BURKA LALISA SILESHI PLC

CEREALS, PULSES AND OIL CROPS PRODUCTION

INVESTMENT PROPOSAL

PROJECT promoter: GIRMA TAMENE GARADO

PROJECT LOCATION: OROMIA REGION, west shewa ZONE, Bako Tibe WOREDA, Bacarraa Odaa Gibee kebele

Contact person: GIRMA TAMENE

(+251-911-26-75-77/911054497)
Consultant: sileshi angerasa econ, business and investment development consultancy service
Address: Mobile: 0911896145/0966109246
Consultant Name & Signature:

Nekemte, Ethiopia
NOVEMBER, 2022

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 TABLE OF CONTENTS
EXECUTIVE SUMMARY OF THE PROJECT........................................................................................iv
1. INTRODUCTION.............................................................................................................................1
2. BACKGROUND...............................................................................................................................2
2.1. Stakes in Agricultural Production.....................................................................................3
2.2. The Agriculture Sector......................................................................................................3
2.3. Development and socio-economic objectives...................................................................4
2.4. Income distribution and poverty.......................................................................................5
3. NAME OF PROMOTERS, CONTACT PERSON, LEGAL FORM OF BUSINESS..................5
4. NEED (PROBLEM STATEMENT) PROBLEM JUSTIFICATION...........................................5
5. PROJECT GOAL, OBJECTIVES AND RATIONALES..............................................................6
6. THE PROJECT AREA DESCRIPTION........................................................................................7
6.1. Physical Features...............................................................................................................7
6.2. Economic Base..................................................................................................................7
6.3. Population.........................................................................................................................9
6.4. Vegetation.........................................................................................................................9
6.5. Infrastructure and Institutions...........................................................................................9
7. THE PROJECT OUT PUTS, ACTIVITIES AND INPUTS........................................................10
7.1. Project Description..........................................................................................................10
7.2. Project Objectives...........................................................................................................10
7.3. Types Of Technology Use..............................................................................................10
7.4. Production Capacity........................................................................................................10
7.5. Land Use Plan and Action Plan......................................................................................11
8. MARKET PROSPECTS................................................................................................................11
8.1. Demands and Main Customers.......................................................................................11
8.2. Competition analysis and Selling Prices.........................................................................12
8.3. Marketing Strategies.......................................................................................................12
9. ORGANIZATIONS AND ADMINISTRATION OF THE PROJECT.......................................13

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 9.1. Business Form.................................................................................................................13
9.2. Organization Structure of the Project..............................................................................13
9.3. Manpower Requirement with Qualification...................................................................13
10. STAKEHOLDERS AND PARTNERS..........................................................................................14
11. FINANCIAL STUDY.....................................................................................................................14
11.1. Financial Requirements...................................................................................................14
11.2. Project Capital Costs.......................................................................................................14
11.3. Forecasted Production.....................................................................................................18
11.4. Forecasted Sales Revenues.............................................................................................18
11.5. Depreciation Calculations...............................................................................................19
11.6. Loan Repayment Schedule and Interest Expense...........................................................19
11.7. Forecasted Income Statement.........................................................................................19
11.8. Forecasted Cash Flow Statement....................................................................................19
11.9. Forecasted Balance Sheet................................................................................................20
11.10. Overall Financial Assessment.........................................................................................20
13. PHASE OUT AND SUSTAINABILITY STRATEGY.................................................................22
14. ACTION PLAN AND BUDGET BREAK DOWN.......................................................................23
15. RISKS AND ASSUMPTIONS.......................................................................................................23
16. ENVIRONMENTAL IMPACT ANALYSIS................................................................................25
17. CONCLUSION AND RECOMMENDATION.............................................................................26
ANNEX.....................................................................................................................................................27

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Executive Summary of the Project
1. Project Name Cereals, Pulses and Oilseed Crop Production Project
2. Project Owner Burka lalisa Silashi plc
3. Project Type Agriculture
4. Project Promoter The promoter of the project is the owners themselves (the investors)
and those of who are benefiting from the project.

5. Nationality Ethiopian
6. Project Location Oromia Region, West shewa Zone, Bako Tibe Woreda, Bacarra Oda
Gibe kebele
7. Premises Required 200 ha
8. Full production Capacity At full production Capacity, the project will produce 4,525 quintals of
produce annually
9. Total investment capital 8,215,011.50 (ETB)
10. Job opportunity Permanent: Skilled 16 and unskilled 5
Temporary: Skilled - and unskilled 637
Total: Skilled 16 and Unskilled 642 (Aggregate =658)
11. Benefit Expected The expected benefit of the project is to produce 4,525 quintals of
production per annual, and thereby create job opportunity for 658
individuals and become source of income for the government
12. Expected beneficiaries  The surrounding community in obtaining job opportunity
 People living in Bako Tibe woreda, Bacara Oda Gibe Kebele and the
surrounding community will obtain social fund and job opportunity
 People living in west shewa and East Wollega zones, in large
 Government and non-government organizations

13. Technology to be used The firm will use environment friendly technology which can be
operated by local people.
14. Market Destination i. Different individuals who are living in Oromia region, west shewa
and east Wollega zone and woredas and towns
ii. Finfinne, Adama and surrounding community
iii. Some of the produce will be planned to be exported
abroad
15. Source of finance Out of Br. 8,215,011.50 as capital requirement, 30% (Br. 2,464,503.45) from own
contribution and 70% 5,750,508.05 ) from bank@ interest rate of 11.5%

16. Recommendation The project is economically, financially and socially feasible. For instance,
financially, the project’s IRR is 138 % which is greater than discount rate
(11.5%) and NPV is equal to Br.

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1. INTRODUCTION

Ethiopia’s Agricultural Sector Policy and Investment Framework (PIF) is a sectoral national policy
applicable for the period of 2010-2020. Its main objective is to sustainably increase rural incomes and
national food security producing more, selling more, nurturing the environment, eliminating hunger
and protecting the vulnerable against shocks. Four main themes, each with its own strategic objective,
are identified within the above overall objective. These are: 1. achieve a sustainable increase in
agricultural productivity and production; 2. accelerate agricultural commercialization and agro
industrial development; 3. reduce degradation and improve productivity of natural resources; and 4.
achieve universal food security and protect vulnerable households from natural disasters. As to the
thematic area of disaster risk management and food security strategic objective 4 aims at reducing the
number of chronically food insecure households, reducing imports of food aid, improving the
effectiveness of targeted social safety net programme for vulnerable groups, reducing the prevalence
of child malnutrition, and improving the effectiveness of the disaster risk management system.

Under the thematic area of productivity and production strategic objective 1 entails the following
outcomes: increase the production of food, cash crops and livestock; increase agricultural productivity;
reduce qualitative and quantitative post-harvest losses; scale-up proven best agricultural practices;
increase the use of agricultural inputs and improved agricultural practices; and reduce dependence on
commercial imports of staple food products. Under the thematic area of rural commercialization in
strategic objective 2, the following outcomes are expected: increase in private agribusiness investment;
increase in smallholder household cash incomes; increase in the proportion of agricultural production
marketed (versus subsistence utilization); increase in the diversification into higher value products;
improvement of farmer access to agricultural inputs and productive assets; increase in farmer access to
rural financial services; increase in agricultural export earnings; increase in households’ participation
in farmer organizations; strengthening of farm income growth through improved infrastructure and
market access; and reduction of rural unemployment.

As with the thematic area of natural resource management strategic objective 3 aims at increasing
areas under irrigation; improving water conservation and water use efficiency; reducing arable,
rangeland and forest degradation; maintaining agricultural biodiversity; improving soil health in key
agricultural landscapes; improving security of private sector access to land resources; and
strengthening farmers’ ability to respond to climate change challenges.

In addition, following the issuance of PIF and GTP, there has been a call for shifting from low value
land extensive production to high value and land intensive form of agriculture is made. Accordingly,
this crop production project is proposed by visionary emerging domestic investor Burka Lalisa Silashi
plc. It is against this background that this project study is being undertaken to assess the profitability
of the project so as to provide the investor and Oromia Investment and Industry Bureau with a tool to
use in determining the feasibility of enterprises and monitoring its performance. In making this
project feasibility study, the consultant team has devoted a great deal of time in searching and
collecting information on specific aspects of the project.
The information was collected by reviewing both print and electronic documents from research
publications (library and on-line reprints and databases).

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2. BACKGROUND

Agriculture is the mainstay of the Ethiopian economy, contributing 41.4% of the country’s gross
domestic product (GDP), 83.9% of the total exports, and 80% of all employment in the
country (Matousa, Todob, & Mojoc, 2013). Put in perspective, Ethiopia’s key agricultural sector has
grown at an annual rate of about 10% over the past decade; much faster than population growth. Other
important sectors are service and industrial sectors contributing 43% and 15.6% respectively (The
World Fact book, 2016). On agriculture expenditure related metric, Ethiopia has dedicated an annual
investment of about 14.7% of all government spending to the agriculture sector since 2003. Ethiopia is
among the few African countries that have consistently met both the African Union’s Comprehensive
Africa Agricultural Development Program (CAADP) targets of 10% increase in public investment in
agriculture by the year 2008 and boosting agricultural production growth by 6% at least by 2015.

Although agriculture is one of Ethiopia’s most promising resources, the sector has been slowed down
by periodic drought, high levels of taxation and poor infrastructure that often make it hard and
expensive to get goods to market. Also, overgrazing, deforestation and high population density has led
to massive soil degradation leading to low productivity. The above problems have made it hard for the
country to feed itself; best exemplified by the dramatic 1984-85 famine. Since then, the country has
experienced similar occurrences that expose a sizeable population to humanitarian needs. As things
stand, over 3 million Ethiopians need food and other humanitarian assistance annually (SIDA, 2015).
However, a critical look at the sector shows a high potential for self-sufficiency in grains and also for
the development export especially for livestock, vegetables, fruits and grains. Further, many other
economic activities depend on agriculture. These include processing, marketing and export of
agricultural products among others.

Although the government’s priority attention is still on increasing the productivity and production by
the smallholder farmers, recognizing the high prevalence of rural poverty and the large productivity
gap, due recognition is now given to the private commercial firms in the agriculture sector. This is
reflected in the Policy and Investment Frame work (PIF) objective of the country which states “to
contribute to Ethiopia’s achievement of middle-income status by 2020”. The Development Objective
aims to “sustainably increase rural incomes and national food security, which embodies the concepts
of producing more, selling more, nurturing the environment, eliminating hunger and protecting the
vulnerable against shocks. Investments are also directed towards expanding the extension system,
irrigation development, and rural commercialization and agro-processing. The government is
complementing its efforts in food-insecure areas with an increased commitment to raise national food
production by investing in areas with high agricultural potential, including efforts to attract private
agricultural investment in areas with under-utilized land and water resources.

