Investment Office ANRS

Project Profile on the Assorted Vegetable Production Farms

Development Studies Associates (DSA)

October 2008 Addis Ababa

Table of Contents
1.Executive Summary..............................................................................................3 2.Product Description and Application.................................................................3 3.Market Study, Farm Capacity and Production Program.................................4
3.1Market Study...........................................................................................................................4 3.1.1Present Demand and Supply............................................................................................4 3.1.2Projected Demand............................................................................................................5 3.1.3Pricing and Distribution...................................................................................................5 3.2Farm Capacity.........................................................................................................................5 3.3Production Program................................................................................................................6

4.Raw Materials and Utilities.................................................................................6

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

5Location and Site...................................................................................................7 6Farming Technology .............................................................................................7

6.1Production Process..................................................................................................................7 6.2Agricultural tools & Equipments............................................................................................9 6.3Civil Engineering Cost............................................................................................................9

7Human Resource and Training Requirement.....................................................9

7.1Human Resource ....................................................................................................................9 7.2Training Requirement...........................................................................................................10

8Financial Analysis................................................................................................10
8.1Underlying Assumption .......................................................................................................10 8.2Investment.............................................................................................................................12 8.3Production Costs...................................................................................................................12 8.4Financial Evaluation.............................................................................................................13

9Economic and Social Benefit and Justification.................................................14 ANNEXES..............................................................................................................16

1. Executive Summary
This project profile deals with the establishment of an assorted vegetable production farms in Amhara National Regional State. The following presents the main findings of the study Demand projection divulges that the domestic demand for vegetable products is substantial and is increasing with time. Accordingly, the planned plantation is set to produce 450 quintals of various types of vegetables. The total investment cost of the project including working capital is estimated at Birr 621,349.01 and creates job opportunities for 58 citizens. The financial result indicates that the project will generate profit beginning from the first year of operation. Moreover, the project will break even at 63.25% of capacity utilization and it will payback fully the initial investment less working capital in three years. The result further show that the calculated IRR of the project is 26.70% and the NPV discounted at annual rate of 18% is Birr 183,953. In addition to this, the proposed project possesses wide range of economic and social benefits such as increasing the level of investment, tax revenue, employment creation and better public health and nutrition, and modernization and commercialization of agriculture. Generally the project is technically feasible, financially and commercially viable as well as socially and economically acceptable. Hence the project is worth implementing.

2. Product Description and Application

Horticulture coves a wide range of products which can be grouped into vegetables, herbs, mushroom and flowers. The Amhara region has great potential and suitable natural resources for the production of these groups of horticultural crops. Infact this project refers to only assorted vegetable production which includes cabbages, lettuce, Tomato, Beans, Green pepper, asparagus, Cauliflower, Broccoli, Carrot, Beetroots, Spinach, and Paprika etc. These products can be supplied as green and fresh, chilled or frozen and packed depending on the market location and

requirement. Combining different kinds of vegetable production creates better opportunity for crop rotational practices and gives advantage of utilizing common faculties such as washing, cleaning cooling and storage facilities. Plus marketing assorted vegetables facilitate an increase marketable volume by attracting more customers.

The Amhara Region has large areas and water resources suitable for the production of assorted vegetables. Compared to cereals, pulses and oil crops, vegetables are very high in productivity per unit of land which can play substantial role to increase the food supply of the region. With a growing urban population, which is totally market dependent, and the current food supply shortage, expansion in vegetable production will play a significant role in increasing food supply of the region.

On the other hand, unbalanced and inadequate nutritional status of the people is still a central problem in the region. Deficiency of essential food elements, such as protein, vitamins and minerals are widely observed as basic food intake is below the minimum requirement in the region. Increase in blindness due vitamin a deficiency is an alarming circumstance in region. Therefore, vegetables are important source of vitamins, minerals and also good sources of protein as well.

3. Market Study, Farm Capacity and Production Program

3.1 Market Study
3.1.1 Present Demand and Supply
A study1 revealed that, although the region has enormous potential on vegetable production, little is realized and therefore there is wide demand gap between the demand for and he supply of vegetables. The existing demand gap is estimated at 2,000,000 quintals.

