Corporate Finance Assignment on Feasibility Study 0f An Organic Fertilizer Company

Submitted to: Mr. Shama-e Zaheer Course Instructor Corporate Finance Institute of Business Administration University of Dhaka Submitted by: Asif Rasool Syeeda Yeasmeen Meer Mahbubur Rahman Fahmida Ahmad

ance

ty Study 0f Company

meen Meer

Roll # 19 Roll # 21 Roll # 38 Roll # 53

Company Overview

A huge portion of our population is somehow related with agriculture, directly or indirectly. Modern agricu fertilizer, especially on chemical fertilizers. But the trend has been changing over years because of the usef organic fertilizers. A lot of NGOs have been working on the market development of organic fertilizers nowa consciousness over organic fertilizer is increasing over time.

For this Organic Fertilizers, compost is produced from organic element through special procedure. Current for compost but no one is producing it commercially. Farmers individually process compost and use it in th within a certain limit, farmers are very much interested to purchase enriched compost.

The main idea behind this project is to initiate production of compost commercially from household garba from households and restaurants by city corporation vehicles and will be delivered to the factory premise f Then the organic elements of the garbage are segregated and shredded. And then these shredded compos enzymes, solid activators, cocopeat and fresh water to balance the moisture level. after removing the leach dried fertilizer comes out of the machine with 50% moisture level. And then it is kept in sacks or polybags f bacteria to grow. Finally these processesd fertilizers are packed.

For distribution purpose, there are fertilizer center and dealership facilities. Centers will stock fertilizer and these fertilizer to prove the effectiveness and also serve as the laboratory service for R & D from these centers. Special focus is given on marketing activities as there is still scope of developing the m

rview

ctly or indirectly. Modern agriculture relies a lot on over years because of the usefulness and popularity of ment of organic fertilizers nowadays. So the use and

ugh special procedure. Currently there is a huge market rocess compost and use it in their fields. But if price is ed compost.

mercially from household garbage. Garbage is collected livered to the factory premise for a certain charge. d then these shredded compost are sprayed with bioe level. after removing the leachate from thiscompost, n it is kept in sacks or polybags for 5 days for the

Centers will stock fertilizer and cultivate crops with ervice for R & D. Compost will also be send to dealers still scope of developing the market.

Process Flow

Garbage collection from home

Put into dustbin by local collectors

Plastic and poly thin sorted out

Metal sorted out

Shredding the organic elements of garbage

sprayed with Bio-5 Enzyme to remove toxic and bad odor, then blended with carbon activator, microbes and cocopeat in Rapid Composting Unit

After 5 days of composting the raw organic fertilizer becomes complete

organic fertilizer becomes complete organic fertilizer and then send for distribution to the regional fertilizer centres

City corp. trucks collects garbage

Delivery of garbage into factory premise

Glass and other inorganic element are removed

The unused elements of garbage are send to the dumping yard by municipality truck

-5 Enzyme to e toxic and bad odor, then d with carbon activator, es and cocopeat in Rapid

Compost is Squeezed to remove leachate

mposting the raw ecomes complete

powered raw organic fertilizer with 30% moisture conetent is

ecomes complete nd then send for regional fertilizer

powered raw organic fertilizer with 30% moisture conetent is packed and kept for 5 days for the bacteria to grow

Figures in BDT.

Revenue Projection

Current Market Demand (ton) Projected Total Market Demand in the Year 2017 Market Share Market Growth Rate Installed Capacity Year Capacity Usage Total Production (in Ton) Increase in production Projected inflation Price per Ton Total Revenue

2,014 2,015 60% 70% 12,342 14,399 20% 17% 9.44% 9.66% 2,500 2,736 3,000 25,713,241 33,769,714 43,202,971

40,000 58,773 35% 8% 20,571 2,013 50% 10,285

2,016 2,017 2,018 80% 90% 90% 16,456 18,514 18,514 14% 13% 0% 9.34% 9.48% 9.49% 3,280 3,591 3,592 53,984,970 66,490,213 66,497,511

Figures in BDT. HR Expenses

Projected Inflation Rate Cola Adjustment CEO Top Management Total Monthly Salary of Top Management Total Yearly Salary of Top Management Accounts & Admin

Marketing and Sales Managers Operations Total Monthly Salary of Managers Total Yearly Salary of Managers Accounts & Admin