2.1. Stakes in Agricultural Production

For Ethiopia to achieve middle-income status by 2025 and make substantial inroads against food
insecurity, concerted and strategic investment and strategic choices in the agricultural sector are vital.
Concentrations of food insecurity and malnutrition are endemic in rural areas, with a population of six
to seven million chronically food insecure, and up to 13 million seasonally food insecure. Over 90
percent of agricultural output is driven by smallholder farmers. Without expanding cultivated land, and
given forecast population growth, the average land holding size in highland areas will be reduced to
0.7 hectares by 2020, placing further pressure on rural incomes and food security.

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Agriculture contributes substantially to the overall Ethiopian economy. On a nominal GDP of USD
25.6 billion, 43 percent was driven by the agricultural sector. Crop production accounts for 29
percent, with livestock at 12 percent, followed by the forestry sector with 4 percent. The sector
contributed USD 1.4 billion to export earnings. The sector also drives aggregate employment figures.
Estimates show 83 percent of the population relies on agriculture for their livelihoods (with many
more dependent on agriculture related cottage industries such as textiles: crops and forestry account
for 60 percent of overall export value, livestock for 28 percent, and remaining exports, a combination
nonagricultural industry, primarily extractives and industrial production.
The role of gender in the Ethiopian agricultural system is also critical: in post-harvest activities for
cereals, women contribute as much as 70 percent of on-farm labor; in marketing, particularly in
cereals, participation of women is as high as 60 percent of labor market share. While MoARD
strategies do identify the role of women in the agricultural value chain, the gap is in the
implementation of these strategies. PASDEP II has already identified targets for the participation of
women in cooperatives and unions (>30 percent), as well as the number of women targeted by public
extension in male-headed and female-headed households, 50 percent and 100 percent, respectively.
Given the stakes of women in production systems, specific strategies that target increasing the
opportunity of women to participate in income generation and decision-making, and the
disaggregation of data sets to capture the participation of women are critical.

2.2. The Agriculture Sector

In spite of disproportionately high employment in the sector (fairly above 84 percent of the rural
population) and high poverty reduction power of the sector, the contribution of the agriculture to GDP
of the nation has been declining. Such declining role of the sector is explained mainly by the small
sizes (land holding share of 83 percent by smallholders farming setup less than 2 hectares and the
average size of the small farms is 1.25 hectare) characterized by low utilization of agricultural inputs,
dependence on inconsistent, uneven & unpredictable rains, poor irrigation system, low technology,
little access to know-how (risk management, technology, skill, etc), limited capital, fragmented plots
hampering economic scale production and productivity, that is vulnerable to natural and man-made
changes.

About a third of rural household’s farm less than 0.5 hectares which, under rain fed agriculture at
current yield levels, cannot produce enough food to meet their requirements. Most agricultural
production is used to meet household consumption needs and, for a very large number of households,
there is a prolonged hunger season during the pre-harvest period. This period is also characterized by
rising in food item prices. When there are surpluses, smallholder farmers are often constrained by
lack of access to markets, and hence sale their outputs at very depressed prices.

Owing to these characteristics of smallholder farmers and the related constraints, crop production
couldn’t keep in pace with the growing demand for such outputs for food and as input for industrial
sector for industrial sector. As a result, Ethiopia has been net importer of cereals and fruit products
despite of decades unreserved government effort to increase the productivity and production of the
smallholder agriculture sector. Hence, food security remains a critical issue for many households, and
for the country as a whole. Moreover, expansion of the cropped area to more marginal lands has led to
severe land degradation in some areas. To fill such growing gap between the supply of crop products
and demand for such items, the government has declared its commitment to increase the national food
production by directing investment in areas with high agricultural potential, including efforts to attract
private agricultural investment in areas with under-utilized land and water resources.
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 2.3. Development and socio-economic objectives
The development and social objective of the Ethiopia is compressive and consistent. In addition to the
well articulation of these in the current national plan (GTP), it is also reflected in the Policy and
Investment Frame work (PIF) objective of the country which states “to contribute to Ethiopia’s
achievement of middle-income status by 2020”. The Development Objective aims to “sustainably
increase rural incomes and national food security”. This objective involves the concepts of producing
more, selling more, nurturing the environment, eliminating hunger and protecting the vulnerable
against shocks; all of which are embodied in various national policy instruments, and are expressed in
terms of four main themes, each with its own Strategic Objective summarized as follows:
Table: Strategic Objective
Thematic Area Strategic Objectives (SOs)
Productivity and To achieve a sustainable increase in agricultural productivity
Production and production.
Rural Commercialization To accelerate agricultural commercialization and agro
industrial development.
Natural Resources Management To reduce degradation and improve productivity of natural
resources.
Disaster Risk Management and To achieve universal food security and protect vulnerable
Food Security households from natural disasters.
Thus, the objective of this investment project proposal is well anchored to, and aligned with the
national socioeconomic development of the country. The detail project rational and objectives are
explained under section three “rationale and Objectives of the project”.

2.4. Income distribution and poverty

As this project is proposed to be implemented in area where there is neither commercial private farm
nor state farms operating so far, and as the local smallholder farmers are mainly characterized by low
input and low output vicious, the successful implementation of the project will contribute toward
equitable income distribution and rural poverty reduction. By creating non-farm job opportunity at
their locality, this project will also reverse the seasonal rural-urban migration, which has been the
norm due to lack of non-farm income generating activities. Given the fact that the success or failure of
any project is usually measured in terms of its final effect on these issues, this project will meet the
priority area where the government needs more investment.

3. NAME OF PROMOTERS, CONTACT PERSON, LEGAL FORM OF BUSINESS

 Name of the project: Cereals, Pulses and Oilseed Crop Production Project
 Owner: Burka Lalisa Silashi plc
 Contact Person: Mr. Adamu Shuke
 Legal form of business: Private Limited Company, PLC

4. NEED (PROBLEM STATEMENT) PROBLEM JUSTIFICATION

Agriculture plays a critical role in the entire life of a given economy. Agriculture is the backbone of
the economic system of a given country. In addition to providing food and raw material, agriculture
also provides employment opportunities to very large percentage of the population.
Hence, the key constraints to agricultural productivity in Ethiopia include low availability of improved
or hybrid seed, lack of seed multiplication capacity, low profitability and efficiency of fertilizer use

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due to the lack of complimentary improved practices and seed, and lack of irrigation and water
constraints.
Indeed, at the close of the century of greatest agricultural expansion, the dilemma of the farmer had
become a major problem. Several basic factors were involved-soil exhaustion, the vagaries of nature,
overproduction of staple crops, decline in self-sufficiency, and lack of adequate legislative protection
and aid. Some of the environmental issues that are related to agriculture are climate change,
deforestation, dead zones, genetic engineering, irrigation problems, pollutants, soil degradation, and
waste.

Ethiopian agriculture has been suffering from various external and internal problems. It has been
stagnant due to poor performance as a result of factors such as low resource utilization; low-tech
farming techniques (e.g., wooden plough by oxen and sickles); over-reliance on fertilizers and
underutilized techniques for soil and water conservation; inappropriate agrarian policy; inappropriate
land tenure policy; ecological degradation of potential arable lands; and increases in the
unemployment rate due to increases in the population

Agriculture progresses technologically as farmers adopt innovations. The extent to which farmers
adopt available innovations and the speed by which they do so determine the impact of innovations in
terms of productivity growth. It is a common phenomenon that farmers like any other kind of
entrepreneurs do not adopt innovations simultaneously as they appear on the market. Diffusion
typically takes a number of years, seldom reaches a level of 100% of the potential adopter’s population
and mostly follows some sort of S-shaped curve in time. Apparently, some farmers choose to be
innovators (first users), while others prefer to be early adopters, late adopters or non-adopters.
Therefore, the project tries to address the aforementioned problems through by accomplishing the
following objectives

5. PROJECT GOAL, OBJECTIVES AND RATIONALES

To address the problems identified on section 3 above this investment proposal is calling for allocation
of land for crop production, pulses and oil seeds production recognizes that:
 The domestic consumption of both cereals and pulse seeds has increased significantly in recent
years;
 National cereals and pulse production does not meet the rapidly growing demand;
 Smallholder output is inadequate and most oilseeds consumption is met by importing;
 There has been a call for our smallholder and investors to concentrate on increasing production and
productivity to meet the growing food demands;
 Past production increases depended largely on an expansion of area planted rather than on
increasing average yields per hectare continued to be low by international standards whereas this
project aims at meeting such standards;
 Such project with the aim of enhancing production and productivity of seeds, pulses and oilseed
crops will minimize the current national budget deficit caused as a result of importing food items
on one hand and generate foreign currency by promoting exports of oil seeds on the other hands.
 Implementation of this commercial crop production project is expected to motivate other
investors to supplement it by investing in agro-processing factors around Bako, so that the
outputs of this project will become the inputs for the processing factors.
 As Bako town is expected to be the commercial center of the western Ethiopia, this project will
have access to lucrative international market. The railroad and airport which is on the process
of implementation will facilitate the transportation of the products safely and swiftly.
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6. THE PROJECT AREA DESCRIPTION

6.1. Physical Features

6.1.1. Location and Accessibility

Bako Tibe is the district found in West Shewa zone. It is located at about 250 kilometers to the west of
zonal town, Ambo town, possessing a total area of 383.80 km2. This district is contiguous with Bakko
Tibe district of West Shewa Zone in the east, Gudeyya Bila district in the north, Boneyya Boshe
district in the south and Sibu Sire district in the west. It is divided in to 8 farmers associations and one
urban center having the capital town named Anno.

6.1.2. Drainage and Climate

Rivers and streams are also found in this district. Some of the rivers found in the district are Gibe,
Robi, Abuko, Mara and other 7 Major rivers as well as several seasonal streams are flowing through
the district. There is no lake in the district. As it is common for most districts of the zone, Bako Tibe
is characterized by undulating land structures.
High forest, woodland, riverine, shrub and bush, savanna and manmade forests are available in Bako
Tibe District.

Climatically, the district is classified into dega (12%), woinadega (35%)and lowland (53%) zones.
Most of the areas in the district range in altitude between 1600 m.a.s.l... And 2870 m.a.s.l.The vast
area of the district receives rainfall between 1000 mm and 1500 mm. The annual mean temperature
ranges between 13.2oc - 32oc. (BakoTibe District Agricultural office, 2019&BakoTibe District
Livestock Resource Development and Health Office, 2019). The area receives maximum rainfall in the
months of July and August.

Climate, the long-term effect of the sun's radiation on the rotating earth's varied surface and
atmosphere. It can be understood most easily in terms of annual or seasonal averages of temperature
and precipitation. Most part of the land has an elevation above 1500 meters and characterized by sub-
tropical climatic condition with a mean annual temperature between 130c and 270c and mean annual
rainfall of 770 mm to 1,657 mm.
6.1.3. Soils
Rendzinas,Haplic and Luvicphaeozems (4.0%), chromic and Orphic Luvisols (14.9%),
DystricNitosols(60.2%), and Chromic and PellicVertisols (20.9%) are the major soil types found in the
district.