. Potential Assessment Survey Horticulture and Floriculture Report.

3.1.2 Projected Demand

The future demand for vegetables is promising due to two main factors. First, an increase in population in general and urbanization in particular is expected to amplify the domestic consumption of vegetables. At the same time, an increase in income inevitably improves the per capita consumption of vegetables in the future. Consequently, with a conservative growth rate of 3% per annum, the future demand for vegetables is forecasted as shown in table 1 below.
Table 1: Future Demand

Year
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Projected Demand (qts)

2,060,000 2,121,800 2,185,454 2,251,018 2,318,548 2,388,105 2,459,748 2,533,540 2,609,546 2,687,833

3.1.3 Pricing and Distribution

The price of vegetables is volatile and seasonal. Generally, vegetables are much cheaper in rainy seasons. However, even in the rainy seasons the average price of vegetables at major cities is estimated at Birr 4 per kg. Allowing a wide profit margin for the whole and retail sellers, an average farm gate price of Birr 1.75 per kg is set.

3.2

Farm Capacity

The envisaged plantation produces 450,000 kg of various types of vegetables in a year by producing three rounds in one year.

3.3

Production Program

The program is scheduled based on the consideration that the envisaged farm will work throughout the year except for Sundays and public holidays. During the first year of operation the farm will operate at 75 percent capacity and then it grows to 90 percent in the 2 nd year. The capacity will grow to 100 percent starting from the 3rd year. This consideration is developed based on the assumption that there is ample demand for the product so that market and logistics barriers would be eliminated with in the first two years of operation.

4. Raw Materials and Utilities

4.1 Availability and Source of Raw Materials

All raw materials are available in the local market. Cooperating with local agriculture bureaus is important.

4.2

Annual Requirement and Cost of Raw Materials and Utilities

The annual raw material and utility requirement and the associated cost for the envisaged farm is listed in table 2 here under
Table 2: Raw Material Requirements Full Capacity

No. 1 2 3

Material Seeds Fertilizers Weed an Insecticides Total

Qty (kg) 1000 4000 900

Unit 10 3 10

Price (Birr) Local Total 10,000 10,000 24,000 24,000 9,000 9,000 43,000 43,000

The annual utility requirements are calculated as follows: Electricity 20000kw Birr 11,000 Furnace Oil 8000lit Birr 756,000, and Water 1000m3 Birr 2,650 Therefore, the total annual utility cost is assumed to be Birr 69,650. 6

5 Location and Site

This project can be implemented in various localities in ANRS. Given varying ago-ecological factors of the region, there is ample opportunity to grow a wide range of horticultural crops, including fruits, spices and various types of vegetables2.

6 Farming Technology
6.1 Production Process

The production process involves many steps. 1. Clearing the plot The site should be as near as possible to a source of water. This may be a spring, river, little stream, well or artificial reservoir. The soil must always be damp. It will have to be watered often even during the rainy season. Before sowing, remove all the plants and trees on the plot. Shade and the roots of trees prevent vegetables from growing well. Roots of trees take out of the soil mineral salts which should feed the vegetables. 2. Sowing The seeds are sown either directly in the open beds or in a nursery bed. a. Sowing in open beds Certain vegetables do not need to be transplanted. They are sown; they grow and ripen, and are harvested all at the same place. Examples are carrots, beans, okra, and radishes. b. Sowing in a nursery bed The nursery bed is a bed set aside for sowing seeds. When the seeds have grown into young seedlings, these seedlings are transplanted into another bed. Examples are green or sweet peppers, lettuces, tomatoes, leeks, cabbages. c. Sowing in rows or seed holes
2

