed Cost
Sale Variable Cost

at full capacity.

The project will break even at 20.3 % of capacity utilization

III.

Payback Period

Investment cost and income statement projection are used in estimating the project payback
period. The project will payback fully the initial investment less working capital in two years.
IV.

Simple Rate of Return

The 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 32.6 % 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 35.3 % and the net present value (NPV) at 18 % discount is Birr 397 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 191 thousand
per year and Birr 1.9 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 706 thousand 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 12 skilled labor as well as support
staffs. Consequently the project creates income of Birr 107 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.

10

ANNEXES

11

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

CONSTRUCTION

PRODUCTION

Year 1

Year 2

65%

75%

85%

100%

0.00

0.00

257783.89

297442.96

337102.02

396590.61

0.00

0.00

109909.09

126818.18

143727.27

169090.91

Raw Material-Local

0.00

0.00

10636.36

12272.73

13909.09

16363.64

Raw Material-Foreign

0.00

0.00

99272.73

114545.45

129818.18

152727.27

Factory Supplies in Stock

0.00

0.00

487.47

562.47

637.47

749.96

Spare Parts in Stock and Maintenance

0.00

0.00

917.63

1058.80

1199.97

1411.73

Work in Progress

0.00

0.00

12186.87

14061.77

15936.68

18749.03

Finished Products

0.00

0.00

24373.74

28123.55

31873.35

37498.06

2. Accounts Receivable

0.00

0.00

70909.09

81818.18

92727.27

109090.91

3. Cash in Hand

0.00

0.00

10083.98

11635.36

13186.75

15513.82

0.00

0.00

228867.88

264078.32

299288.76

352104.42

4. Current Liabilities

0.00

0.00

70909.09

81818.18

92727.27

109090.91

Accounts Payable

0.00

0.00

70909.09

81818.18

92727.27

109090.91

TOTAL NET WORKING CAPITAL REQUIRMENTS

0.00

0.00

157958.79

182260.14

206561.49

243013.52

INCREASE IN NET WORKING CAPITAL

0.00

0.00

157958.79

24301.35

24301.35

36452.03

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%

396590.61

396590.61

396590.61

396590.61

396590.61

396590.61

169090.91

169090.91

169090.91

169090.91

169090.91

169090.91

Raw Material-Local

16363.64

16363.64

16363.64

16363.64

16363.64

16363.64

Raw Material-Foreign

152727.27

152727.27

152727.27

152727.27

152727.27

152727.27

Factory Supplies in Stock

749.96

749.96

749.96

749.96

749.96

749.96

Spare Parts in Stock and Maintenance

1411.73

1411.73

1411.73

1411.73

1411.73

1411.73

Work in Progress

18749.03

18749.03

18749.03

18749.03

18749.03

18749.03

Finished Products

37498.06

37498.06

37498.06

37498.06

37498.06

37498.06

2. Accounts Receivable

109090.91

109090.91

109090.91

109090.91

109090.91

109090.91

3. Cash in Hand

15513.82

15513.82

15513.82

15513.82

15513.82

15513.82

352104.42

352104.42

352104.42

352104.42

352104.42

352104.42

4. Current Liabilities

109090.91

109090.91

109090.91

109090.91

109090.91

109090.91

Accounts Payable

109090.91

109090.91

109090.91

109090.91

109090.91

109090.91

TOTAL NET WORKING CAPITAL REQUIRMENTS

243013.52

243013.52

243013.52

243013.52

243013.52

243013.52

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)