Clay loam and loam soil is exceedingly dominating the district, which has a good quality of
agricultural potentialities. The coverage of Clay loam soil in hectares is 27,002 and of this hectare
14,889.4 hectares is suitability for agriculture. Loam soil also covers 6,750.6 hectares and it is totally
suitable for agriculture.
6.2. Economic Base
6.2.1. Crop Production
The crop cultivation activity was conducted during meher season only. In Bako Tibe district, there is
no state farm and large-scale private farms. But there is bako Agricultural research Center to assist and
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provide Agricultural inputs which are believed to be the most important factor to attain food self-
sufficiency. Without chemical fertilizer, high yield is not expected & feeding a family of large size
would be impossible. During last two years the farmers used fertilizers as DAP and Urea, improved
seeds of maize and wheat and others distributed for them in order to improve productivity.
Farmers of the district used the two methods of soil fertility. Traditional methods of maintaining soil
fertility used are organic and green manure and mulching whereas modern methods of maintaining soil
fertility in the district are using adding chemical fertilizers, use compost and crop rotation. Shifting
cultivation, intercropping and counter ploughing are among traditional methods of soil conservation
and soil band, cut off drain, grass stig and water way are modern methods of soil conservation exist in
the district.

6.2.2. Livestock

Livestock Production
There are about 127,615 cattle, 3,438 sheep, 11,600 goats, 9,709 horses, 9,200 donkeys, 4,668 Mules
and 8,033 Poultry in the district.Commonly Prevalent livestock diseases are:-Rypanoso-miasis,
Anthrax, Black leg and pasteurelosis (BakoTibe District Agricultural Office,2019&BakoTibe District
Livestock Resource Development and Health Office, 2019).

Livestock play a key role in day-to-day life of the society, especially in the peasant sector. They
provide meat & milk, transport, manure, skin & hide & furnish regular & easily realizable cash
income. But in contrast to the size of the livestock population, physical & value productivity are low.
The following table indicates the size of livestock in the district.
In this project area oxen are the main source of power for peasant farming and hence a farmer with no
farm oxen is considered as poor. A farmer having a pair of ox is expected to feed himself and his
families provided that he possesses enough farmland. Saving capacity of the society is again the
function of their production capacity, which in turn, is the functions of oxen and farm sizes, both of
which are declining from time to time in this area. Besides, the farm oxen need medical care and
treatment, the cost and availability of which is again the major challenges for the smallholder farmers.
As a result, the average number of farm oxen per household has been decreasing from time to time
thereby leaving the smallholder farmers at very precarious situation.

6.2.3. Land Use Pattern

The term land use refers to the ways that people use land and the natural resources it provides. It is the
best allocation of land for its best alternative uses. Land use potential is necessary to select the land
characteristics needed for any production. Some of the major factors that determine the potentiality of
the land are temperature, length of growing period, moisture availability, flood hazard, degradation
hazard, toxicity, rooting condition and workability.

Bako Tibe District is with an area of about 644.7 km2 of which about 54.25% ha is under crop, about
23.98% ha is under pasture, about 5.12%ha is under forest and about 16.65% ha is for Infrastructure or
for other uses. (Bako Tibe District Agricultural office, 2019 & Bako Tibe District Livestock Resource
Development and Health Office, 2019).

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The district borders east Wollega zone in the West, Horro guduru Wollega zone in North, Chaliya
District in the East and Bilo boshe distirict (East Wollega zone) in the south. Government and
community owned forests are also available. Reserves, vervet, monkey, baboon, warthog,
hippopotamus, leopard, duiker, colobus monkey, Bush buck, spotted hyena and civet cats are some of
wild animals found dispersedly in the District.

6.2.4. Input Supply and Product Markets

According to the information obtained from the East Wollega Zone Finance and Economic
Development office, currently farmer’s multi-purpose cooperatives are providing agricultural inputs
and facilitate market for their production and irrigation cooperative facilitates market for their
production and provides different inputs. More importantly, Bako agricultural research Centre,
Ethiopia Seed enterprise and Oromia seed enterprise are potential sources of the modern input
supplies.

6.2.5. Industry
Industry is a group of productive enterprises or organizations that produce or supply goods, services,
or sources of income. There were 11 registered small-scale industries in Gobbu Sayyo district by the
year 2002 E.C with capital of 564,675 birr.

6.3. Population
Population size, compositions, its spatial distribution and some other demographic and socio-economic
data are very important for planning, monitoring and evaluation of various development programs.

Based on the 2007 census, the district’s population was estimated to be 133,799 of which 21.15% was
urban and 78.85% lives in rural areas. The age groups 0 -14 years, 15-64 years and above 64 years
constituted 42.2%, 52.3% and 4.0% of the population, respectively (CSA, 2018).

As shown in table below the counted population of Gobbu Sayyo district based on population and
housing census conducted in 2007 G.C is 43,581 and 45,690 in 2001 E.C and 2002 E.C respectively.
By the year 2002 E.C from 45,690 total populations of the district 22,388 (48.99%) were males
whereas about 23,302 (51.01%) were females. During this year about 87.97% of the total populations
were rural population, which are directly engaged their life with even the back bone of the country
called agriculture. The crude population density of the district in the year 2002 E.C was 119 persons
per. km2.

6.4. Vegetation
Gobbu Sayyo district has a better vegetation cover than the other neighboring districts. There are
different patches of forests along the riverside. There was a forest area assumed to be under forest on
some areas having a total area of about 1,381 hectares, but not demarcated as assumed. However, there
is a very serious deforestation especially along the river and its surrounding where there had been a
jangle forest before a decade.

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 6.5. Infrastructure and Institutions
The project area is only about 90 km far from the Bako town. There is also access road from the
district town to the project area. Thus, there will be no transportation problems to and from the project
area. In addition, the area is covered by mobile and fixed line telecommunication facilities and hence
there would be easy communication of the project affairs within the project and with the external
bodies.

7. THE PROJECT OUT PUTS, ACTIVITIES AND INPUTS

7.1. Project Description

This project aims at mixed cultivation: crop production with rain fed system. Accordingly, the total
land area covering of 200 hectares was allocated as: cereals (maize 63 percent; pulses (soybeans 10
percent & oil seeds sesame & groundnuts 25 percent of the land). Most of these crops are high valued
products which fetch high foreign exchanges for the country on one hand and inadequately supplied
even in the domestic market on the other hand. To determine the land use and crop patterns, we have
utilized the expertise of soil scientists, Agronomists and environmentalists and hence the proposed
crop varieties are recommended based on the suggestions of regional and local agricultural research
institutions.

7.2. Project Objectives

The main objective of this project is:
i. To fill the gap of food shortage encountered the farming community,
ii. Increase the production of high valued crops such as soybean, groundnuts by modernizing the
faming system.
iii. In addition, the project has such strategic objectives of creation of job opportunities to the
local people;
iv. contributing toward increasing the foreign currency earning potential of the country through
increasing exportable products, and
v. Improving the problem of natural resource management practices through creation of
employment opportunity in the project area (alternative income generation of non-farm
activity for the local people).
vi. Thus, this project will reduce the prevailing environmental degrading practices widely
exercised by the local low-income societies, which include, coal making and selling, use of
animal dung for light and heat, timber production, collecting of fire-woods for commercial
purposes, all of which are commonly exercised by the local community.

7.3. Types Of Technology Use

The project aims at employing technologies which are environmentally friendly and which can be
effectively utilized by locally existing know-how with the exceptions of some machineries and
equipment which should be imported if there is no domestic source of supply. The project aims at
utilizing locally available technologies so as to encourage the backward and forward linkage of the
project and hence contribute towards the realization of Agricultural Development Led Industrialization
(ADLI) strategy of the country.

9|Page
 7.4. Production Capacity
For each crop types proposed, the project aims at producing the maximum output per hectare as
proved to be achievable at the research stations. The project promoter aims at utilizing the
technologies and practices as per the recommendations of the research centers so as to produce the
maximum output per hectare. Accordingly, the projected output per hectare for each crop will be
presented under sub-section 9 (projected output per hectare).

7.5. Land Use Plan and Action Plan

The following table shows the proposed land use and crops for which the land is to be used.
Table 1: Land use plan for 200 hectares
Land allocated to Land Use and Development Plan
Land allocation
Rainfed production system
(%)
Crop type Crop name 1 2 3 4 5 6 7 8 9 10 to 25
Cereals Maize 100 100 100 100 100 100 100 100 100 100 50%
Pulses Soya Beans 40 40 40 40 40 40 40 40 40 40 20%
Oil Seeds Sesame 55 55 55 55 55 55 55 55 55 55 28%
Total crop land 195 195 195 195 195 195 195 195 195 195 98%
Construction Plots 1 1 1 1 1 1 1 1 1 1 0.50%
Total Farm Area 196 196 196 196 196 196 196 196 196 196 98%
Forest Area 4 4 4 4 4 4 4 4 4 4 2%
Total Investment area 200 200 200 200 200 200 200 200 200 200 100%

As the above table shows, the total farm land is allocated to production of demanded crop production
and various high valued items such as: Cereal (50 percent of the land to be covered by maize); Pulses
crop production (20 percent of the land to be covered by Soybean); Oilseed’s production (28 percent
of the land to be covered by groundnuts. The construction plots are expected to cover only 0.5 hectare
and the remaining land 2 percent is reserved for forest coverage (at least 2 percent of the allotted land
for investment as per the Oromia Rural Land use and Administration Proclamation No. 130/ 2007,
which will be 9 hectares).

8. MARKET PROSPECTS

8.1. Demands and Main Customers

As socio-economic development of a country proceeds, it is expected that the preference of a society
for goods and services changes. This logic is also true in Ethiopia. We observe that as our economy
improves over time, demand for improved seed and food items in general and preference for high
valued products are increasing. The number of Hotels, Motels, Cafeterias, Restaurants and Resorts are
increasing. In addition, the number of colleges, universities, research centers and other institutions are
being located at the nearby towns. More importantly, as the Bako town is becoming considered as the
western Ethiopia development corridor being fulfilled with infrastructural facilities, the project will
enjoy lucrative international market. It is also expected that agro-processing firms which will utilize
the outputs of the project as input for their production will emerge in the Bako area. Thus, there is no
doubt the project will have sufficient domestic and international markets.

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 8.2. Competition analysis and Selling Prices
As the demand for the project outputs are expected to keep growing in the face of very limited
potential suppliers, it could be possible even to charge exorbitant price per units of the products to be
produced for the domestic market. However, since the very motive of the project owners is not just to
reap profits at the expense of the consumers, the price for each product will be set at affordable prices
by considering the forces of supply and demand operating during each year of production. In all cases,
we assume prices of each commodity to increase at least by 5 percent each year and accordingly we
have full projections for the selling price per quintal of each product presented under sub-section 9
(projections of revenues).