.Idid

 Sowing in rows Lines are traced with the cord and the seeds sown along the lines. The distance between rows varies according to the size of the vegetables. Sowing in seed holes Little holes are made along the lines, and one or several seeds are placed in each hole. The distance between holes is different according to the size of the vegetables. 3. Taking care a. Watering
Vegetables need plenty of water to develop their roots and leaves. Vegetables do not grow well in dry soil; the soil of the beds must always be moist. In the dry season, each bed of 10 square meters needs about 7 watering cans full of water every day.

b. Weeding and earthing up

Watering a lot means that weeds will grow. Furthermore, the water compacts the soil and a hard layer of earth may form. Weeds take the nourishment (mineral salts) of the vegetables out of the soil. Weeds must be removed often. Earthing up means heaping up soil around the base of the plant. Cultivate often, so as to remove all weeds and loosen the soil.

c. Mulching
In order to protect the soil from the sun and to enrich it with organic matter, cover the soil with straw or herbage. This is called mulching.

d. Tying
Certain vegetables are softer and sell at a better price when they are blanched. You can prevent them turning green by tying together the leaves, for example, endives; or by covering the base of the plant with earthfor example, leeks.

e. Putting up shelters
In regions where the sun is very hot, or the rain very heavy, the young plants must be protected. Over every vegetable bed, put up a shelter made of palm fronds or matting.

4. Harvest and sale

In order to keen quality, utmost care should be made in harvest. Well- packed vegetables are easier to sell and fetch a better price. Vegetables must not be damaged in transport. Alternatives: 1. The traditional subsistence farming 2. Large scale mechanized farming

6.2

Agricultural tools & Equipments

Basically, the planting and harvesting of vegetables do not require much tools and equipments. Tractor is used while preparing the land for the first planting period and therefore, the envisaged plantation shall use hired tractor while preparing the land. The plantation however, needs to acquire 10 medium capacity water pumps and the associated equipments for irrigation purpose. In addition various hand tools are also demanded. The cost of agricultural tools is estimated to be birr 40,000. The water pumps and equipments can be purchased from local suppliers.

6.3

Civil Engineering Cost

The envisaged assorted vegetable plantation requires 10 hectares of land. It also requires 100m2 area for office, store and other related facilities. The land rate is estimated at Birr 800; while the construction is estimated at Birr 100,000.

7 Human Resource and Training Requirement

7.1 Human Resource

The list of human resource requirement for the envisaged plantation is stated in table 3 below.

Table 3: Human Resource Requirement

Salary/Wage (Birr)

Job Title
1 Manager 2 Horticulturists 3 Laborers 1 2 3 4 5 6 7 Support Staff Administration & Finance Accountant Cashers Sales Clerks Store Keeper Driver Guards Total Employment Benefits 20% of Annual Salary

No.

Monthly Annual 1 4,000 48,000 3 2,500 90,000 40 400 192,000 1 1 2 3 1 1 5 58 2,000 1,000 850 600 600 850 350 24,000 12,000 20,400 21,600 7,200 10,200 21,000 446,400 89,280 535,680

7.2

Training Requirement

Commercial vegetable plantation is a risky business which requires utmost care. Therefore, appropriate trainings are imperative for all workers. Annual budget of Birr 53,000 is allotted for training purpose and it is included in the working capital.

8 Financial Analysis
8.1 Underlying Assumption

The financial analysis of vegetable plantation is based on the data provided in the preceding chapters and the following assumptions.

10

A. Construction and Finance

Preparation period Source of finance Tax holidays Bank interest rate Discount for cash flow Value of land Spare Parts, Repair & Maintenance

2 year 40% equity and 60% loan 2 years 12% 18% Based on lease rate of ANRS 3% of fixed investment

B. Depreciation Building Machinery and equipment Office furniture Vehicles Pre-production (amortization) 5% 10% 10% 20% 20%

C. Working Capital (Minimum Days of Coverage) Raw Material-Local Supplies in Stock Spare Parts in Stock and Maintenance Work in Progress Finished Products Accounts Receivable Cash in Hand Accounts Payable 30 30 30 10 15 30 30 30

11

8.2

Investment

The total investment cost of the project including working capital at full capacity is estimated at Birr 621,349.01 as shown in Table 4 below. The Owner shall contribute 40% of the finance in the form of equity while the remaining 60% is to be financed by bank loan.
Table 4: Initial Investment and Working Capital