Marketing and Sales Executives Operations (Engineers) Total Monthly Salary of Executives Total Yearly Salary of Executives Labor

Supervisors

Guard Production Employees Technician & Machine Operator

Production Employees

Electrician Total Monthly Salary of Production Employees Total Yearly Salary of Operational Employees Cleaner

Peon & Messenger Non-Operational Employees Guard Total Monthly Salary of Production Employees Total Yearly Salary of Non-Operational Employees Total Salary Expenses

es
Monthly Salary 2013 2014 9.44% 8.00% 54,000 1 54,000 54,000 648,000 27,000 1 27,000 27,000 1 27,000 27,000 1 27,000 81,000 972,000 16,200 1 16,200 16,200 15 243,000 16,200 1 16,200 275,400 3,304,800 4,752 75 356,400 7,560 1 7,560 4,860 6 29,160 7,560 3 2015 9.66% 8.00% 58,320 1 58,320 58,320 699,840 29,160 1 29,160 29,160 2 58,320 29,160 1 29,160 116,640 1,399,680 17,496 1 17,496 17,496 20 349,920 17,496 1 17,496 384,912 4,618,944 5,132 100 513,216 8,165 2 16,330 5,249 6 31,493 8,165 3 2016 9.34% 8.00% 62,986 1 62,986 62,986 755,827 31,493 1 31,493 31,493 2 62,986 31,493 1 31,493 125,971 1,511,654 18,896 1 18,896 18,896 20 377,914 18,896 2 37,791 434,601 5,215,208 5,543 100 554,273 8,818 2 17,636 5,669 6 34,012 8,818 3 2017 9.48% 8.00% 68,024 1 68,024 68,024 816,293 34,012 1 34,012 34,012 2 68,024 34,012 1 34,012 136,049 1,632,587 20,407 1 20,407 20,407 25 510,183 20,407 2 40,815 571,405 6,856,864 5,986 125 748,269 9,523 3 28,570 6,122 6 36,733 9,523 3 2018 9.49% 8.00% 73,466 1 73,466 73,466 881,597 36,733 1 36,733 36,733 2 73,466 36,733 1 36,733 146,933 1,763,194 22,040 1 22,040 22,040 25 550,998 22,040 2 44,080 617,118 7,405,414 6,465 125 808,130 10,285 3 30,856 6,612 6 39,672 10,285 3

Base Salary No. of Employees Monthly Salary

Base Salary No. of Employees Monthly Salary Base Salary No. of Employees Monthly Salary Base Salary No. of Employees Monthly Salary

Base Salary No. of Employees Monthly Salary Base Salary No. of Employees Monthly Salary Base Salary No. of Employees Monthly Salary

Base Salary No. of Employees Monthly Salary Base Salary No. of Employees Monthly Salary Base Salary No. of Employees Monthly Salary Base Salary No. of Employees

50,000 1 50,000 50,000 600,000 25,000 1 25,000 25,000 1 25,000 25,000 1 25,000 75,000 900,000 15,000 1 15,000 15,000 15 225,000 15,000 1 15,000 255,000 3,060,000 4,400 50 220,000 7,000 1 7,000 4,500 6 27,000 7,000 3

Monthly Salary Base Salary No. of Employees Monthly Salary

Base Salary No. of Employees Monthly Salary Base Salary No. of Employees Monthly Salary Base Salary No. of Employees Monthly Salary

21,000 22,680 24,494 26,454 28,570 30,856 4,400 4,752 5,132 5,543 5,986 6,465 1 1 1 1 1 1 4,400 4,752 5,132 5,543 5,986 6,465 279,400 420,552 590,665 637,918 848,129 915,979 3,352,800 5,046,624 7,087,980 7,655,018 10,177,546 10,991,749 4,400 4,752 5,132 5,543 5,986 6,465 1 1 1 1 1 1 4,400 4,752 5,132 5,543 5,986 6,465 5,000 5,400 5,832 6,299 6,802 7,347 1 1 1 1 1 1 5,000 5,400 5,832 6,299 6,802 7,347 4,400 4,752 5,132 5,543 5,986 6,465 3 3 3 3 3 3 13,200 14,256 15,396 16,628 17,958 19,395 22,600 24,408 26,361 28,469 30,747 33,207 271,200 292,896 316,328 341,634 368,965 398,482 8,184,000 10,264,320 14,122,771 15,479,341 19,852,255 21,440,435

50000

8% 54000

10% 59400

Figures in BDT.