8.3. Marketing Strategies

For efficient and effective distributions of the inputs and outputs of the project, we aim at establishing
and maintaining value chains. For this purpose, the following institutions are identified with which we
plan to work.
1. For the Supply of project inputs:
 Regional and zonal Agricultural Research Institutes;
 Regional and zonal Seed Enterprises (RSEs),
 Universities and Agricultural Colleges existing in the region, and
 Private organizations.
2. For the distributions of the project outputs:
 Seed multiplication enterprises
 Agricultural Colleges existing in the region,
 Civil society organizations (CSOs), including cooperatives and farmer organizations,
 Private organizations, and individuals

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9. ORGANIZATIONS AND ADMINISTRATION OF THE PROJECT

9.1. Business Form

Burka Lalisa Silashi Plc Cereals, Pulses and Oil seed Production investment project is supposed to be
established as one of the many branches the Company. Accordingly, its organizational structure is
presented below.

9.2. Organization Structure of the Project

Fig.1: Organizational Structure of Burka Lalisa Silashi Plc Cereals, Pulses and Oil seed Production
investment project

Note that this organizational structure depicts the overall flows of accountability and reporting
structure of the project staffs.

9.3. Manpower Requirement with Qualification

Manpower is the decisive factor for the successful implementation and operation of any project.
Hence, careful identification of the number and qualification of the manpower requirement of the
project is in order. Accordingly, the following table shows the manpower requirement with
qualifications for the project:
Table 2. Manpower Requirement (with qualifications, number and estimated monthly salaries in Birr)
Staffs with position No Profession/Qualification Monthly Salary Annual Salary (Birr)
Required (Birr)
General Manager 1 MSc Agronomy/Related 6,000 72,000
Farm Manager 1 Bsc in Plant science 6,000 72,000
Agronomist 1 Bsc in Agronomy 5,500 66,000
Crop protection 1 Bsc in Plant science 5,500 66,000
Marketing officer 1 BA in Marketing 5,500 66,000
Administration 1 BA in Management 6,000 72,000
Forman 3 Diploma in relevant field 5,000 180,000
Clerk/Accountant 1 Diploma &above in relevant field 4,500 54,000
Time Keeper 3 Diploma &above in relevant field 2,500 90,000
Tractor Operators 3 4th /5th grade license and 10th/12th complete 5,000 180,000
Farm Guards 3 8th /10th complete 1500 54,000
Store keepers 3 Diploma in relevant field 3,000 108,000
Secretary 1 Diploma in relevant field 2,500 30,000
Cashier 1 Diploma in relevant field 3,500 42,000
Cooks 3 10th /12th complete 1,500 54,000
Cleaners/Janitors 3 10th complete 1,200 43,200
Driver 3 4th /5th grade license and 10th /12th complete 3,000 108,000
Sub-Total 33 1,357,200.00

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Note that the employees’ salary is expected to increase by a minimum of five per cent each year.

10. STAKEHOLDERS AND PARTNERS

The key stakeholders are the shareholders, the surrounding woreda communities, Zonal, Woreda, and
Kebele level administration Offices, the Investment Commission, Agriculture offices, and Land
Administration and Environment, Forest and Climate change Bureaus at regional, woreda, and Kebele
levels. The private sectors, research, academia, and civil society constitute another category of
stakeholders who will engage in delivering specific services and benefitting directly or indirectly from
the project.

11. FINANCIAL STUDY

In this section, both the cash outflow requirements and the projected inflows are projected and
analyzed.

11.1. Financial Requirements

The yearly financial requirements of the project are classified as capital costs, operating costs and
working capital requirements as follows.

11.2. Project Capital Costs

The project capital costs include such costs as construction costs, expenditures on office equipment’s,
investment in farm equipment’s, and other costs which are supposed to be capitalized as cost of the
project and are gradually depreciated over the life of the project. Accordingly, the following are the
projected capital costs of the project summarized under different sections.

Construction costs: - these include expenditures related with the constructions of Store, residential
houses with guard room, offices, toilet, and guardian houses, parking areas, cafeteria etc. The
following table shows just the summaries of the construction items and their respective costs.
Table 3. Summaries of the project construction costs (in Birr)
S.N0 Constructions needed unit Block Annual salary (Birr)
1 Residential houses construction (for workers) class 2 1,400,000.00
2 Office construction class 2 330,000.00
3 Cafeteria construction class 2 420,000.00
4 Store and bathing rooms, rest room class 1 2,250,000.00
5 Shade for tractors and other vehicles class   80,000.00
Total estimated construction costs   4,480,000.00

Investment on farm machineries and equipment’s: - The following table shows the specifications of
the selected machineries from the proforma invoices attached to this report.
Table 4. Summaries cost of the project farm machineries (in Birr)
S.N0 Descriptions of the Items quantity Unit Total costs
costs
1 New John Deere 6100D Mfwd Tractor (Mexico Origin) 1 3,850,000 3,850,000
2 Mounted Four Disc Plough (Make: Nardi, Model: QD 70/E) 1 820,000 820,000
3 Mounted Tandem Disc Harrow (Make: Nardi, Model: 28 HOP 56) 2 685,725 1,371,450
4 Nardi Mounted Ridge (Model: PT70/5A45R) 1 1,050,000 1,050,000

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5 Brand New Toyota Hilux Double cab (Full Option) 4WD, 2.5L, 1 2,800,000 2,800,000
2949cc, 4cylinders, 16valve, Diesel Turbo, DOHC (Japan origin)
6 Trailer 1 779,995 779,995
7 Truck 1 2,450,000 2,450,000
  Estimated machineries (in Birr)     13,121,445.00

Farm tools: - in addition to the above-mentioned farm machineries, the following farm tools are also
identified with their respective current unit prices. However, as these items are diverse in kind and in
significant in terms of cost per unit, the costs are forested based on the current market price without
the need to collect proforma invoices.

Table 5. Farm tools with their respective per unit cost and quantities needed
S.No Items Quantity Units cost Total cost
1 Chemical Sprayer 60 400 24,000
2 Sickles 170 60 10,200
3 Axes 35 100 3,500
4 Tape meter (100 m) 8 450 3,600
5 Wheel borrow 5 3,500 17,500
6 Shovel 8 180 1,440
7 Weighing scale 3 20,000 60,000
8 Thresher 2 45,000 90,000
9 Saw 10 60 600
10 Cutlass or Machete 1 40,000 40,000
11 Spade hoe 10 900 9,000
12 Local hand hoe 12 70 840
13 Spade 18 98 1,764
14 Digging fork 30 400 12,000
15 Trovel 4 500 2,000
= Estimated cost of farm tools (in Birr) 276,444

Office Equipment’s: - the following table shows the prices of office equipment’s at the time of
preparing this project proposal.

Table 6. Summaries of the office equipment’s’ costs (in Birr)

FURNITURE Qty Unit Total
Cost cost
Table and chair (Farm Manger) Set 3 9,500 28,500
Waiting /guest Chair Pcs 5 750 3,750
Camp bed and furniture’s Set 4 3200 12,800
Shelf and Other Drawers Set 2 5,000 10,000
Weighing scale 2 20,000 40,000
Desk top computer with its Accessories 3 15,000 45,000
Fax Machine 1 7,600 7,600
Laptop computer 1 12,500 12,500
Computer tables 3 5,000 15,000

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Printer 1 7,600 7,600
Safe box 1 13,000 13,000
Cash register machine 1 8,000 8,000
Calculator /adding machines 2 450 900
Sub total     204,650.00

11.2.1. Project Operating Costs

Here, the operating costs refer to these costs which are not included in the project capital costs and
hence are not subjected to periodical depreciation. These costs include such costs as labor costs; costs
for equipment operations and maintenance such as fuel cost and repair and maintenance costs;
depreciation costs; utilities expenses such as water bills, electricity bills and telephone charges;
employee’s salaries; and others miscellaneous expenses.
Labor costs: - In order to determine the periodical labor cost of the project, first we need to determine
labor required to cultivate a hectare of each crop in each project year. Accordingly, the following are
our procedure to determine the labor requirement of the project:
1. First, we started from our land use and cropping pattern proposd throughout the life of the project
as depicted by table 1 land use plan of 200 hectares specified above.
2. Second, we have determined the labor requirements of each crop per hectare per year by the types
of operations throughout the project life as shown by table 7 (annexed). Labor requirement is
expressed in terms of work-day, which is to mean the time devoted by one person during one day
(usually eight hours).
3. Thrid, we have determine the total labor requirement of each crop per year by multiplying the
labor requirement of per hectares by their corresponding total hectares of land planned to plant
each crop (table one). This is represented by table 7 (annexed).
4. Fourth, we have summed the total labor requirement of each crop in each year so as to determine
the annual total labor requirement of the project.
5. Finally, the average wage per day of labor is multiplied by the total labor requirement of the
project for each year. We have taken Birr 120.00 as the average wage per day per worker
applicable to the project location. The average wage per work-day is projected to increase by
minimum of 5 percent each year. This is determined by considering the change in the labor
markete price over the past few years.
Supplies costs: - such costs include costs for technological inputs such as fuel cost for the tractors,
fertilizers, seeds, office supplies and other chemicals. Table 9 (annexed) shows the detailed
calculations of these cost items, the summary of which is Birr 837,953.00 annual supplies cost. As
usual, we expect these cost items to increase by a minimum of 5 per cent per year. This is presented by
table 12 (annexed).
Repair and maintenance costs: - Operating costs for operations and maintenance of machineries and
equipment is taken to be 2 percent of the initial investment costs starting from its second year after
acquisition until end of tenth year, after which the rate would be 10 percent. Accordingly, table 8
(annexed) shows the detailed calculation of this cost item which is summarized to be Birr 97,868.00
starting from the second year of the project operation to tenth year. This is presented by table 13
(annexed).
Utilities expenses: - these include such periodical costs as incurrence of liabilities (payments of cash)
for water bills, electricity bills, fuel consumptions and telephone expanses. Although such types of
expenses are changing with the volumes of operations, it is forecasted that a minimum of Birr

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201,250.00 forecasted for the first year of project operation, which is expected to increase by a
minimum of 5 percent per year. This is presented by table 14 (annexed).
Miscellaneous Expense: - are other operating expense for which it is neither economical nor
convenient to give specific account code and hence should be merged together under “miscellaneous
expense” includes entertainment expense, employee benefits, litigation expense and others. Similar to
the utilities expense, such expenses are estimated to be Birr 364,576.00 for the first year and expected
to increase at least by 5 percent per year. This is presented by table 14 (annexed).