Total Initial Investment Item

Land Building and civil works Office equipment Vehicles Machinery & equipment Total Fixed Investment Pre production capital expenditure Total Initial Investment Working capital at full capacity

Cost
40.00 100,000.00 75,000.00 250,000.00 40,000.00 465,040.00 23,252.00 488,292.00 133,057.01

621,349.01 *Pre-production capital expenditure includes - all expenses for pre-investment studies, consultancy fee during construction and expenses for companys establishment, project administration expenses, commission expenses, preproduction marketing and interest expenses during construction.

Total

8.3

Production Costs

The total production cost at full capacity operation is estimated at Birr 778,168.73 as detailed in Table 5 below.

12

Table 5: Production Costs

Total Production Cost at Full Capacity Items Cost

1. Raw materials 2. Utilities 3. Wages and Salaries 4. Spares and Maintenance Factory costs 5. Depreciation 6. Financial costs 43,000.00 69,650.00 535,680.00 13,951.20 662,281.20 71,150.40 44,737.13 778,168.73

Total Production Cost 8.4

I.

Financial Evaluation

Profitability

According to the projected income statement attached in the annex part (see annex 3) the project will generate profit beginning from the first year of operation. Ratios such as the percentage of net profit to total sales, return on equity and return on total investment are 1.44%, 18.27% and 3.91% in the first year and are gradually rising to 24.80%, 25.14% and 62.85%, respectively. The first year profit amount Birr 9,713. Annual profits increases and reach the maximum Birr 156,216 at the eighth year. The income statement and all other profitability indicators show that the project is viable. II. Breakeven Analysis

The breakeven point of the project is estimated by using income statement projection. Accordingly, the project will break even at 63.25% of capacity utilization.

13

III.

Payback Period

Investment cost and income statement projection are used in estimating the project payback period. The projects will payback fully the initial investment less working capital in third year of operation. IV. Simple Rate of Return

For the envisaged plantation the simple rate of return equals to 20.1%. V. Internal Rate of Return and Net Present Value

Based on cash flow statement described in the annex part, the calculated IRR of the project is 26.7% and the net present value at 18 % discount is Birr 183,953.44. VI. Sensitivity Analysis

The envisaged plantation is profitable even with considerable cost increment. That is the plantation maintains to be profitable starting from the first year when 10 % cost increment takes place although the total profit drops to Birr 821,701. If sales revenue drops by 10%, total profit drops to Birr 494,714. However, in both cases the project remains profitable.

9 Economic and Social Benefit and Justification

The envisaged project possesses wide range of benefits where it promotes the socio-economic goals and objectives stated in the strategic plan of the Amhara National Regional State. These benefits are listed as follows A. Profit Generation The project is found to be financially viable and earns about of Birr 1.14 within the project life. Such result induces the project promoters to reinvest the profit which, therefore, increases the investment magnitude in the region.

14

B. Tax Revenue In the project life under consideration, the government will collect about Birr 445,530 from corporate tax payment alone (i.e. excluding income tax, sales tax and VAT). Such result create additional fund for the regional government that will be used in expanding social and other basic services in the region C. Employment and Income Generation The proposed project is expected to create employment opportunity to 58 citizens of the region. D. Pro Environment Project The proposed production is environment friendly. E. Public Health and Nutrition Eating fresh and clean vegetables improves and public health and nutrition. F. Modernization of Agriculture The proposed project compliments to the concerted efforts to modernize and commercialize Ethiopian agriculture.