Schedule of Costs
2013 2014 2015 2016 7,713,972 10,130,914 12,960,891 16,195,491 900,000 912,000 924,480 937,459 1,736,400 1,908,724 2,071,211 2,225,380 659,524 659,524 559,524 559,524 7,800,000 6,810,000 6,622,200 6,186,644 8,184,000 10,264,320 14,122,771 15,479,341 26,993,896 30,685,482 37,261,078 41,583,839

Cost of Raw materials Costs of Rent Costs of utilities Depreciation expenses Marketing and distribution expenses Human Resources Cost Total Costs

2017 2018 19,947,064 19,949,253 950,958 964,996 2,374,484 2,406,717 559,524 519,524 6,253,377 6,372,444 19,852,255 21,440,435 49,937,661 51,653,370

Figures in BDT.

Initial Outlay

Land

Production Facility

Machineries

Office Equipment

Fertilizer Centre Total Initial Outlay

Land for Fertilizer Center Land for Production Facility Total Cost of Land Land processing cost Electricity Generators Building Miscellaneous Total Cost for Production Facility Compost Shredder Machine (02 Machine) Packing Machine (01 Machine) Total Cost for Machineries Furniture A/C Computer & accessories Advance office rent Total Cost of Office Furniture Infrastructure cost (per center) Total Cost for Fertilizer Centers

2,500,000 600,000 3,100,000 600,000 1,500,000 600,000 100,000 2,800,000 2,613,240 672,000 3,285,240 200,000 160,000 200,000 50,000 610,000 200,000 2,000,000 11,795,240

Figures in BDT.

Projected Income Statement

2013 25,713,241 12,602,772 7,713,972 3,352,800 1,536,000 13,110,469 14,391,124 200,400 4,831,200 7,800,000 900,000 659,524 (1,280,655) (480,246) (800,409) 2014 33,769,714 16,866,938 10,130,914 5,046,624 1,689,400 16,902,776 13,818,544 219,324 5,217,696 6,810,000 912,000 659,524 3,084,232 1,156,587 1,927,645 2015 43,202,971 21,879,576 12,960,891 7,087,980 1,830,705 21,323,396 15,381,502 240,506 7,034,792 6,622,200 924,480 559,524 5,941,894 2,228,210 3,713,683 2016 53,984,970 25,812,926 16,195,491 7,655,018 1,962,417 28,172,044 15,770,913 262,962 7,824,323 6,186,644 937,459 559,524 12,401,131 4,650,424 7,750,707

Revenue COGS Raw Materials Indirect Labor Factory Overhead Gross Profit Operating Expenses Utility Expenses Human Resources Expenses Marketing & Distribution Expenses Rent Expenses Depreciation Expenses Net Income Before Taxes Taxes @37.5% Net Income (Loss) After Taxes

2017 66,490,213 32,211,204 19,947,064 10,177,546 2,086,594 34,279,009 17,726,457 287,890 9,674,709 6,253,377 950,958 559,524 16,552,552 6,207,207 10,345,345

2018 66,497,511 33,032,505 19,949,253 10,991,749 2,091,503 33,465,006 18,315,393 315,214 10,448,686 6,372,444 659,524 519,524 15,149,613 5,681,105 9,468,508

Figures in BDT.

Cash flow from Operating Activities

Cash flow from Investing Activities

Cash flow from Financing Activities Net increase/(decrease) in Cash and Cash Equivalents during the year Terminal Cashflow Net increase/(decrease) in Cash and Cash Equivalents after taking terminal cashflow into consideration Cash and Cash Equivalents at beginning of year Cash and Cash Equivalents at end of year

Projected Cash Flow Statement 2012 Net Income Add: Depreciation Add: Provision for tax made during the current year Tax Paid During the Year Net Cash Provided by Operating Activities Purchase of Land Purchase of Electricity Generator Down payment on leased land Construction of Factory Shade Purchase of Machineries Purchase of office equipment Construction of Fertilizer center Advance Office Rent Net Cash Used in Investing Activities Net Cash Provided by (Used in) financing activities 2013 2014 (800,409) 1,927,645 659,524 659,524 (480,246) 1,156,587 (480,246) (621,131) 4,224,001 0 0 0 0 0 0 0 0 0 0 0 2015 3,713,683 559,524 2,228,210 1,156,587 5,344,831 0 0 0 0 0 0 0 0 0 0 5,344,831

