Investment Office ANRS

Project Profile on the Establishment

of Television Set Assembly Plant.

Development Studies
Associates (DSA)

October 2008
Addis Ababa

Table of Contents
1. Summary.............................................................................................1
2. Product Description and Application...............................................1
3. Market Study, Plant Capacity and Production Program...............2
3.1. Market Study........................................................................................................................2
3.1.1.
3.1.2.
3.1.3.

Present Supply and Demand.............................................................................2

Projected Demand............................................................................................ 3
Pricing and Distribution....................................................................................4

3.2. Plant Capacity.......................................................................................................................4

3.3. Production Program.............................................................................................................4

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

4.1. Availability and Source of Raw Materials..........................................................................4
4.2. Annual Requirement and Cost of Raw Materials and Utilities........................................5

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

6. Technology and Engineering.............................................................6
6.1. Production Process...............................................................................................................6
6.2. Machinery and Equipment..................................................................................................7
6.3. Civil Engineering Cost.........................................................................................................7

7. Human Resource and Training Requirement..................................8

7.1. Human Resource...................................................................................................................8
7.2. Training..................................................................................................................................9

8. Financial Analysis...............................................................................9
8.1. Underlying Assumption........................................................................................................9
8.2. Investment cost....................................................................................................................10
8.3. Production Cost...................................................................................................................11
8.4. Financial Evaluation...........................................................................................................11
9.

Economic and Social Benefit and Justification................................................................12

ANNEXES.............................................................................................15

1. Summary
The project envisages the establishment of television set assembly plant.
The total investment outlay of the project is estimated at Birr 11 million of which Birr 2.3
million is required to finance the fixed investment cost and the balance is for pre-production
capital expenditure and initial working capital.
The demand for the proposed output is expected to emanate from the urban population.
Currently the demand estimated at 98527 pcs and it is expected reach 140235 in the year 2017.
for this product is met through import.
The project is expected to generate employment opportunities for 17 people. The internal rate of
return (IRR) of the project is 18.3%. The Net present value at 18% discount rate is Birr 1.26
million.

2. Product Description and Application

The television manufacturing is more technology intensive and rapid in its technical renovation
than any other industries, with diverse performances and functions in its products. Economically,
compared with heavy and chemical industries, it is an industry requiring relatively lower capital
investments. It is characterized by low resources and energy consumptions and also is virtually
pollution-free.
The television industry is relatively easy in its international division of labour, and it can usually
be multinational with ease and highly value-additive. It occupies an important position in the
electronics industry, because electronics products worldwide tend to be closely related in their
order to the B/W TV, colour TV, audio articles, VTR and then to computers starting from radio.
Black and white (B/W) TV set is composed of 300 parts and the coloured one is composed of
800 parts.

3. Market Study, Plant Capacity and Production Program

3.1. Market Study
3.1.1. Present Supply and Demand
The demand for television sets in Ethiopia is increasing as a result of the expansion of urban
centres as well as the establishment of TV satellite stations in almost all administrative
regions of the country. However, since almost there are no domestic TV assembling plants 1,
the demand for TV sets is met through import. The annual import of TV sets during the last
ten years covering the period 1997- 2007 is provided in Table 1.
Table 1: Import of TV Sets in Ethiopia

Year
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007

Coloured TV
CIF Value
Number
(Birr)
42100
1193
31834
20107
92734
42010
124691
127582
177726
8113
374023

53646579
42635013
48177753
30477849
55255939
50791393
89626930
365948914
109745615
212095673
156110247

B/W TV
CIF Value
Number
(Birr)
1723
750
10
336
1384
2257
3385
2822
10187
304
2897

3862225
1082943
144820
343509
409423
1214829
2138986
1395012
2272144
2985415
383334

Average
94738 110410173
2369
1475694
Source:
CSA and Customs Authority
As can be observed from the above table the country imported an average of 94, 738 coloured (at
average cost of Birr 11 million) and 2369 Black and White (at average cost of Birr 1.48 million)
television sets per annum during 1997 - 2007. This figure does not include TV sets imported
illegally.