15

ANNEXES

16

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

CONSTRUCTION
Year 1 Capacity Utilization (%) 1. Total Inventory Raw Materials in Stock- Total Raw Material-Local Raw Material-Foreign Factory Supplies in Stock Spare Parts in Stock and Maintenance Work in Progress Finished Products 2. Accounts Receivable 3. Cash in Hand CURRENT ASSETS 4. Current Liabilities Accounts Payable TOTAL NET WORKING CAPITAL REQUIREMENTS INCREASE IN NET WORKING CAPITAL 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 Year 2 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1 75% 53,784 3,518 3,518 0 600 1,141 15,002 30,004 73,636 49,527 173,429 73,636 73,636 99,793 99,793

PRODUCTION
2 85% 60,955 3,987 3,987 0 680 1,294 17,002 34,005 83,455 56,131 196,553 83,455 83,455 113,098 13,306 3 90% 64,541 4,222 4,222 0 720 1,370 18,002 36,005 88,364 59,432 208,115 88,364 88,364 119,751 6,653 4 100% 71,712 4,691 4,691 0 800 1,522 20,003 40,005 98,182 66,036 231,239 98,182 98,182 133,057 13,306

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

5 Capacity Utilization (%) 1. Total Inventory Raw Materials in Stock-Total Raw Material-Local Raw Material-Foreign Factory Supplies in Stock Spare Parts in Stock and Maintenance Work in Progress Finished Products 2. Accounts Receivable 3. Cash in Hand CURRENT ASSETS 4. Current Liabilities Accounts Payable TOTAL NET WORKING CAPITAL REQUIREMENTS INCREASE IN NET WORKING CAPITAL 100% 71,712 4,691 4,691 0 800 1,522 20,003 40,005 98,182 66,036 231,239 98,182 98,182 133,057 0 6 100% 71,712 4,691 4,691 0 800 1,522 20,003 40,005 98,182 66,036 231,239 98,182 98,182 133,057 0 7 100% 71,712 4,691 4,691 0 800 1,522 20,003 40,005 98,182 66,036 231,239 98,182 98,182 133,057 0

(continued)

PRODUCTION
8 100% 71,712 4,691 4,691 0 800 1,522 20,003 40,005 98,182 66,036 231,239 98,182 98,182 133,057 0 9 100% 71,712 4,691 4,691 0 800 1,522 20,003 40,005 98,182 66,036 231,239 98,182 98,182 133,057 0 10 100% 71,712 4,691 4,691 0 800 1,522 20,003 40,005 98,182 66,036 231,239 98,182 98,182 133,057 0

Annex 2: Cash Flow Statement (in Birr)

CONSTRUCTION
Year 1 TOTAL CASH INFLOW 1. Inflow Funds Total Equity Total Long Term Loan Total Short Term Finances 2. Inflow Operation Sales Revenue Interest on Securities 3. Other Income TOTAL CASH OUTFLOW 4. Increase In Fixed Assets Fixed Investments Pre-production Expenditures 5. Increase in Current Assets 6. Operating Costs 7. Corporate Tax Paid 8. Interest Paid 9.Loan Repayments 10.Dividends Paid Surplus (Deficit) Cumulative Cash Balance 244,146 244,146 97,658 146,488 0 0 0 0 0 244,146 244,146 232,520 11,626 0 0 0 0 0 0 0 0 Year 2 377,203 377,203 150,881 226,322 0 0 0 0 0 244,146 244,146 232,520 11,626 0 0 0 0 0 0 133,057 133,057 1 748,636 73,636 0 0 73,636 675,000 675,000 0 0 767,565 0 0 0 173,429 496,418 0 97,719 0 0 -18,929 114,128

PRODUCTION
2 774,818 9,818 0 0 9,818 765,000 765,000 0 0 691,980 0 0 0 23,124 561,984 0 44,737 62,135 0 82,838 196,966 3 814,909 4,909 0 0 4,909 810,000 810,000 0 0 737,785 0 0 0 11,562 594,767 32,040 37,281 62,135 0 77,124 274,090 4 909,818 9,818 0 0 9,818 900,000 900,000 0 0 817,025 0 0 0 23,124 660,334 41,607 29,825 62,135 0 92,794 366,883