(2,500,000) (1,500,000) (600,000) (2,800,000) (3,285,240) (610,000) (2,000,000) (50,000) (13,295,240)

(13,295,240) (621,131) 4,224,001

(13,295,240) (621,131) 4,224,001 0 (621,131)

5,344,831 3,602,870 8,947,701

(13,295,240) (621,131) 3,602,870

2016 7,750,707 559,524 4,650,424 2,228,210 10,732,445 0 0 0 0 0 0 0 0 0 0 10,732,445

2017 10,345,345 559,524 6,207,207 4,650,424 12,461,652 0 0 0 0 0 0 0 0 0 0 12,461,652 72,784,076

2018 9,468,508 519,524 5,681,105 6,207,207 9,461,930 0 0 0 0 0 0 0 0 0 0 9,461,930

Assumption

0.03

g= 3% for perpetuity

10,732,445 8,947,701 19,680,146

85,245,728 19,680,146 104,925,874

IRR Calculation
2012 2013 (13,295,240) (621,131) 2014 3,602,870 2015 8,947,701 67%

Net increase/(decrease) in Cash IRR

NPV Calculation 1
Initial Outlay Net increase/(decrease) in Cash PV NPV 2012 (13,295,240) 2013

2
2014

3
2015

(621,131) (13,295,240) (535,458)

3,602,870 8,947,701 2,677,520 5,732,413 55,404,979

WACC Calculation
WACC 16% Cost of Equity 22% Weight 50% Cost of Debt 16% Weight 50%

Figures in BDT. 2016 2017 19,680,146 104,925,874 67%

4
2016

5
2017

19,680,146 104,925,874 10,869,169 49,956,574

979

Tc 37.5%

Figures in BDT. Scenario Analysis

Assumption We believe that the base case scenario estimates about sales price, sales volume and cost of materials are accurate within +/ constant. Best case scenario Price Increase 10% Production Volume Increase 10% Cost of raw materials Decrease 10% Base Case Scenario 2750 Price 11314 Production Volume 675 Cost of Raw Materials 2,500 10,285 750

Best case scenario Total sales Raw Materials Indirect Labor Factory Overhead COGS Gross profit operating expenses Net Income Before Taxes Taxes @37.5% Net Income (Loss) After Taxes 31,113,022 7,636,833 3,352,800 1,536,000 12,525,633 18,587,389 14,391,124 4,196,265 1,573,600 2,622,666

For the year 2013 Income Statement Base Case Scenario Total sales 25,713,241 Raw Materials 7,713,972 Indirect Labor 3,352,800 Factory Overhead 1,536,000 COGS 12,602,772 Gross profit 13,110,469 operating expenses 14,391,124 Net Income Before Taxes (1,280,655) Taxes @37.5% (480,246) Net Income (Loss) After Taxes (800409.41)

materials are accurate within +/- 10% and all other costs are

Worst case Scenario Price Decrease 10% Production Volume Decrease 10% Cost of raw materials Increase 10%

2250 9256.8 825

Worst case Scenario Total sales Raw Materials Indirect Labor Factory Overhead COGS Gross profit operating expenses Net Income Before Taxes Taxes @37.5% Net Income (Loss) After Taxes 20,827,725 7,636,833 3,352,800 1,536,000 12,525,633 8,302,093 14,391,124 (6,089,031) (2,283,387) (3805644.49)

Figures in BDT. Sensitivity Analysis

Selling Price (per Ton) Sales Volume Cost of raw materials

Sensitivity of NI to Sales Price -20% -10% No change 2,000 2,250 2,500 10,285 10,285 10,285 750 750 750

10% 2,750 10,285 750

20% 3,000 10,285 750

Sales COGS Gross Profit Operating Expenses Net Income Before Taxes Taxes @37.5% Net Income (Loss) After Taxes

For the year 2013 Income Statement 20,570,593 23,141,917 25,713,241 28,284,565 12,602,772 12,602,772 12,602,772 12,602,772 7,967,821 10,539,145 13,110,469 15,681,793 14,391,124 14,391,124 14,391,124 14,391,124 (6,423,303) (3,851,979) (1,280,655) 1,290,669 (2,408,739) (1,444,492) (480,246) 484,001 (4,014,565) (2,407,487) (800,409) 806,668