. A local manufacturer United Tebarek started to assemble VESTEL TV sets in Kaliti, AA suburb, in the year
1999. In the year 2001, it started to export VESTEL TV sets to neighbouring African countries. The current
status of this manufacturing is not known. However limited, its experience shows that there might be some
possibility of exporting as TV sets to the neighbouring countries.

On the other hand, the future demand for TV sets is expected to be much higher for the following
reasons:

The demand for TV sets will increase along with the rapid urbanization.

The demand for TV sets in the country will increase along with the expansion of TV
satellite stations in different administrative regions of the country.

3.1.2. Projected Demand

The current and future demand for Colour TV Sets in Ethiopia is estimated on the basis of
average import. Accordingly, the current effective demand for the TV set is estimated at 94738
TVS. It is assumed that the future demand for TV set is expected to increase in line with urban
population growth rate which is 4% per annum. Accordingly, the future demand for TV sets is
provided in Table 2.
Table 2: Projected Demand for Colour TV Sets in Ethiopia
Year
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
Average

Demand
94738
98527
102468
106567
110830
115263
119873
124668
129655
134841
140235
116151

As can be seen from the above table, it is anticipated that an average of about 116,151 TV sets
will be annually demanded in the projection years, i.e., 2007 -2017. Moreover, considering the
comparative advantages of labour cost and absence of domestic TV assembling plant it is
economically justified to establish TV manufacturing plant in the country.

3.1.3. Pricing and Distribution

The price of colour TV is determined on the basis of import parity i.e, by adding up 20% on C&F
value so as to cover duties, port clearances and local costs like insurance, inland transport and
clearing. Accordingly the average selling price of a colour TV set is worked out at Birr 1650 and
this price is taken to be a proxy to selling price of the envisaged product.
In Ethiopia, TV sets are marketed both through wholesale and retail outlets. However, this
project is proposed to distribute its product through wholesale channel.

3.2. Plant Capacity

The envisaged plant will have a capacity to produce 15, 000 colure TV sets per annum. The
colour TV set to be produced will be a 21 inch model, having a wooden cabinet and operating on
a 220V-240V line. The plant will operate single shift, 8 hours a day for 275 days a year after
subtracting the holidays, Sundays and maintenance stoppages.

3.3. Production Program

The TV assembly plant will start operation at 75% of its capacity in the first year, and then build
up its production capacity to 85% and 100% in the second and third year of operation,
respectively. The fact that the production equipment are new, and operators usually take
sometime to develop the specific skill and know-how required, the production build-up
programme is made to start at relatively lower level (75%) and then gradually rise to full
capacity (100%).

4. Raw Materials and Utilities

4.1. Availability and Source of Raw Materials
Many of the inputs or components will be imported.

4.2. Annual Requirement and Cost of Raw Materials and Utilities

Materials and components required to assemble colour TV set consist of local supplies and
imports. The complete list of materials and components, costs involved to assembly 15,000 sets
are listed in Table 3 below.
Table 3: Material Cost

No.
1
2
3
4
5
6
7
8
9
10
11
12

13
14
15
16
17
18

Cost (000 Birr)

Item
LC
FC*
Packaging (Carton)
379
Cabinet
3790
Back
288
Picture Tube
252
4036
Speaker
50
161
Degaussing coil and Earth baid
124
Mains lead
43
Printed circuit Boards
426
Integrated Circuits (ICS)
129
469
Transistors/Nodes
50
1264
Resistors-fixed
252
1112
variable
2521
Capacitors electrolytic
62
Ceramic
81
Other
361
Mains Transformer
71
85
Flyback Transformer
121
290
Drive Transformer
29
733
Tuner Transformer
101
1213
Customer controls
99
Miscellaneous
50
1894
Total
5607
14931
Note: LC Local Currency; FC Foreign Currency
*

Total
379
3790
288
4288
211
124
43
426
598
1315
1365
2521
62
81
361
157
411
762
1314
99
1944
20538

Utilities
Inputs required by the TV assembly plant include electricity and water. The total cost of utilities
required annually is estimated at Birr 20,000.

5. Location and Site

The selected location is Bahr Dar. Barhr Dar is selected for because of it proximity to the
potentials user, availability of developed infrastructures including international Airport.