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

PRODUCTION
TOTAL CASH INFLOW 1. Inflow Funds Total Equity Total Long Term Loan Total Short Term Finances 2. Inflow Operation Sales Revenue Interest on Securities 3. Other Income TOTAL CASH OUTFLOW 4. Increase In Fixed Assets Fixed Investments Pre-production Expenditures 5. Increase in Current Assets 6. Operating Costs 7. Corporate Tax Paid 8. Interest Paid 9. Loan Repayments 10.Dividends Paid Surplus (Deficit) Cumulative Cash Balance 5 900,000 0 0 0 0 900,000 900,000 0 0 788,681 0 0 0 0 660,334 43,844 22,369 62,135 0 111,319 478,202 6 900,000 0 0 0 0 900,000 900,000 0 0 799,857 0 0 0 0 660,334 62,476 14,912 62,135 0 100,143 578,345 7 900,000 0 0 0 0 900,000 900,000 0 0 794,638 0 0 0 0 660,334 64,713 7,456 62,135 0 105,362 683,707 8 900,000 0 0 0 0 900,000 900,000 0 0 727,284 0 0 0 0 660,334 66,950 0 0 0 172,716 856,423 9 900,000 0 0 0 0 900,000 900,000 0 0 727,284 0 0 0 0 660,334 66,950 0 0 0 172,716 1,029,140 10 900,000 0 0 0 0 900,000 900,000 0 0 727,284 0 0 0 0 660,334 66,950 0 0 0 172,716 1,201,856

Annex 3: DISCOUNTED CASH FLOW-TOTAL CAPITAL INVESTED

CONSTRUCTION
Year 1 TOTAL CASH INFLOW 1. Inflow Operation Sales Revenue Interest on Securities 2. Other Income TOTAL CASH OUTFLOW 3. Increase in Fixed Assets Fixed Investments Pre-production Expenditures 4. Increase in Net Working Capital 5. Operating Costs 6. Corporate Tax Paid NET CASH FLOW CUMULATIVE NET CASH FLOW Net Present Value (at 18%) Cumulative Net present Value 0 0 0 0 0 244,146 244,146 232,520 11,626 0 0 0 -244,146 -244,146 -244,146 -244,146 Year 2 0 0 0 0 0 244,146 244,146 232,520 11,626 0 0 0 -244,146 -488,292 -206,903 -451,049 1 675,000 675,000 675,000 0 0 596,210 0 0 0 99,793 496,418 0 78,790 -409,502 56,585 -394,464

PRODUCTION
2 765,000 765,000 765,000 0 0 575,290 0 0 0 13,306 561,984 0 189,710 -219,792 115,464 -279,000 3 810,000 810,000 810,000 0 0 601,420 0 0 0 6,653 594,767 0 208,580 -11,212 107,583 -171,417 4 900,000 900,000 900,000 0 0 715,247 0 0 0 13,306 660,334 41,607 184,753 173,541 80,757 -90,660

Annex 3: DISCOUNTED CASH FLOW-TOTAL CAPITAL INVESTED

PRODUCTION
5 TOTAL CASH INFLOW 1. Inflow Operation Sales Revenue Interest on Securities 2. Other Income TOTAL CASH OUTFLOW 3. Increase in Fixed Assets Fixed Investments Pre-production Expenditures 4. Increase in Net Working Capital 5. Operating Costs 6. Corporate Tax Paid NET CASH FLOW CUMULATIVE NET CASH FLOW Net Present Value (at 18%) Cumulative Net present Value Net Present Value (at 18%) Internal Rate of Return 900,000 900,000 900,000 0 0 704,178 0 0 0 0 660,334 43,844 195,822 369,363 72,539 -18,121 6 900,000 900,000 900,000 0 0 722,810 0 0 0 0 660,334 62,476 177,190 546,553 55,624 37,503 7 900,000 900,000 900,000 0 0 725,047 0 0 0 0 660,334 64,713 174,953 721,506 46,544 84,047 8 900,000 900,000 900,000 0 0 727,284 0 0 0 0 660,334 66,950 172,716 894,223 38,940 122,987