30,855,890 12,602,772 18,253,117 14,391,124 3,861,993 1,448,247 2,413,746

Selling Price Sales Volume Cost of raw materials

Sensitivity of NI to Sales Volume -20% -10% No change 2,500 2,500 2,500 8,228 9,257 10,285 750 750 750

10% 2,500 11,314 750

20% 2,500 12,342 750

Sales COGS Gross Profit Operating Expenses Net Income Before Taxes Taxes @37.5% Net Income (Loss) After Taxes

For the year 2013 Income Statement 20,570,593 23,141,917 25,713,241 28,284,565 12,602,772 12,602,772 12,602,772 12,602,772 7,967,821 10,539,145 13,110,469 15,681,793 14,391,124 14,391,124 14,391,124 14,391,124 (6,423,303) (3,851,979) (1,280,655) 1,290,669 (2,408,739) (1,444,492) (480,246) 484,001 (4,014,565) (2,407,487) (800,409) 806,668

30,855,890 12,602,772 18,253,117 14,391,124 3,861,993 1,448,247 2,413,746

Selling Price Sales Volume

Sensitivity of NI to Cost of raw materials -20% -10% No change 2,500 2,500 2,500 10,285 10,285 10,285

10% 2,500 10,285

20% 2,500 10,285

Cost of raw materials

540

675

750

825

990

For the year 2013

Sales COGS Gross Profit Operating Expenses Net Income Before Taxes Taxes @37.5% Net Income (Loss) After Taxes Income Statement 25,713,241 25,713,241 25,713,241 25,713,241 25,713,241 10,442,860 11,831,375 12,602,772 13,374,170 15,071,244 15,270,381 13,881,866 13,110,469 12,339,072 10,641,998 14,391,124 14,391,124 14,391,124 14,391,124 14,391,124 879,257 (509,258) (1,280,655) (2,052,052) (3,749,126) 329,721 (190,972) (480,246) (769,520) (1,405,922) 549,536 (318,286) (800,409) (1,282,533) (2,343,204)

Summary of Sensitivity Analysis Net Income

Changes (%) Sales price Sales Volume Cost of Raw Materials -20% (4,014,565) (4,014,565) 549,536 -10% No change 10% (2,407,487) (800,409) 806,668 (2,407,487) (800,409) 806,668 (318,286) (800,409) (1,282,533) 20% 2,413,746 2,413,746 (2,343,204)

Ratios
Ratios Gross profit margin Operating profit margin NPM Cash to income Cashflow to revenue DOL Formula gross profit/revenue Operating profit/revenue Net profit/revenue CFO/Operating Income CFO/Revenue Change in EBIT/Change in Sales 2013 51% -5% -3% 49% -2% (17.04) 2014 50% 9% 6% 137% 13% 5.56 2015 49% 14% 9% 90% 12% 7.61 2016 52% 23% 14% 87% 20% 2.68 2017 52% 25% 16% 75% 19% 0.00 2018 50% 23% 14% 62% 14% 1.00

Sales volatility Mean STDEV CV Business Risk Mean STDEV CV 48,276,437 16,980,102 35%

8,641,461 7,151,159 83%

Explanation Gross profit per Tk of sales Operating profit per Tk of sales Net income per Tk of sales Cash generating ability of operations cash generated per dollar of revenue Sensitivity of operating profit to change in sales volume

Figures In BDT.

Cost of Raw Materials

Current Market Demand (ton) Projected Total Market Demand in the Year 2017 Market Share Market Growth Rate Raw material cost ( garbage + transportation) Year Capacity Usage Total Production (in Ton) Price (per ton) Cost of Raw materials (30%) Total Cost of Raw Materials

40,000 58,773 35% 8% 30% of revenue 2013 50% 10,285 2,500 7,713,972 7,713,972

Schedule of Raw Materials Cost Cost of purchasing waste Cost of Transportation in & out of Factory Cost of additives

Additives include Coconut Coir Dust this is a soil conditioner with growth hormone. It can absorb moisture up to 90% providing the for growth and development. Coir dust maintains the organic fertilizer at 28-30% and helps preserve its weight. Th 20%. The Solid Activator this enhances the digestion and composting of raw materials into organic fertilizer. The benef materials is responsible for rapid digestion of type fed material. Bio enzymes used to remove toxic and bad odor from wastes