2

CONSTRUCTION

PRODUCTION

Year 1

Year 2

226465.31

469478.83

720909.09

760909.09

860909.09

1016363.64

226465.31

469478.83

70909.09

10909.09

10909.09

16363.64

Total Equity

90586.13

187791.53

0.00

0.00

0.00

0.00

Total Long Term Loan

135879.19

281687.30

0.00

0.00

0.00

0.00

0.00

0.00

70909.09

10909.09

10909.09

16363.64

2. Inflow Operation

0.00

0.00

650000.00

750000.00

850000.00

1000000.00

Sales Revenue

0.00

0.00

650000.00

750000.00

850000.00

1000000.00

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

226465.31

226465.31

762563.69

646687.13

769018.36

893931.53

4. Increase In Fixed Assets

226465.31

226465.31

0.00

0.00

0.00

0.00

Fixed Investments

215681.25

215681.25

0.00

0.00

0.00

0.00

Pre-production Expenditures

10784.06

10784.06

0.00

0.00

0.00

0.00

5. Increase in Current Assets

0.00

0.00

228867.88

35210.44

35210.44

52815.66

6. Operating Costs

0.00

0.00

426865.83

491774.30

556682.76

654045.46

7. Corporate Tax Paid

0.00

0.00

0.00

0.00

65774.09

84070.68

8. Interest Paid

0.00

0.00

106829.98

50107.98

41756.65

33405.32

9.Loan Repayments

0.00

0.00

0.00

69594.41

69594.41

69594.41

10.Dividends Paid

0.00

0.00

0.00

0.00

0.00

0.00

Surplus(Deficit)

0.00

243013.52

-41654.60

114221.96

91890.74

122432.10

Cumulative Cash Balance

0.00

243013.52

201358.92

315580.88

407471.61

529903.72

TOTAL CASH INFLOW

1. Inflow Funds

Total Short Term Finances

3. Other Income

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

3

PRODUCTION
5
1000000.00

6
1000000.00

7
1000000.00

8
1000000.00

9
1000000.00

10
1000000.00

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

1000000.00

1000000.00

1000000.00

1000000.00

1000000.00

1000000.00

Sales Revenue

1000000.00

1000000.00

1000000.00

1000000.00

1000000.00

1000000.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

835269.94

830718.10

824872.17

749431.82

749431.82

749431.82

4. Increase In Fixed Assets

0.00

0.00

0.00

0.00

0.00

0.00

Fixed Investments
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

5. Increase in Current Assets

0.00

0.00

0.00

0.00

0.00

0.00

6. Operating Costs

654045.46

654045.46

654045.46

654045.46

654045.46

654045.46

7. Corporate Tax Paid

86576.08

90375.56

92880.96

95386.36

95386.36

95386.36

8. Interest Paid

25053.99

16702.66

8351.33

0.00

0.00

0.00

9. Loan Repayments

69594.41

69594.41

69594.41

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

Surplus(Deficit)

164730.06

169281.90

175127.83

250568.18

250568.18

250568.18

Cumulative Cash Balance

694633.78

863915.68

1039043.52

1289611.70

1540179.88

1790748.06

TOTAL CASH INFLOW

1. Inflow Funds

Interest on Securities
3. Other Income
TOTAL CASH OUTFLOW

10.Dividends Paid

Annex 3: DISCOUNTED CASH FLOW-TOTAL CAPITAL INVESTED

4

CONSTRUCTION

PRODUCTION

Year 1

Year 2

TOTAL CASH INFLOW

0.00

0.00

650000.00

750000.00

850000.00

1000000.00

1. Inflow Operation

0.00

0.00

650000.00

750000.00

850000.00

1000000.00

Sales Revenue

0.00

0.00

650000.00

750000.00

850000.00

1000000.00

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

226465.31

226465.31

584824.62

516075.65

580984.11

774568.16

3. Increase in Fixed Assets

226465.31

226465.31

0.00

0.00

0.00

0.00

Fixed Investments

215681.25

215681.25

0.00

0.00

0.00

0.00

Pre-production Expenditures

10784.06

10784.06

0.00

0.00

0.00

0.00

4. Increase in Net Working Capital

0.00

0.00

157958.79

24301.35

24301.35

36452.03

5. Operating Costs

0.00

0.00

426865.83

491774.30

556682.76

654045.46

6. Corporate Tax Paid

0.00

0.00

0.00

0.00

0.00

84070.68

NET CASH FLOW

-226465.31

-226465.31

65175.38

233924.35

269015.89

225431.84

CUMMULATIVE NET CASH FLOW

-226465.31

-452930.63

-387755.24

-153830.89

115185.00

340616.83

Net Present Value (at 18%)

-226465.31

-191919.76

46807.95

142373.58

138755.40

98538.33

Cumulative Net present Value

-226465.31

-418385.07

-371577.12

-229203.54

-90448.14

8090.19

2. Other Income

Annex 3: DISCOUNTED CASH FLOW-TOTAL CAPITAL INVESTED

(Continued)