(Continued) 9 900,000 900,000 900,000 0 0 727,284 0 0 0 0 660,334 66,950 172,716 10 900,000 900,000 900,000 0 0 727,284 0 0 0 0 660,334 66,950 172,716 1,239,656 27,966 183,953

1,066,939 33,000 155,987

183,953.44

26.7%

Annex 4: NET INCOME STATEMENT ( in Birr)

PRODUCTION
1 2
85%

3
90%

4
100%

5
100%

Capacity Utilization (%)

1. Total Income Sales Revenue Other Income 2. Less Variable Cost VARIABLE MARGIN (In % of Total Income) 3. Less Fixed Costs OPERATIONAL MARGIN (In % of Total Income) 4. Less Cost of Finance 5. GROSS PROFIT 6. Income (Corporate) Tax 7. NET PROFIT RATIOS (%) Gross Profit/Sales Net Profit After Tax/Sales Return on Investment Return on Equity

75%

675,000 675,000 0 331,044 343,956 50.96 236,524 107,432 15.92 97,719 9,713 0 9,713

765,000 765,000 0 375,183 389,817 50.96 257,951 131,866 17.24 44,737 87,128 0 87,128

810,000 810,000 0 397,253 412,747 50.96 268,665 144,082 17.79 37,281 106,801 32,040 74,761

900,000 900,000 0 441,392 458,608 50.96 290,092 168,516 18.72 29,825 138,691 41,607 97,084

900,000 900,000 0 441,392 458,608 50.96 290,092 168,516 18.72 22,369 146,147 43,844 102,303

1.44% 1.44% 18.27% 3.91%

11.39% 11.39% 21.93% 35.06%

13.19% 9.23% 18.43% 30.08%

15.41% 10.79% 20.42% 39.06%

16.24% 11.37% 20.06% 41.16%

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

PRODUCTION
6 7
100%

8
100%

9
100%

10
100%

Capacity Utilization (%)

1. Total Income Sales Revenue Other Income 2. Less Variable Cost VARIABLE MARGIN (In % of Total Income) 3. Less Fixed Costs OPERATIONAL MARGIN (In % of Total Income) 4. Less Cost of Finance 5. GROSS PROFIT 6. Income (Corporate) Tax 7. NET PROFIT RATIOS (%) Gross Profit/Sales Net Profit After Tax/Sales Return on Investment Return on Equity

100%

900,000 900,000 0 441,392 458,608 50.96 235,441 223,166 24.80 14,912 208,254 62,476 145,778

900,000 900,000 0 441,392 458,608 50.96 235,441 223,166 24.80 7,456 215,710 64,713 150,997

900,000 900,000 0 441,392 458,608 50.96 235,441 223,166 24.80 0 223,166 66,950 156,216

900,000 900,000 0 441,392 458,608 50.96 235,441 223,166 24.80 0 223,166 66,950 156,216

900,000 900,000 0 441,392 458,608 50.96 235,441 223,166 24.80 0 223,166 66,950 156,216

23.14% 16.20% 25.86% 58.65%

23.97% 16.78% 25.50% 60.75%

24.80% 17.36% 25.14% 62.85%

24.80% 17.36% 25.14% 62.85%

24.80% 17.36% 25.14% 62.85%

Annex 5: Projected Balance Sheet (in Birr)

CONSTRUCTION
TOTAL ASSETS 1. Total Current Assets Inventory on Materials and Supplies Work in Progress Finished Products in Stock Accounts Receivable Cash in Hand Cash Surplus, Finance Available Securities 2. Total Fixed Assets, Net of Depreciation Fixed Investment Construction in Progress Pre-Production Expenditure Less Accumulated Depreciation 3. Accumulated Losses Brought Forward 4. Loss in Current Year TOTAL LIABILITIES 5. Total Current Liabilities Accounts Payable Bank Overdraft 6. Total Long-term Debt Loan A Loan B 7. Total Equity Capital Ordinary Capital Preference Capital Subsidies 8. Reserves, Retained Profits Brought Forward 9.Net Profit After Tax Dividends Payable Retained Profits Year 1 244,146 0 0 0 0 0 0 0 0 244,146 0 232,520 11,626 0 0 0 244,146 0 0 0 146,488 146,488 0 97,658 97,658 0 0 0 0 0 0 Year 2 621,349 133,057 0 0 0 0 0 133,057 0 488,292 232,520 232,520 23,252 0 0 0 621,349 0 0 0 372,809 372,809 0 248,540 248,540 0 0 0 0 0 0 1 704,699 287,557 5,260 15,002 30,004 73,636 49,527 114,128 0 417,142 465,040 0 23,252 71,150 0 0 704,699 73,636 73,636 0 372,809 372,809 0 248,540 248,540 0 0 0 9,713 0 9,713