Cost of Raw Materials

2014 2015 2016 2017 2018 60% 70% 80% 90% 90% 12,342 14,399 16,456 18,514 18,514 2,736 3,000 3,280 3,591 3,592 10,130,914 12,960,891 16,195,491 19,947,064 19,949,253 10,130,914 12,960,891 16,195,491 19,947,064 19,949,253

b moisture up to 90% providing the natural irrigation system needed by the plants 0% and helps preserve its weight. The quality of coir dust added to the material is

als into organic fertilizer. The beneficial microbes impregnated to the pre-mixed

Figures in BDT. Cost of Rent

Total Lease Yearly payment (BDT.) Year Lease payment Monthly Rent of Head Office Yearly Rent of Head Office Total Cost of Rent

20 Katha 600,000 2013 2014 2015 2016 2017 2018 600,000 600,000 600,000 600,000 600,000 600,000 25,000 26,000 27,040 28,122 29,246 30,416 300,000 312,000 324,480 337,459 350,958 364,996 900,000 912,000 924,480 937,459 950,958 964,996

Figures in BDT. Marketing & Distribution Expenses

2013 500,000 500,000 1,000,000 300,000 2,300,000 3,500,000 2,000,000 5,500,000 7,800,000

Educational Marketing TV, Radio, Newspaper Advertisements Marketing Expenses Celebrity Campaign Free Sample Tot Marketing Expenses Projected Increase in Fuel Price Factory to distribution center delivery Expense Distribution Expenses Distribution Center to Dealers Total distribution expenses Total Marketing & distribution expenses

2014 500,000 500,000 0 200,000 1,200,000 2.0% 3,570,000 2,040,000 5,610,000 6,810,000

2015 300,000 500,000 0 100,000 900,000 2.0% 3,641,400 2,080,800 5,722,200 6,622,200

2016 200,000 100,000 0 50,000 350,000 2.0% 3,714,228 2,122,416 5,836,644 6,186,644

2017 150,000 100,000 0 50,000 300,000 2.0% 3,788,513 2,164,864 5,953,377 6,253,377

2018 150,000 100,000 0 50,000 300,000 2.0% 3,864,283 2,208,162 6,072,444 6,372,444

Figures in BDT.

Cost of Utilities
Year Increase in production Office Factory Diesel Cost for Generator's (Factory) Total Cost Of Electricity Office Factory Total Cost of Water Consumption Projected inflation BTCL (office) BTCL (Factory) Mobile (Office) Mobile (Factory) Internet Bill(Office) Total Cost of Communication

Cost of Electricity Consumption

Cost of Water Consumption

Cost of Communication

Total Cost of Utilities

ilities
2013 120,000 600,000 600,000 1,320,000 8,400 300,000 308,400 36,000 24,000 24,000 12,000 12,000 108,000 1,736,400 2014 2015 2016 2017 2018 20% 17% 14% 13% 0% 131,332 144,016 157,463 172,389 188,751 660,000 715,000 766,071 813,951 813,951 660,000 715,000 766,071 813,951 813,951 1,451,332 1,574,016 1,689,605 1,800,291 1,816,653 9,193 10,081 11,022 12,067 13,213 330,000 357,500 383,036 406,975 406,975 339,193 367,581 394,058 419,043 420,188 9.44% 9.66% 9.34% 9.48% 9.49% 39,400 43,205 47,239 51,717 56,625 26,266 28,803 31,493 34,478 37,750 26,266 28,803 31,493 34,478 37,750 13,133 14,402 15,746 17,239 18,875 13,133 14,402 15,746 17,239 18,875 118,199 129,614 141,716 155,150 169,876 1,908,724 2,071,211 2,225,380 2,374,484 2,406,717

Figures in BDT.