6. Technology and Engineering

6.1. Production Process
The TV set to be assembled in the envisaged plant consists of a cabinet and speakers, picture
tube, and chassis with printed circuit boards (PCB), controls and auxiliaries such as transformers.
The sequence of operations involved in TV assembly consists of the following.
-

Sample checking of components

preparing cabinet and fitting speaker

Fitting picture tube and chassis

Solder wiring and fitting tuner controls

Mechanical inspection and warm-up (15 mins)

Adjusting focus, picture size and geometry

Quality control check

Closing back and safety check.

Plastic cabinets are at present widely used. However since the use of plastic will require the
purchase of a new large injection moulding machine, a wooden cabinets are proposed as its
production can be sub-contracted to a local wood-working industries.
The assembly and testing operation is carried out at a series of work stations served by a short
length of roller conveyor on which TV sets resting on pallets are slid from the conveyor onto a
side table. The pallets (platforms) return on a slide beneath the conveyer. Working single shift 8
hours a day, and 275 days a year, the total numbers of working hours is 2200 hrs. Thus, it would
be possible to complete the assembly of about seven TV sets per hour.
The sources of technology are countries like Korea, India and China, the addresses of which
are indicated below.
-

China National Machinery

Import and Export Corporation

Shandong Branch

82 Fan Hsiu Road

Tsingtao
- The National small Industries
Corporation Limited
Ladhu Udgog Bhavan
Okhla industrial Estate
New Delhi-110 020
India

6.2. Machinery and Equipment

Machinery and equipment required for TV assembly plant, together with their costs, is shown
in Table 4. All the machineries and equipment should be imported and thus require foreign
currency.
Table 4: Machinery and Equipment (000 Birr)

No

Item

Cost

Signal Transmission Tester

Assembly Test Meters

Q. A Lab Measuring Gear

Oscilloscope

32.2

Conveyor

86.8

Jigs and Tools

Semi-automatic Insertion

Test Rigs

Colure Signal source

10

PCB Tester

155.4
82.6
103.6

123.2
79.8
187.6
63.0
126.0

Total

1,040.2

6.3. Civil Engineering Cost

Building area required by the assembly plant is estimated at 500 m 2. It consists of stores,
production (assembly) hall, inspection (QA Lab) room, and offices; at least 200 m 2 free space is
required. Assuming unit cost of Birr 2000 per m 2 of building will be Birr 1 million. The land
lease expense is Birr 42,000. One fifth of these Birr 42 000 shall be paid per annum.

7. Human Resource and Training Requirement

7.1. Human Resource
The total human resource requirement together with monthly wages and salaries, and the
associated annual expenditures is presented in Table 5.
Table 5: Human Resource Requirement

1
2
3
4
5
6
7
8
9
10
11
12
13
14

Description
Manager
Electronics Engineer
Accountant
Personnel Officer
Clerks
Inspection (Quality
Assurance)
Assemble/solder
Inspect/signal adjustment
Focusing
Line quality control
Fit back
Safety check
Cleaning & packaging
Driver
Benefits (20%)
Total Cost

No
1
1
1
1
3

Monthly
Salary
(Birr)
4,500
3,000
1,500
1,500
800

Annual
Salary
(Birr)
54,000
36,000
18,000
18,000
28,800

1
1
1
1
1
1
1
1
1
16

1,500
1,500
1,500
1,500
1,500
1,500
1,500
1,500
800
24,100

18,000
18,000
18,000
18,000
18,000
18,000
18,000
18,000
9,600
308,400
61,680
370,080

7.2. Training
Some training is required for the production workers. It can be carried out at plant site during
erection, commissioning and testing. Annual training expenditure is estimated at Birr 35,000 and
it is included in he working capital.