11.2.2. Project Working Capital

Project working capital refers to cash required to be held at hand at the end of each year for some
operating costs to be incurred at the beginning of the next year. These costs are usually determined as
a given percentage of the next year’s increase in the operating cost requirements. Accordingly, the
following table shows the projected working capital requirement of the project, determined as the 80
percent of the increase in the operating costs of the next year. This is presented by table 15 (annexed).
Note that the working capital requirement of the first year is determined to be 80 percent of the
increase in the operating cost requirement of the second year Birr 205,077.00 (2,667,755- 2,462,679)
which is (Birr 205,077*0.8= 164,061). It is estimated that the remaining 20 Percent increase in each
year’s operating expense will be covered by the cash inflows of the preceding year. The same
approach is followed for the rest years. The non-cash expense is not included in the determinations of
the working capital requirements. This is because such expense has no effect on cash flow streams for
which we need to determine working capital requirement. However, periodical income tax and interest
liabilities need to be considered since such items affect cash flows of an entity. Nonetheless, they are
not reflected in this case since we have not yet estimated such costs by this time.

11.2.3. Total Financial requirements

Total financial requirement for the project is just the sum of the three cost elements we have determined
above: total capital cost, total operating cost and total working capital costs. The following table summarizes
the total finance requirement of the project together with the possible sources of finance.
Table 16. Total Financial Requirement of the Project
Items   Birr
Project construction costs (table 3)   4,480,000.00
Project farm machineries costs (table 4 )   13,121,445.00
Project farm tools costs (table 5)   276,444.00
Summaries of the office equipments’ costs (table 6)   204,650.00
Total Project Capital Cost   18,082,539.00
Operating Costs (Table 15)   8,583,607.50
Working Capital Cost (Table 15)   525,684.12
Total Financial Requirement at first year (In Birr)   27,191,830.62
Sources of Finance:    
Owner’s Equity Contributions (30 %)   8,157,549.19
Bank loan at 11.5% simple interest rate (70%)   19,034,281.44
Total Financial Requirement at first year (In Birr)   27,191,830.62

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 11.3. Forecasted Production
In order to estimate the per hectare production of each crop, we have utilized opinions of experts in the
field of agronomists. Accordingly, table 17 (annexed) shows the projected output in quintal from each
crop proposed to be cultivated over the first ten years of the project life.

Note that the projections are based on the expert opinions in the field as well as per the
recommendations of West Shewa zone agriculture office, and experienced investors & seed multipliers
enterprises. In essence, if the project is to be implemented and run-in accordance with the
recommendations of the experts, these projections are supposed to be achievable. Here, it is expected
that as the project operates for a greater number of years, there is advantage of getting lessons from the
past years and hence the latter years’ output per year is expected to increase accordingly.

11.4. Forecasted Sales Revenues

Sales revenues are the functions of projected production and projected selling price per unit of each
crop. Taking the projected production of each crop from the table 17, we now proceed to the
projection of selling price of each crop. Accordingly, the selling price of each quintal of the crop is
expected to increase each year by a minimum of 5 percent. Given the trends of the past five years in
Ethiopia in particular and in the world in general, this projection wouldn’t be far from the reality under
the normal macroeconomic condition. Table 18 (annexed) shows the projected selling price per quintal
of each crop over the next ten years.
In order to determine the forecasted sales revenues, we need to multiply the forecasted selling price
per unit of each crop by their respective projected production of each year. Table 19 (annexed) shows
this procedure.

11.5. Depreciation Calculations

In order to determine the periodical depreciation, we adopted the Ethiopian standard of useful
economic life of fixed assets and hence used depreciation rates for each asset category accordingly.
The detail depreciation schedule is presented by Table 20 (annexed). Depending on the difference in
the useful lives of specific assets, the depreciation charge is estimated to be larger at the beginning of
the project life and smaller at the earlier years since some of the assets are expected to be fully
depreciated within the first five years. Accordingly, the periodical depreciation charge is estimated to
be Birr 433,396 for the first five years and will be reduced to Birr 428,146.00 over the next two years
(since the farm machineries are supposed to have useful lives of seven years), and finally Birr
11,200.00 for the next subsequent years (since the constructed assets are supposed to have useful lives
of more than 25 years).

11.6. Loan Repayment Schedule and Interest Expense

The periodical interest expense is just the functions of amount of the loan outstanding at the beginning
of each period, the interest rate and the time for which the loan remains unchanged. Accordingly, the
bank loan was estimated to be Birr 5,779,219, at simple interest rate of 11.5 percent on the unpaid
balance of the loan at the beginning of each period. The loan with interest is expected to be paid with
equal installment amount of Birr 848,100.36 over ten years starting just at the end of the second year
of operation. Table 21 (annexed) shows the periodical loan repayment and interest expense.

11.7. Forecasted Income Statement

Forecasted income statement shows just the summary reports of all revenues earned and costs expired
(expense incurred) during each period. Accordingly, Table 22 (annexed) shows the forecasted income
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statement of the project over the first ten years of the project life. Note that the farm project will have
substantial net income starting from its first year of operation. It is evident that that this project is
financially viable.

11.8. Forecasted Cash Flow Statement

Unlike the forecasted income statement, the forecasted cash flow statement shows the inflows and
outflows of money to and from the project over a given period of time. In this case, all items (revenues
and expense) which don’t affect cash flow are excluded from the statement. In our case, depreciation
expense is the only expense that doesn’t affect cash flow and hence excluded from the outflows
whereas all revenues are supposed to be either fully collected within the year of sales or the sale be
made on cash basis.

The cash flow statement shows the sources and uses of money over a given period of time.
Accordingly, there are three sections of this report: (1) cash flows of operating activities (O); (2), cash
flows of investing activities (I), and (3) cash flows of financing activities (F). Net cash flow of the
project is the sum of net cash flows from these three sections. Table 23 (annexed) shows the projected
cash flow statement over the first ten years of the project. Note also that this cash flow report shows
that the firm’s cumulative cash inflows over the forecast period is very attractive and deserves
financing. This statement also proves that the project is finically viable.

11.9. Forecasted Balance Sheet

Forecasted balance sheet shows the summary report of what the entity owns and what it owes on the
specific date in a time, usually, at the end of the fiscal year. In essence, it reports on total assets, total
liabilities and capital (owner’s equity and creditors’ equity) of the entity on a given date. Thus,
balance sheet contains information regarding the financial viability of the enterprise on a given date.
By comparing change in the elements of the balance sheet over different periods, we can judge
whether or not the enterprise is improving its financial position over the periods. Accordingly, table 24
(annexed) shows forecasted balance sheet of the enterprise for the first ten years of the life of the
project.
Note that as the projected balance sheet shows that the financial position of the firm remarkably
improves over the period and will be able to full operate by own finance after ten years if the project is
successfully implemented. This also supports that the project has financial viability.

11.10. Overall Financial Assessment

The overall financial performance of the project is appealing as shown by the projected by the above
three financial statements. When evaluated in terms of its profitability, there is steady increase in after
tax net income showing that the project would remarkably contribute towards wealth maximization of
the shareholders. Similarly, the forecasted balance sheet shows extraordinary attractive financial
position of the firm over the same period. In addition, when viewed in terms of the sources and uses of
money (cash flow statements), there is steady increase in the net cash provided by the project cash
receipts after covering the cash payments required to sustain the project.
Furthermore, the project has the following financial performance measured in different investment
decision criteria. The following table shows the summarized project financial viability test just for the
first ten years of the life of the project. Note that these figures would have been much larger if we
consider the entire life of the project since most of the capital expenditures of the project are supposed
to be committed at the beginning of the years while most net cash inflows are expected during the later
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life of the project. However, these figures are still indicators of financial attractiveness of the project.
Detail calculation is presented by table 25 (annexed).

Table 26. Project financial viability test

Criteria     Results
Present Value of Costs PVC 183,263,534
Present Value of Benefits PVB 282,278,049
Net Present Values NPV 99,014,515.28
Benefit Cost Ratios BCR 1.54
Net Benefit Cost Ratio NBCR 0.54
Internal Rate of Returns IRR 106%

Net Present Value (NPV): - is the sum of present values of all the cash flow both positive and
negative that are expected to occur over the life of the project. The formal selection criterion for the
NPV measure of project worth is to accept all independent projects with a positive NPV when
discounted at the opportunity cost of capital. In this project case, given the project has positive value
of Birr 99,014,515.28; it means that the project would contribute 99,014,515.28 towards the wealth
maximization of the owner’s wealth and hence it is viable.
Benefit Cost Ratio (BCR): - The benefit-cost ratio is defined as the ratio of the discounted values of
benefits to the discounted value of costs. A ratio of at least one is required for acceptability and the
ratio of one indicates that the NPV of zero at a particular discount rate. In our case BCR of Birr 1.54
shows, for every one Birr invested in this project, the return would be 1.54 Birr, which is highly
remarkable figure.
Net Benefit Cost Ratio (NBCR): - this ratio is defined as the ratio of net present value to the present
value of cost. A ratio greater than zero (0) is needed for the project to be financially acceptable; in our
case the ratio of 0.54 is in excess of the hurdle rate required to make the project financially viable (the
project is magnificent in terms of this criteria also).
Internal Rate of Return (IRR): - is the maximum interest that a project could pay for the resources
used if the project is to recover its investment and operating costs and still break even. It measures
opportunity cost of capital tied up in the investment. In this project case, IRR is 135 106 percent
which is extraordinarily large compared with the minimum cost of capital of 13.5 per cent. Hence, we
can safely conclude that the IRR of the project is extraordinarily high and hence indicates project
viability.
It should be recalled that the various investment decision criterion we have considered above involve
predicting values for each of the various elements entering into the definition of volume of output sold,
selling price, required investment, labor costs per unit; maintenance costs of machines, profit, and so
forth. However, as these values are based on certain assumptions, they may change in unfavorable
direction thereby making projects less attractive than when it was planned. Thus, switching value
measures the value an element of a project would have to reach as a result of a change in an
unfavorable direction before that project no longer meets the minimum level of acceptability as
indicated by one of the measures of project worth. In this case we ask, by how much an element would
have to change in an unfavorable direction before the project would no longer meet the minimum level
of acceptability as indicated by one of the measures of project worth. In other words, in sensitivity
analysis, we ask how sensitive is the project’s estimated financial and economic benefits to increase in
costs, fall in price and extension of implementation periods?

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In our case, since BCR is 1.54, it means that cost can rise by 54 percent at which the BCR will become
exactly 1.0 and hence the decision will be indifference. However, any rise in cost beyond 80 percent
keeping sales revenues constant will lead the BCR to be below 1.0 and hence the decision will be to
reject the project on this ground. But it is unlikely to expect such increase in operating costs keeping
selling prices of these products’ constant. Thus, the 38 percent margin of safety is large enough to
guarantee for the stability of the above decision criteria. Similarly, revenues can keep dropping up to

= = 1-0.649= 0.35 which is roughly equals to 35 percent, keeping the cost

elements constant. Any drop in sales by more than 35 percent may lead the project to rejection region.
However, given the past few year trends, the price of these items has been increasing at increasing rate
and hence expected to increase over the next many years partly due to increasing demand to these
outputs and partly due to increasing general trend in commodity prices. Overall, when evaluated both
in terms of cost and revenue, the project has sufficient margin of safety to guarantee the stability of the
determined investment decision criteria above. Thus, it is can be safely concluded that the project is
financially viable.