Depreciation- Straight line

Cost 1,500,000 2,000,000

Infrastructure

Machine

Factory shade (Expected Useful Life 20 years) Fertilizer Centers (Expected Useful Life 20 years, 10 centers costing 200,000per center) Total Depreciation: Infrastructures Compost Shredder Machine (01 Machine, Expected Useful Life 10 Years) Packing Machine (01 Machine, Expected Useful Life 10 Years) Total Depreciation: Machine Furniture (Expected Useful Life 2 years) A/C (Expected Useful Life 10 years) Computer & accessories (Expected Useful Life 5 years) Total Depreciation: Office Equipment

2,613,240 672,000 200,000 160,000 200,000

Office Equipment

Total Depreciation

Depreciation 75,000 100,000 175,000 261,324 67,200 328,524 100,000 16,000 40,000 156,000 659,524

Inflation Calculation Year 2007-08 2008-09 2009-10 2010-2011 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 Inflation Rate 9.93 6.66 7.31 8.8 10.62 8.91 9.44 9.66 9.34 9.48 9.49 3-Year Moving Average 2014 0.0944 2015 0.0966 2016 0.0934

8.91 9.44 9.66 9.34 9.48 9.49

GDP Growth Rate Calculation Year 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 Average GDP growth rate 5.26% 6.27% 5.96% 6.63% 6.43% 6.19% 5.74% 6.07% 6.66% 6.30% 6.15%

2017 0.0948

2018 0.0949

Notes Topic (Click to Return to the Sheet)

Educational Marketing TV, Radio, Newspaper Advertisements Celebrity Campaign Free Sample Factory to distribution center delivery Expense Distribution Center to Dealers Land for Fertilizer Center

Explanation 1. Educational marketing will be done to promote and create awareness of the usefulness of organic fertilizer in contrast to synthetic or chemical fertilizers. This program will be heavily conducted in the previous years of starting the business to introduce and establish the brand among people. There will be region wise campaign 2. Advertisements about the brand will be done through TV, radio and print media extensively for the first 3 years and then when the brand will be known to all, the expenses will be curtailed and occasional campaign will be carried on. 3. Celebrity campaigning will be conducted through renowned persons in agricultural sector i.e., researchers, academicians and other experts in the initial year to introduce the brand to people. 4. Free sample packet of fertilizers will be provided for the willing farmers to test productivity of plants using the fertilizers. 5. There will be in total 10 fertilizer centers in 10 regions of the country. Fertilizers will be distributed to the centers from the main factory at Demra and then from there fertilizers will be distributed to the dealers of specific regions. The increase in distribution cost has been estimated to be 2% each year. 6. There will be 20 dealers in each region to whom fertilizers will be distributed monthly from the fertilizer centers of that region 7. Five Katha of land will be purchased for each of the 10 fertilizer centers. Office building, godown, display center will be built on this land along with a plot of land where R& D on plants using the fertilizers will be grown. This will also serve the purpose of practical showcasing of the usefulness and productivity gained from using the fertilizers. 8. Land for factory building will be leased for 10 years at an annual lease payment of 600,000 for 20 Katha of land. The land will be rented near Demra. The reason for choosing this location will be availability of large land and ease of transportation outside of Dhaka. 9. Compost shredder machine will be used to shred waste for being prepared to get decomposed and take the form of fertilizer. The machine will cost $15,555, the dollar figure has been converted to Taka assuming $1 = BDT. 84 10. Packing machine will be used to package organic fertilizers into specified size of packets. 11. Advance office rent will be paid for main company office which will be situated in a commercial location outside of the factory area. The advance payment for the office has been assumed to be BDT. 50,000 (Two months advance payment). 12. Infrastructure cost for fertilizer centers will include the cost of office building, godown, showroom and for other related costs. 13. All the departments will be headed by just one Chief Executive Officer. Since top management salary is quite high, the whole company will be headed by one person only, which will be economic. Moreover, there is no need of a numerous top level managers. 14. The company will have only one manager who will look after both the administrative works and accounts. The company doe not need any individual Finance Manger or Accounts Manager, since the financing and accounting activities will be very limited. 15. Marketing will play a huge part in the company's revenue generation since it is new company and creating a brand name are pivotal. There will be one Marketing manager. He will also look after companies distribution channels also. 16. Marketing and sales executives will be placed in the different parts of the country, who will promote company's product, maintain liaison with dealers, and promote companies brand image. The total number of Marketing and Sales Executive will be increased gradually. 17. These executives will be engineer too assisting the Operation Manager. 18. The whole process is labor intensive, so a good numbers of individuals will be required. These personnel will be involved in separating plastic and metals from the wastes, unload wastes from trucks, carry them to the grinding machine and so on. These workers will be paid on minimum wage rate of day laborers. 19. The laborers will work on group basis. Each group will consist of 50 person head by 1 supervisor. 20. There will be 6 guards in the production facility who will be working in shifts of 8 hours- two persons per shift. 21. Although the company has three machines in total (two grinders and one packaging), only two machines will be running simultaneously in a day i.e. Only two machine operators will be needed, however, one extra operator is employed to ensure smooth operation. 22. Since the machines are run by electricity, there must be an electrician always standing by to stop any disruption in the production due to electricity problem 23. These employees will be employed in head quarter of the company where administrative and office work will be done.