PRODUCTION
2 739,510 393,519 5,961 17,002 34,005 83,455 56,131 196,966 0 345,991 465,040 0 23,252 142,301 0 0 739,510 83,455 83,455 0 310,675 310,675 0 248,540 248,540 0 0 9,713 87,128 0 87,128 3 757,046 482,205 6,312 18,002 36,005 88,364 59,432 274,090 0 274,841 465,040 0 23,252 213,451 0 0 757,046 88,364 88,364 0 248,540 248,540 0 248,540 248,540 0 0 96,842 74,761 0 74,761 4 801,813 598,122 7,013 20,003 40,005 98,182 66,036 366,883 0 203,690 465,040 0 23,252 284,602 0 0 801,813 98,182 98,182 0 186,405 186,405 0 248,540 248,540 0 0 171,603 97,084 0 97,084

Annex 5: Projected Balance Sheet (in Birr):

TOTAL ASSETS 1. Total Current Assets Inventory on Materials and Supplies Work in Progress Finished Products in Stock Accounts Receivable Cash in Hand Cash Surplus, Finance Available Securities 2. Total Fixed Assets, Net of Depreciation Fixed Investment Construction in Progress Pre-Production Expenditure Less Accumulated Depreciation 3. Accumulated Losses Brought Forward 4. Loss in Current Year TOTAL LIABILITIES 5. Total Current Liabilities Accounts Payable Bank Overdraft 6. Total Long-term Debt Loan A Loan B 7. Total Equity Capital Ordinary Capital Preference Capital Subsidies 8. Reserves, Retained Profits Brought Forward 9. Net Profit After Tax Dividends Payable Retained Profits 5 841,981 709,441 7,013 20,003 40,005 98,182 66,036 478,202 0 132,540 465,040 0 23,252 355,752 0 0 841,981 98,182 98,182 0 124,270 124,270 0 248,540 248,540 0 0 268,687 102,303 0 102,303 6 925,624 809,584 7,013 20,003 40,005 98,182 66,036 578,345 0 116,040 465,040 0 23,252 372,252 0 0 925,624 98,182 98,182 0 62,135 62,135 0 248,540 248,540 0 0 370,990 145,778 0 145,778 7 1,014,486 914,946 7,013 20,003 40,005 98,182 66,036 683,707 0 99,540 465,040 0 23,252 388,752 0 0 1,014,486 98,182 98,182 0 0 0 0 248,540 248,540 0 0 516,767 150,997 0 150,997

Continued 8 1,170,702 1,087,662 7,013 20,003 40,005 98,182 66,036 856,423 0 83,040 465,040 0 23,252 405,252 0 0 1,170,702 98,182 98,182 0 0 0 0 248,540 248,540 0 0 667,764 156,216 0 156,216 9 1,326,919 1,260,379 7,013 20,003 40,005 98,182 66,036 1,029,140 0 66,540 465,040 0 23,252 421,752 0 0 1,326,919 98,182 98,182 0 0 0 0 248,540 248,540 0 0 823,981 156,216 0 156,216 10 1,483,135 1,433,095 7,013 20,003 40,005 98,182 66,036 1,201,856 0 50,040 465,040 0 23,252 438,252 0 0 1,483,135 98,182 98,182 0 0 0 0 248,540 248,540 0 0 980,197 156,216 0 156,216

PRODUCTION

10