12. MONITORING AND EVALUATION

Monitoring of the project will be continuous and ongoing by the project promotor. Monitoring and
Evaluation of the project will be handled by the promoter on daily basis. Burka Lalisa Silashi PLC will
develop a guideline for monitoring and evaluation. The amount of input (Financial, material and
manpower) will be evaluated through a technical team that will be established containing members of
Burka Lalisa Silashi PLC, zonal, Woreda and Kebele administrative organs and community members.
Moreover, during the final year of Project implementation the M&E data collected over the Project
implementation period will be used as part of a thorough assessment of Project achievements. The
Project is scaling up the development of efficient and sustainable village organizations in region
including the field testing of innovative technology and associated capacity building of supporting
institutions. The experiences so derived will be scaled up/replicated in other parts of the region. This
also involves major potential for scaling up and synergies in relation to subsequent investment
programme

13. PHASE OUT AND SUSTAINABILITY STRATEGY

Concerning the Sustainability of the invested Project, the promoter is mainly decided to make the
project sustainable that the concerned government bodies will take-over it after this project is phase
out. Till then Burka Lalisa Silashi PLC will firmly and closely handle the project. The project aims to
achieve a sustainable increase in agricultural productivity and production. This will be achieved
through scaling up of technologies which are appropriate, affordable and profitable to promoter, and
can be sustained without ongoing support in the long-run.

To ensure the sustainability of the project sustainability will be integrated in the projects right from the
beginning, Key stakeholders will be involved: Another major step to ensure sustainability is the
involvement and participation of key stakeholders in program development. In general, the exit
strategy of the investment project will be based on the lease agreement of the project.

14. ACTION PLAN AND BUDGET BREAK DOWN

Action plans help know what needs to be done to complete a task, project, initiative or strategy. An
action plan generally includes steps, milestones, and measures of progress, as well as responsibilities,

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specific assignments, and a time line. Action plans are an important part of strategic planning. The
following table indicates activities to be undertaken in the first year of the project. While the budget
needed is indicated on section 8.1.4 above
Table: Operational Plan of the Project
S/N Cropping Activities Work schedule (%) Year: 2022/23
2022/23
Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct

1 Secure the project site 50% 50%                    

2 Camp construction     60% 40%                
3 Site clearing       30% 70%              
4 Manpower employment       35% 40% 25%            
5 Bank loan processing       20% 80%              
6 Surveying and land development       50% 50%              
7 Machinery procurement           50% 50%          
8 Plouging         30% 20% 30% 20%        
9 Seeding and plantation         40% 60%            
10 Weeding and cultivation           60% 40%          
11 Harvesting               ** ** **    
12 Marketing                     ** **

15. RISKS AND ASSUMPTIONS

Successful agricultural development initiatives associated with poverty reduction have seldom
included large-scale land-based investment. Feed the Future focuses on smallholder-led agricultural
growth as the principal engine of poverty reduction and food security. Investment in agriculture of all
sizes, however, can be constructive and is encouraged by the Ethiopian Government, but investments
must take into account specific country contexts and circumstances and respect the rights of local
populations.

Large-scale land-based investment in agriculture, if approached in an equitable and sustainable way,

can hold unique benefits that complement smallholder agriculture: it can bring new technologies,
crops and/or market opportunities to a region, and, through associated out-grower or contract farming
schemes, to smallholder farmers within the region. The result can be a mutually beneficial model
where large investments create new opportunities for adjacent communities and farmers. Nevertheless,
this model has come under heavy criticism for failing to recognize smallholder property rights, thereby
potentially harming the people it aims to help. Consequently, there is all the more need to improve
land governance and focus on assisting all investors to better understand the needs and tools for
responsible land-based agricultural investment.

Successful commercial investment in agriculture is dependent upon access to clear and uncontested
land rights. In environments where land rights are undocumented or poorly protected, medium to large
commercial investments in agriculture could lead to displacement, loss of livelihoods and more limited
access to land for the local population, in particular indigenous and nomadic communities.

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These negative outcomes not only undermine the Ethiopian Government’s development and poverty
reduction objectives among the populations it aims to serve but also significantly increase reputational
risk for the Ethiopian Government, its development partners and the private sector. Conflicts over land
rights can also significantly augment the financial risks for companies investing in commercial
agriculture due to delays or disruptions in operations.

The five general risks in the project are as follows:

1. Production risks stem from the uncertain natural growth processes of crops and livestock, with
typical sources of these risks related to weather and climate (temperature and precipitation) and
pests and diseases. Other yield-limiting or yield-reducing factors are also production risks such as
excessive heavy metals in soils or soil salinity.
2. Market risks largely focus on uncertainty with prices, costs, and market access. Sources of
volatility in agricultural commodity prices include weather shocks and their effects on yields,
Other sources of market risk include international trade, liberalization, and protectionism as they
can increase or decrease market access across multiple spatial scales. Farmers’ decision making
evolves in a context in which multiple risks occur simultaneously, such as weather variability and
price spikes or reduced market access.

3. Institutional risks relate to unpredictable changes in the policies and regulations that effect
agriculture, with these changes generated by formal or informal institutions. Government, a formal
institution, may create risks through unpredictable changes in policies and regulations, factors over
which farmers have limited control. Sources of institutional risk can also derive from informal
institutions such as unpredictable changes in the actions of informal trading partners, rural
producer organizations, or changes in social norms that all affect agriculture.

4. Personal risks are specific to an individual and relate to problems with human health or personal
relationships that affect the farm. Some sources of personal risk include injuries from farm
machinery, the death or illness of family members from diseases, negative human health effects
from pesticide use, and disease transmission between livestock and humans.

5. Financial risk refers to the risks associated with how the farm is financed and is defined as the
additional variability of the promoter’s operating cash flow due to the fixed financial obligations
inherent in the use of credit. Some sources of financial risk include changes in interest rates or
credit availability, or changes in credit conditions.

Key invested Project implementation assumptions are that the country’s economy maintains its
stability and that consistency is established between the stated government policies and agricultural
reforms supporting private sector development, and the agriculture sector vis-à-vis the actual
implementation of investment policies and reforms.

16. ENVIRONMENTAL IMPACT ANALYSIS

Consistent with the government’s high priority of encouraging private investment in the agriculture
sector, these integrated projects aim at agricultural production with due care to reduce degradation and
improve productivity of natural resources. Given the fact that these projects intend to utilize the rain
fed cultivation, certainly these reliefs the existing degradation pressure on rural farm land imposed by
the traditional farming system.

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More importantly, the projects aim at reversing the environmental degradation trends widely
observable in the area by breaking the nexus between poverty and degradations. In essence, the
projects aim at solving the key problem area by breaking the nexus between rural poverty, natural
resource management and climate change mainly by creating alternative and more lucrative income
source for the local resource poor smallholder farmers, who, otherwise should depend on the natural
resource bases and hence causes the degradations. The project promoters believe:
 environment and natural resource degradation are often a direct cause of rural poverty;
 rural poverty often exacerbates environment and natural resource degradation; and
 Climate change increases the vulnerability of rural people and the ecosystems they depend on
for their livelihoods.
Thus, opening alternative source of income by creating job opportunities within the project can relieve
the current pressure on the rural land in the project area. Besides, the project promoters are fully
aware of the Oromia Rural Land use and Administration Proclamation No. 130/ 2007, which force any
investor to cover at least 2 percent of the allotted land area by indigenous trees.

17. CONCLUSION AND RECOMMENDATION

Overall, the projects have the following merits which would justify the need for giving priority in its
finance:
 The strategic objectives of the projects are highly consistent with the national development
objective which calls to “sustainably increase rural incomes and national food security, which
embodies the concepts of producing more, selling more, nurturing the environment, eliminating
hunger and protecting the vulnerable against shocks.
 These projects are expected to create job opportunities for these potential migrants at their nearby
village and hence alleviate the pushing factor for migrations.
 The projects aim at utilizing locally available technologies so as to encourage the backward and
forward linkage of the project and hence contribute towards the realization of Agricultural
Development Led Industrialization (ADLI) strategy of the country.
 Finally, the projects will largely contribute towards the national economic development by
contributing to National GDP. GDP contribution originating from the agriculture sector has more
power of poverty reduction than other sectors (a one percent GDP growth rate originating in
agriculture sector has more potential for poverty reduction than two percent GDP growth rate
originating from the service sector).
Recommendation: - considering the viability of the project, as aforementioned, the project is
recommended for implementation.

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 ANNEX
  Table. 7 Labour requirement per Hectares of each crop                  

    Project life in years                  

Crop and Operation 1 2 3 4 5 6 7 8 9 10 to 25
Maize (Seed) Land preparation 15 15 15 15 15 15 15 15 15 15
Planting 20 20 20 20 20 20 20 20 20 20
  Weeding (2X) 15 15 15 15 15 15 15 15 15 15
Chemical application (2X) 10 10 10 10 10 10 10 10 10 10
  Harvesting 20 20 20 20 20 20 20 20 20 20
threshing 10 10 10 10 10 10 10 10 10 10
  Total 90 90 90 90 90 90 90 90 90 90
Soya Beans
  Land preparation 8 8 8 8 8 8 8 8 8 8
Planting 10 10 10 10 10 10 10 10 10 10
  Weeding (2X) 8 8 8 8 8 8 8 8 8 8
Chemical application (4X) 5 5 5 5 5 5 5 5 5 5
  Harvesting (2X) 15 15 15 15 15 15 15 15 15 15
  threshing 10 10 10 10 10 10 10 10 10 10
Total 56 56 56 56 56 56 56 56 56 56
Sesame
  Land preparation 8 8 8 8 8 8 8 8 8 8
Planting 15 15 15 15 15 15 15 15 15 15
  Weeding (2X) 10 10 10 10 10 10 10 10 10 10
  Harvesting (2X) 15 15 15 15 15 15 15 15 15 15
threshing 10 10 10 10 10 10 10 10 10 10
Total 58 58 58 58 58 58 58 58 58 58
Labor requirement is expressed in terms of work-day, which is to mean the time devoted by one person during one day (usually eight hours).            