Land for Production Facility Compost Shredder Machine (02 Machine) Packing Machine (01 Machine) Advance office rent Infrastructure cost (per center) CEO Accounts & Admin Marketing and Sales Marketing and Sales Operations (Engineers)

Labor Supervisors Guard Technician & Machine Operator Electrician Cleaner, Peon and Messenger, Guard

Cleaner, Peon and Messenger, Guard Electricity Generators

23. These employees will be employed in head quarter of the company where administrative and office work will be done. 24. Electricity Generators of 80 Kilo Watt will be installed in the factory premise otherwise load shedding will disrupt the production greatly. 25. The electricity bill for office and factory has been estimated to be Tk 10,000 and Tk. 50,000 respectively. Inflation has been adjusted for the office use. However, The growth of electricity expenditure will be half of the growth in production, since economy of scale could be achieved with increased production volume and the production machine will be working far below its capacity. 26. Generator's diesel consumption has been estimated as Tk. 50,000 per month. 27. Office's water consumption has been estimated on lump sum basis that will adjusted with the inflation. Factory's water consumption will be far greater, because water is must needed component in the production process. The growth of water expenditure will be half of the growth in production, since economy of scale could be achieved with increased production volume and the production machine will be working far below its capacity. 28. According to a journal on commercial compost production in Bangladesh, there is a market for organic fertilizer with a demand of 40000 ton per year. The link of the report is as follows: http://proxied.changemakers.net/journal/300508/displayfec.cfm-ID=11 29. We have assumed that the market is increasing at a growth of 8% per year (app.). 30. Our target is to capture 35% market share of the total market 31. The report indicates that the collection and transportation of garbage will cost around 30% of the revenue 32. According to the journal, the retailers would buy 2500 to per ton. The price per ton will be adjusted to the inflation rate each year. 33. Total 20 Katha of land was leased near by Demra. The annual lease payment will be BDT 600,000. 34. There will be an experienced engineer who look after the whole production process 35. The installed capacity of the firm is 25% of the projected market demand after 5 years. 36. The salary of all employees will be adjusted according to the cost of living adjustment rate which will reflect the current inflation rate and budget of the company. however, for simplicity, we have assumed the COLA to be 8% each year as inflation during the next 5 years will be around 9.5%. 37. Monthly rent for Head Office has been estimated BDT. 25,000 per month. The rent will be adjusted each year at rate of 4%. 38. The production growth has been derived from the increment of capacity usage year to rear. 39. The company has been assumed to grow at 3% in perpetuity. As there is no hard & fast rule to assume growth rate in perpetuity and there is a common practice to take the 10 years average GDP growth rate as the growth rate in perpetuity for a new firm, we could have taken that rate which is 6.15%. But we didn't think the growth rate will be sustainable in the long term because of various factors, availability of raw materials will be one of the major factors among them. Thus we took 3% as the sustainable growth rate for the firm in perpetuity. 40. The tax rate is 37.5% which is the tax rate applicable for non-publicly traded companies. As the factory will be located in Demra which is under Dhaka District, it will not get tax holiday advantage according to the Income Tax Gadget-1, 2011. However, as the factory can be considered as an waste treatment plant also we can apply for tax holiday which is applicable for plants located anywhere in the country.In that case for the 1st five years, the company will not pay any tax at all. Thus we didn't consider tax holiday as it can not be said with certainty whether the factory will be eligible to get tax holiday advantage or not.
***GDP growth rate

Office Diesel Cost for Generator's (Factory)

Office

Current Market Demand (ton) Market Growth Rate Market Share Raw material cost ( garbage + transportation) Price per Ton Total Lease Operations Cola Adjustment Monthly Rent of Head Office Increase in production

g= 3% for perpetuity

Tax @ 37.5 %