PRODUCTION
5

10

TOTAL CASH INFLOW

1000000.00

1000000.00

1000000.00

1000000.00

1000000.00

1000000.00

1. Inflow Operation

1000000.00

1000000.00

1000000.00

1000000.00

1000000.00

1000000.00

Sales Revenue

1000000.00

1000000.00

1000000.00

1000000.00

1000000.00

1000000.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

740621.54

744421.02

746926.42

749431.82

749431.82

749431.82

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

5. Operating Costs

654045.46

654045.46

654045.46

654045.46

654045.46

654045.46

6. Corporate Tax Paid

86576.08

90375.56

92880.96

95386.36

95386.36

95386.36

NET CASH FLOW

259378.46

255578.98

253073.58

250568.18

250568.18

250568.18

CUMMULATIVE NET CASH FLOW

599995.30

855574.27

1108647.85

1359216.03

1609784.21

1860352.39

Net Present Value (at 18%)

96081.96

80232.64

67327.23

56492.12

47874.68

40571.76

Cumulative Net present Value

104172.16

184404.80

251732.03

308224.14

356098.82

396670.58

Interest on Securities
2. Other Income
TOTAL CASH OUTFLOW

4. Increase in Net Working Capital

Net Present Value (at 18%)

Internal Rate of Return

396,670.58

35.3%

Annex 4: NET INCOME STATEMENT ( in Birr)

6

PRODUCTION
1

65%

75%

85%

100%

100%

650000.00

750000.00

850000.00

1000000.00

1000000.00

650000.00

750000.00

850000.00

1000000.00

1000000.00

Other Income

0.00

0.00

0.00

0.00

0.00

2. Less Variable Cost

394199.42

454845.48

515491.55

606460.65

606460.65

255800.58

295154.52

334508.45

393539.36

393539.36

39.35

39.35

39.35

39.35

39.35

64980.04

69242.44

73504.84

79898.44

79898.44

190820.54

225912.08

261003.61

313640.92

313640.92

29.36

30.12

30.71

31.36

31.36

4. Less Cost of Finance

106829.98

50107.98

41756.65

33405.32

25053.99

5. GROSS PROFIT

83990.56

175804.10

219246.97

280235.60

288586.93

0.00

0.00

65774.09

84070.68

86576.08

83990.56

175804.10

153472.88

196164.92

202010.85

Gross Profit/Sales

12.92%

23.44%

25.79%

28.02%

28.86%

Net Profit After Tax/Sales

12.92%

23.44%

18.06%

19.62%

20.20%

Return on Investment

31.24%

35.57%

29.60%

32.99%

32.63%

Return on Equity

30.17%

63.15%

55.13%

70.47%

72.57%

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

7

PRODUCTION
6

10

100%

100%

100%

100%

100%

1000000.00

1000000.00

1000000.00

1000000.00

1000000.00

1000000.00

1000000.00

1000000.00

1000000.00

1000000.00

Other Income

0.00

0.00

0.00

0.00

0.00

2. Less Variable Cost

606460.65

606460.65

606460.65

606460.65

606460.65

393539.36

393539.36

393539.36

393539.36

393539.36

39.35

39.35

39.35

39.35

39.35

75584.81

75584.81

75584.81

75584.81

75584.81

317954.54

317954.54

317954.54

317954.54

317954.54

31.80

31.80

31.80

31.80

31.80

4. Less Cost of Finance

16702.66

8351.33

0.00

0.00

0.00

5. GROSS PROFIT

301251.88

309603.21

317954.54

317954.54

317954.54

6. Income (Corporate) Tax

90375.56

92880.96

95386.36

95386.36

95386.36

7. NET PROFIT

210876.32

216722.25

222568.18

222568.18

222568.18

Gross Profit/Sales

30.13%

30.96%

31.80%

31.80%

31.80%

Net Profit After Tax/Sales

21.09%

21.67%

22.26%

22.26%

22.26%

Return on Investment

32.70%

32.34%

31.98%

31.98%

31.98%

Return on Equity

75.75%

77.85%

79.95%

79.95%

79.95%

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)

8

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
226465.31
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
226465.31
0.00
215681.25
10784.06
0.00
0.00
0.00
226465.31
0.00
0.00
0.00
135879.19
135879.19
0.00
90586.13
90586.13
0.00
0.00
0.00
0.00
0.00
0.00