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   Table 8. Estimated yearly repair and maintenance expenses   Repair and maintenance

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   Items costs Rate  
1 Store and bathing room 2,250,000.00 0.02 45,000.00
2 New John Deere 6100D Mfwd Tractor (Mexico Origin) 3,850,000 0.02 77,000.00
3 Mounted Four Disc Plough (Make: Nardi, Model: QD 70/E) 820,000 0.02 16,400.00
4 Mounted Tandem Disc Harrow (Make: Nardi, Model: 28 HOP 56) 1,371,450 0.02 27,429.00
5 Nardi Mounted Ridge (Model: PT70/5A45R) 1,050,000 0.02 21,000.00
6 Brand New Toyota Hilux Double cab 2,800,000 0.02 56,000.00
7 Trailer 779,995 0.02 15,599.90
8 Truck 2,450,000 0.02 49,000.00
9 Chemical Sprayer 24,000.00 0.02 480.00
10 Sickles 10,200.00 0.02 204.00
11 Axes 3,500.00 0.02 70.00
12 Tape meter (100 m) 3,600.00 0.02 72.00
13 Wheel borrow 17,500.00 0.02 350.00
14 Shovel 1,440.00 0.02 28.80
15 Weighing scale 60,000.00 0.02 1,200.00
16 Thresher 90,000.00 0.02 1,800.00
17 Saw 600.00 0.02 12.00
18 Cutlass or Machete 40,000.00 0.02 800.00
19 Spade hoe 9,000.00 0.02 180.00
20 Local hand hoe 840.00 0.02 16.80
21 Spade 1,764.00 0.02 35.28
22 Digging fork 12,000.00 0.02 240.00
23 Trovel 2,000.00 0.02 40.00
24 Laptop Computer 12,500.00 0.02 250.00
25 Printers 7,600.00 0.02 152.00
26 Shelf 10,000.00 0.02 200.00
27 Managerial Chairs 28,500.00 0.02 570.00
28 Guest Chairs 3,750.00 0.02 75.00
29 Computer tables 15,000.00 0.02 300.00
  Total Repair and Maintenance costs   314,504.78

  Table 9. Total Labor requirement and cost of the project              

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   Years 1 2 3 4 5 6 7 8 9 10
Maize_seed Labor per Ha (table 7) 90 90 90 90 90 90 90 90 90 90
  Land area (table 1) 100 100 100 100 100 100 100 100 100 100
  Sub-total labor required 9000 9000 9000 9000 9000 9000 9000 9000 9000 9000
Soybean Labor per Ha (table 7) 56 56 56 56 56 56 56 56 56 56
  Land area (table 1)* 40 40 40 40 40 40 40 40 40 40
  Sub-total labor required 2240 2240 2240 2240 2240 2240 2240 2240 2240 2240
Sesame Labor per Ha (table 7) 58 58 58 58 58 58 58 58 58 58
  Land area (table 1)* 55 55 55 55 55 55 55 55 55 55
  Sub-total labor required 3190 3190 3190 3190 3190 3190 3190 3190 3190 3190
  Total Labor required per ha 14430 14430 14430 14430 14430 14430 14430 14430 14430 14430

  Table 10. Summaries of labor cost (wage expense)

Years 1 2 3 4 5 6 7 8 9 10
Total Annual Labor 14,430 14,430 14,430 14,430 14,430 14,430 14,430 14,430 14,430 14,430
Labor cost per work-day 120 120 126 132 139 146 153 161 169 177
(Birr)
Projected wage Cost per year 1,731,600 1,731,600 1,818,180 1,909,089 2,004,543 2,104,771 2,210,009 2,320,510 2,436,535 2,558,362

Table 12: summaries of supplies costs per year

  1 2 3 4 5 6 7 8 9 10
Supplies costs 2,623,155 2,754,313 2,892,028 3,036,630 3,188,461 3,347,884 3,515,279 3,691,043 3,875,595 4,069,374

Table 13. Repair and Maintenance expense per year    

1 2 3 4 5 6 7 8 9 10
Repair & maintenance 0 314,505 330,230 346,742 364,079 382,283 401,397 421,466 442,540 464,667
Table 14. Miscellaneous and utilities expense per year
years 1 2 3 4 5 6 7 8 9 10
Utilities Expense 822,500 863,625 906,806 952,147 999,754 1,049,742 1,102,229 1,157,340 1,215,207 1,275,967
Other Operating expense 2,049,153 2,151,61 2,259,191 2,372,150 2,490,758 2,615,296 2,746,060 2,883,363 3,027,532 3,178,908
0

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 Table 15. Operating and working capital costs needed
Years 1 2 3 4 5 6 7 8 9 10
Employee salaries 1,357,200 1,425,060 1,496,313 1,571,129 1,649,685 1,732,169 1,818,778 1,909,717 2,005,203 2,105,463
Labor cost (table 10) 1,731,600 1,731,600 1,818,180 1,909,089 2,004,543 2,104,771 2,210,009 2,320,510 2,436,535 2,558,362
Repair& maint. (table 13) 0 314,505 330,230 346,742 364,079 382,283 401,397 421,466 442,540 464,667
Utilities costs (table 14) 822,500 863,625 906,806 952,147 999,754 1,049,742 1,102,229 1,157,340 1,215,207 1,275,967
Supplies cost (table 12) 2,623,155 2,754,313 2,892,028 3,036,630 3,188,461 3,347,884 3,515,279 3,691,043 3,875,595 4,069,374
Miscellaneous cost (table 14) 2,049,153 2,151,610 2,259,191 2,372,150 2,490,758 2,615,296 2,746,060 2,883,363 3,027,532 3,178,908
Total Operating 8,583,608 9,240,713 9,702,748 10,187,886 10,697,280 11,232,144 11,793,751 12,383,439 13,002,611 13,652,741
Increase in Operating costs 0 657,105 462,036 485,137 509,394 534,864 561,607 589,688 619,172 650,131
Working capital needed 525,684 369,629 388,110 407,515 427,891 449,286 471,750 495,338 520,104 0

  Table 17. Forecasted production of each crop over the first 10 years        
Crops   1 2 3 4 5 6 7 8 9 10
Maize Seed Land area in Ha 100 100 100 100 100 100 100 100 100 100
  Output per Ha (quint) 70 70 70 70 70 70 70 70 70 70
Total Output (quint) 7,000 7,000 7,000 7,000 7,000 7,000 7,000 7,000 7,000 7,000
Soybean Land area in Ha 40 40 40 40 40 40 40 40 40 40
Output per Ha (quint) 35 35 35 35 35 35 35 35 35 35
  Total Output (quint) 1400 1400 1400 1400 1400 1400 1400 1400 1400 1400
Sesame Land area in Ha 55 55 55 55 55 55 55 55 55 55
  Output per Ha (quint) 30 30 30 30 30 30 30 30 30 30
Total Output (quint) 1,650 1,650 1,650 1,650 1,650 1,650 1,650 1,650 1,650 1,650
10,050 10,050 10,050 10,050 10,050 10,050 10,050 10,050 10,050 10,050

  Table 18. Projected selling price of (at the farm gate price in Birr per quintal)    
Crops 1 2 3 4 5 6 7 8 9 10
Maize 1800 2 2 2, 2,

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 1,890 1,985 2,084 ,188 2,297 2,412 ,533 659 792
Soya beans 2500 3 3 3, 3,
2,625 2,756 2,894 ,039 3,191 3,350 ,518 694 878
Sesame 5000 6 7 7, 7,
5,250 5,513 5,788 ,078 6,381 6,700 ,036 387 757

    Table 19 Projected annual Sales revenues from each Crop (at the farm gate price in Birr)

Crops   1 2 3 4 5 6 7 8 9 10
Maize Price (Birr) 1800 1 2, 2, 2 2, 2, 2, 2,
seed 1,890 ,985 084 188 ,297 412 533 659 792
  Production (quint) 7,000 7,000 7,000 7,000 7,000 7,000 7,000 7,000 7,000 7,000
Sales (Birr) 13,23 13,891 14,586, 15,315, 16,081 16,885, 17,729, 18,615, 19,546,
12,600,0 0,000 ,500 075 379 ,148 205 465 939 736
00
Soyabea Price (Birr) 2,500 2,625 2,756 2,894 3,039 3,191 3,350 3,518 3,694 3,878
n
Production (quint) 1400 1400 1400 1400 1400 1400 1400 1400 1400 1400
  Sales (Birr) 3,500,00 3,675,000 3,858,750 4,051,688 4,254,272 4,466,985 4,690,335 4,924,851 5,171,094 5,429,649
0
Sesame Price (Birr) 5,000 5,250 5,513 5,788 6,078 6,381 6,700 7,036 7,387 7,757
  Production (quint) 1,650 1,650 1,650 1,650 1,650 1,650 1,650 1,650 1,650 1,650
Sales (Birr) 8,250,00 8,662,500 9,095,625 9,550,406 10,027,927 10,529,323 11,055,789 11,608,578 12,189,007 12,798,458
0
Total Sales revenues 24,350,0 25,567,500 26,845,875 28,188,169 29,597,577 31,077,456 32,631,329 34,262,895 35,976,040 37,774,842
00

Table 19 Projected annual Sales revenues from each Crop (at the farm gate price in Birr)
Crops 1 2 3 4 5 6 7 8 9 10

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 Maize seed Price (Birr) 1500 1575 1653.75 1736.4375 1,823.26 1,914.42 2,010.14 2,110.65 2,216.18 2,326.99
Production (quint) 3,750 3,750 3,750 3,750 3,750 3,750 3,750 3,750 3,750 3,750
Sales (Birr) 5,625,000 5,906,250 6,201,563 6,511,641 6,837,223 7,179,084 7,538,038 7,914,940 8,310,687 8,726,221
Soyabean Price (Birr) 2,100 2,205 2,315 2,431 2,553 2,680 2,814 2,955 3,103 3,258
Production (quint) 300 300 300 300 300 300 300 300 300 300
Sales (Birr) 630,000 661,500 694,575 729,304 765,769 804,057 844,260 886,473 930,797 977,337
Groundnuts Price (Birr) 1,800.00 1,890.00 1,984.50 2,083.73 2,187.91 2,297.31 2,412.17 2,532.78 2,659.42 2,792.39
Production (quint) 250 250 250 250 250 250 250 250 250 250
Sales (Birr) 450,000 472,500 496,125 520,931 546,978 574,327 603,043 633,195 664,855 698,098
Sesame Price (Birr) 3,000 3,150 3,308 3,473 3,647 3,829 4,020 4,221 4,432 4,654
Production (quint) 225 225 225 225 225 225 225 225 225 225
Sales (Birr) 675,000 708,750 744,188 781,397 820,467 861,490 904,565 949,793 997,282 1,047,147
Total Sales revenues 7,380,000 7,749,000 8,136,450 8,543,273 8,970,436 9,418,958 9,889,906 10,384,401 10,903,621 11,448,802

Table 21. Projected periodical loan repayment and interest expense

Years 1 2 3 4 5 6 7 8 9 10
Principal loan outstanding at beginning 5,750,508 5,175,457 4,600,406 4,025,356 3,450,305 2,875,254 2,300,203 1,725,152 1,150,102 575,051
Periodical loan repayments 575,051 575,051 575,051 575,051 575,051 575,051 575,051 575,051 575,051 575,051
Outstanding Loan at the end 5,175,457 4,600,406 4,025,356 3,450,305 2,875,254 2,300,203 1,725,152 1,150,102 575,051 0
Periodical interest expense 488,793 439,914 391,035 342,155 293,276 244,397 195,517 146,638 97,759 48,879
Total periodical payment 1,063,844 1,014,965 966,085 917,206 868,327 819,447 770,568 721,689 672,809 623,930

Table 22 Projected Annual Income Statement (all in Birr)                  

Years 1 2 3 4 5 6 7 8 9 10

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 Total Revenues 7,380,000 7,749,000 8,136,450 8,543,273 8,970,436 9,418,958 9,889,906 10,384,401 10,903,621 11,448,802
Operating Expenses:                    
Salaries Expense 740,400 777,420 816,291 857,106 899,961 944,959 992,207 1,041,817 1,093,908 1,148,603
Wages Expense 318,500 318,500 334,425 351,146 368,704 387,139 406,496 426,820 448,161 463,182
Repair & maintenance 0 97,868 102,761 107,899 113,294 118,959 124,907 131,152 137,710 144,595
Utilities Expense 201,250 211,313 221,878 232,972 244,621 256,852 269,694 283,179 297,338 312,205
Supplies Expense 837,953 879,850 923,843 970,035 1,018,537 1,069,463 1,122,936 1,179,083 1,238,037 1,299,939
Miscellaneous Expense 364,576 382,805 401,945 422,042 443,144 465,302 488,567 512,995 538,645 565,577

Depreciation Expense 486,668 486,668 486,668 486,668 486,668 433,396 433,396 5,250 5,250 5,250
Interest Expense 488,793 439,914 391,035 342,155 293,276 244,397 195,517 146,638 97,759 48,879
Total Operating Expense 3,438,140 3,594,337 3,678,846 3,770,024 3,868,204 3,920,466 4,033,720 3,726,935 3,856,808 3,988,231
Income Before Income Tax 3,941,860 4,154,663 4,457,604 4,773,249 5,102,232 5,498,492 5,856,186 6,657,466 7,046,813 7,460,571
Income Tax (30%) 1,182,558 1,246,399 1,337,281 1,431,975 1,530,670 1,649,548 1,756,856 1,997,240 2,114,044 2,238,171
Net Income 2,759,302 2,908,264 3,120,323 3,341,274 3,571,562 3,848,944 4,099,330 4,660,226 4,932,769 5,222,400
Retained Earnings 2,759,302 5,667,566 8,787,889 12,129,163 15,700,725 19,549,670 23,649,000 28,309,226 33,241,995 38,464,395

Table 23. Projected Annual cash Flow Statement (all in Birr)

Years 1 2 3 4 5 6 7 8 9 10
1. Cash flows of Operating activities:
Cash Inflows:
Collections from Sales 7,380,000 7,749,000 8,136,450 8,543,273 8,970,436 9,418,958 9,889,906 10,384,401 10,903,621 11,448,802
Cash Outflows:
Salaries payment 740,400 777,420 816,291 857,106 899,961 944,959 992,207 1,041,817 1,093,908 1,148,603
Wages payment 318,500 318,500 334,425 351,146 368,704 387,139 406,496 426,820 448,161 463,182
Repair & maintenance - 97,867.74 102,761.13 107,899.18 113,294.14 118,958.85 124,906.79 131,152.13 137,709.74 144,595.23
Utilities Expense 201,250 211,313 221,878 232,972 244,621 256,852 269,694 283,179 297,338 312,205
Supplies Expense 837,953 879,850 923,843 970,035 1,018,537 1,069,463 1,122,936 1,179,083 1,238,037 1,299,939
Miscellaneous Expense 364,576 382,805 401,945 422,042 443,144 465,302 488,567 512,995 538,645 565,577
Interest payment 488,793 439,914 391,035 342,155 293,276 244,397 195,517 146,638 97,759 48,879

31 | P a g e
 Income Tax (30%) 1,182,558 1,246,399 1,337,281 1,431,975 1,530,670 1,649,548 1,756,856 1,997,240 2,114,044 2,238,171
Working capital 123,046 80,033 84,034 88,236 92,648 97,280 102,144 107,251 108,182 0
Total cash outflows 4,257,076 4,434,100 4,613,493 4,803,566 5,004,853 5,233,897 5,459,324 5,826,176 6,073,784 6,221,153
Net cash provided by operation 3,122,924 3,314,900 3,522,957 3,739,707 3,965,583 4,185,060 4,430,582 4,558,225 4,829,838 5,227,650
2. Cash flows of investing activities:
Cash inflows:
Cash Outflows:
Project construction costs 862,000
Projected farm machine cost 4,417,027
Projected farm tools cost 210,360
Projected office equipments 139,900
Total cash outflows 5,629,287
Net cash used by investing -5,629,287
3. Cash flows of Financing:
cash inflows:
Owners' equity 2,464,503
Bank loans 5,750,508
Total cash inflows 8,215,011
Cash outflows:
Repayments of loans 575,051 575,051 575,051 575,051 575,051 575,051 575,051 575,051 575,051 575,051
Net cash flows by financing 7,639,961 -575,051 -575,051 -575,051 -575,051 -575,051 -575,051 -575,051 -575,051 -575,051
Total N et cash flows 4,915,497 2,739,849 2,947,906 3,164,656 3,390,532 3,610,010 3,855,531 3,983,174 4,254,787 4,652,599
Cumulative cash flows 4,915,497 7,655,345 10,603,251 13,767,907 17,158,439 20,768,449 24,623,980 28,607,154 32,861,941 37,514,540

Table 24 Projected Balance sheet of the project (in Birr)

Years 1 2 3 4 5 6 7 8 9 10
Assets
Current asset
Cash (cumulated) 4,915,497 7,655,345 10,603,251 13,767,907 17,158,439 20,768,449 24,623,980 28,607,154 32,861,941 37,514,540
working capital (cumulated) 123,046 203,079 287,113 375,349 467,997 565,277 667,421 774,673 882,854 882,854
Total current assets 5,038,543 7,858,424 10,890,364 14,143,256 17,626,436 21,333,726 25,291,401 29,381,827 33,744,795 38,397,394
Fixed asset
Project construction costs 862,000 862,000 862,000 862,000 862,000 862,000 862,000 862,000 862,000 862,000
Projected accu. depren -5,250 -10,500 -15,750 -21,000 -26,250 -31,500 -36,750 -42,000 -47,250 -52,500
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 Projected farm machine cost 4,417,027 4,417,027 4,417,027 4,417,027 4,417,027 4,417,027 4,417,027 4,417,027 4,417,027 4,417,027
Projected accu. depren -428,146 -856,293 -1,284,439 -1,712,585 -2,140,731 -2,568,878 -2,997,024 -3,425,170 -3,853,317 -3,853,317
projected farm tools cost 210,360 210,360 210,360 210,360 210,360 210,360 210,360 210,360 210,360 210,360
Projected accu. depren -42,072 -84,144 -126,216 -168,288 -210,360 -252,432 -294,504 -336,576 -378,648 -420,720
projected office equipment’s 139,900 139,900 139,900 139,900 139,900 139,900 139,900 139,900 139,900 139,900
Projected accu. depren -11,200 -22,400 -33,600 -44,800 -56,000 -67,200 -78,400 -89,600 -100,800 -112,000
Total fixed assets 5,142,619 4,655,950 4,169,282 3,682,614 3,195,946 2,709,277 2,222,609 1,735,941 1,249,272 1,190,750
Total assets 10,181,161 12,514,374 15,059,647 17,825,870 20,822,381 24,043,003 27,514,010 31,117,767 34,994,067 39,588,144
Liability
Bank Loan 5,175,457 4,600,406 4,025,356 3,450,305 2,875,254 2,300,203 1,725,152 1,150,102 575,051 0
Capital
Owners' equity 2,464,503 2,464,503 2,464,503 2,464,503 2,464,503 2,464,503 2,464,503 2,464,503 2,464,503 2,464,503
Retained earning 2,759,302 5,667,566 8,787,889 12,129,163 15,700,725 19,549,670 23,649,000 28,309,226 33,241,995 38,464,395
Total capital 5,223,805 8,132,069 11,252,392 14,593,667 18,165,229 22,014,173 26,113,503 30,773,729 35,706,499 40,928,898
Total Liability + Capital 10,399,263 12,732,476 15,277,748 18,043,971 21,040,483 24,314,376 27,838,656 31,923,831 36,281,549 40,928,898

Table 25. Projected Annual cash Flow Statement from Operations(all in Birr)
years 1 2 3 4 5 6 7 8 9 10
Cash flows of Operating activities:
Cash Inflows:
Cash collections from revenues 7,380,000 7,749,000 8,136,450 8,543,273 8,970,436 9,418,958 9,889,906 10,384,401 10,903,621 11,448,802
Cash Outflows:
Salaries payment 740,400 777,420 816,291 857,106 899,961 944,959 992,207 1,041,817 1,093,908 1,148,603
Wages payment 318,500 318,500 334,425 351,146 368,704 387,139 406,496 426,820 448,161 463,182
Repair & maintenance - 97,868 102,761 107,899 113,294 118,959 124,907 131,152 137,710 144,595

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 Utilities Expense 201,250 211,313 221,878 232,972 244,621 256,852 269,694 283,179 297,338 312,205
Supplies Expense 837,953 879,850 923,843 970,035 1,018,537 1,069,463 1,122,936 1,179,083 1,238,037 1,299,939
Miscellaneous Expense 364,576 382,805 401,945 422,042 443,144 465,302 488,567 512,995 538,645 565,577
Interest payment 488,793 439,914 391,035 342,155 293,276 244,397 195,517 146,638 97,759 48,879
Income Tax (30%) 1,182,558 1,246,399 1,337,281 1,431,975 1,530,670 1,649,548 1,756,856 1,997,240 2,114,044 2,238,171
Working capital 123,046 80,033 84,034 88,236 92,648 97,280 102,144 107,251 108,182 -
Capital cost 5,629,287
Total cash outflows 9,886,363 4,434,100 4,613,493 4,803,566 5,004,853 5,233,897 5,459,324 5,826,176 6,073,784 6,221,153
Net cash provided by operation (2,506,363) 3,314,900 3,522,957 3,739,707 3,965,583 4,185,060 4,430,582 4,558,225 4,829,838 5,227,650
PVC 9,111,855 4,086,729 4,252,067 4,427,250 4,612,768 4,823,869 5,031,635 5,369,748 5,597,957 5,733,781
PVB 6,801,843 7,141,935 7,499,032 7,873,984 8,267,683 8,681,067 9,115,121 9,570,877 10,049,420 10,551,891
NPV (2,310,012) 3,055,207 3,246,965 3,446,734 3,654,915 3,857,199 4,083,486 4,201,129 4,451,463 4,818,110
PVC 53,047,658.43
PVB 85,552,854.30
NPV 32,505,195.87
BCR 1.61
NBCR 0.61
IRR 138%

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