Year 2
695944.14
243013.52
0.00
0.00
0.00
0.00
0.00
243013.52
0.00
452930.63
215681.25
215681.25
21568.13
0.00
0.00
0.00
695944.14
0.00
0.00
0.00
417566.48
417566.48
0.00
278377.66
278377.66
0.00
0.00
0.00
0.00
0.00
0.00

PRODUCTION
1
850843.79
430226.79
111314.19
12186.87
24373.74
70909.09
10083.98
201358.92
0.00
420617.00
431362.50
0.00
21568.13
32313.63
0.00
0.00
850843.79
70909.09
70909.09
0.00
417566.48
417566.48
0.00
278377.66
278377.66
0.00
0.00
0.00
83990.56
0.00
83990.56

Annex 5: Projected Balance Sheet (in Birr):

2
967962.57
579659.20
128439.45
14061.77
28123.55
81818.18
11635.36
315580.88
0.00
388303.38
431362.50
0.00
21568.13
64627.25
0.00
0.00
967962.57
81818.18
81818.18
0.00
347972.07
347972.07
0.00
278377.66
278377.66
0.00
0.00
83990.56
175804.10
0.00
175804.10

3
1062750.13
706760.38
145564.71
15936.68
31873.35
92727.27
13186.75
407471.61
0.00
355989.75
431362.50
0.00
21568.13
96940.88
0.00
0.00
1062750.13
92727.27
92727.27
0.00
278377.66
278377.66
0.00
278377.66
278377.66
0.00
0.00
259794.66
153472.88
0.00
153472.88

4
1205684.27
882008.14
171252.60
18749.03
37498.06
109090.91
15513.82
529903.72
0.00
323676.13
431362.50
0.00
21568.13
129254.50
0.00
0.00
1205684.27
109090.91
109090.91
0.00
208783.24
208783.24
0.00
278377.66
278377.66
0.00
0.00
413267.54
196164.92
0.00
196164.92

Continued

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
1338100.70
1046738.20
171252.60
18749.03
37498.06
109090.91
15513.82
694633.78
0.00
291362.50
431362.50
0.00
21568.13
161568.13
0.00
0.00
1338100.70
109090.91
109090.91
0.00
139188.83
139188.83
0.00
278377.66
278377.66
0.00
0.00

6
1479382.61
1216020.11
171252.60
18749.03
37498.06
109090.91
15513.82
863915.68
0.00
263362.50
431362.50
0.00
21568.13
189568.13
0.00
0.00
1479382.61
109090.91
109090.91
0.00
69594.41
69594.41
0.00
278377.66
278377.66
0.00
0.00

7
1626510.44
1391147.94
171252.60
18749.03
37498.06
109090.91
15513.82
1039043.52
0.00
235362.50
431362.50
0.00
21568.13
217568.13
0.00
0.00
1626510.44
109090.91
109090.91
0.00
0.00
0.00
0.00
278377.66
278377.66
0.00
0.00

8
1849078.62
1641716.12
171252.60
18749.03
37498.06
109090.91
15513.82
1289611.70
0.00
207362.50
431362.50
0.00
21568.13
245568.13
0.00
0.00
1849078.62
109090.91
109090.91
0.00
0.00
0.00
0.00
278377.66
278377.66
0.00
0.00

9
2071646.80
1892284.30
171252.60
18749.03
37498.06
109090.91
15513.82
1540179.88
0.00
179362.50
431362.50
0.00
21568.13
273568.13
0.00
0.00
2071646.80
109090.91
109090.91
0.00
0.00
0.00
0.00
278377.66
278377.66
0.00
0.00

10
2294214.98
2142852.48
171252.60
18749.03
37498.06
109090.91
15513.82
1790748.06
0.00
151362.50
431362.50
0.00
21568.13
301568.13
0.00
0.00
2294214.98
109090.91
109090.91
0.00
0.00
0.00
0.00
278377.66
278377.66
0.00
0.00

609432.46
202010.85
0.00
202010.85

811443.31
210876.32
0.00
210876.32

1022319.63
216722.25
0.00
216722.25

1239041.88
222568.18
0.00
222568.18

1461610.06
222568.18
0.00
222568.18

1684178.24
222568.18
0.00
222568.18

10