8. Financial Analysis
8.1. Underlying Assumption
The financial analysis of particleboard is based on the data provided in the preceding discussions
and the following assumptions.
Box 1: Construction and Finance

Construction period

2 years

Source of finance

40% equity and 60% loan

Tax holidays

2 years

Bank interest rate

12%

Discount for cash flow*

18%

Value of land

Based on lease rate of ANRS

Spare Parts, Repair & Maintenance 3% of fixed investment

Note: 18% is set because its the maximum interest rate available in the financial market in Ethiopia
Box 2: Depreciation

Building

5%

Machinery and equipment

10%

Office furniture

10%

Vehicles

20%

Pre-production (amortization)

20%

Box 3: Working Capital

Raw Material-Local

30 days

Raw Material-Foreign

120 days

Factory Supplies in Stock

30 days

Spare Parts in Stock and Maintenance 30 days

Work in Progress
Finished Products
Accounts Receivable
Cash in Hand
Accounts Payable

10 days
15 days
30 days
30 days
30 days

8.2. Investment cost

The project requires Birr 2.41 million initial investment and about Birr 8.9 million working
capita at full capital. The total Initial Investment, therefore, is about Birr 11.35 million. The
detail is shown in Table 6.
Table 6: Total Initial Investment

Total Initial Investment

Item
Land
Building and civil works
Office equipment
Vehicles

Cost
2,100.00
500,000.00
100,000.00
650,000.00

Plant machinery & equipment

Total Fixed Investment
Pre production capital expenditure
Total Initial Investment
Working capital at full capacity

Total

1,040,200.00
2,292,300.00
114,615.00
2,406,915.00
8,941,954.55
11,348,869.55

10

8.3. Production Cost

The total production cost at full capacity operation is estimated at Birr 22.89 million. The detail
is shown in Table 7 below.
Table 7: Production Cost (in Birr)

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

Total Production Cost

20,537,580
20,000.00
370,080.00
68,769
20,996,429
291,943
1,603,284
22,891,656

8.4. Financial Evaluation

A. Profitability
According to the projected income statement attached in the annex part, the project will generate
profit beginning from the first year of operation. The percentage of net profit to total sales at the
first year of operation is 1.25% and is rising with time to reach about 11.24% at the 10 th year. The
total profit during the 10 operational years will amount Birr 14.87 million.

11

B. Breakeven Analysis
The breakeven point of the project is estimated by using income statement projection.
Accordingly, the project will break even at 15.4% of capacity utilization.
C. 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 the 2 nd year
time.
D. Simple Rate of Return
Simple rate of return refers to the ratio of net profit plus interest to the total capital invested for a
single year at full capacity operation. Accordingly, for the envisaged plant return amounts to
16.8%.
E. Internal Rate of Return and Net Present Value
Based on cash flow statement the calculated IRR of the project is 18.3% and the net present
value at 18 % discount is Birr 1.26 million.
F. Sensitivity Analysis
The sensitivity analysis shows that the plant will be profitable starting from the first year of
operation even if 10 percent increase in cost takes place. Moreover, the project will pay back its
initial investment within 4 years and 3 months under this condition.

9. Economic and Social Benefit and Justification

The proposed project also possesses wide range of benefits that complement the financial
feasibility obtained earlier. These benefits are listed as follows

12

I. Profit Generation
The project is found to be financially viable and earns a net profit of about birr 14.87 million
within the project life. Such result induces the project promoters to reinvest the profit which,
therefore, increases the investment magnitude in the region
II.

Tax Revenue

In the project life under consideration, the region will collect about birr 5.72 million from
corporate tax payment alone (i.e. excluding income tax, sales tax and VAT). Such result create
additional fund for the regional government that will be used in expanding social and other basic
services in the region
III.

Import Substitution and Foreign Exchange Saving

The analysis conducted revealed the presence of dependence on imported TV sets. Thus, with the
advent of this project a portion of the import burden will be relived. That is, based on the
projected figure we learn that in the project life an estimated amount of Birr 230.4 million will be
saved as a result of the proposed project. This will create room to save hard currency to be used
in other vital and strategic sectors
IV.

Employment and Income Generation

The proposed project is expected to create employment opportunity to several citizens of the
country. That is, it will provide permanent employment to 16 professionals as well as support
staffs.

13

V.

Pro Environment Project

The proposed production process is environment friendly. In general the envisaged project
promotes the socio-economic goals and objectives stated in the strategic plan of the Amhara
National Regional State.
VI.

Diversification/ Integration

The plant contributes to industrialization of the economy and enhances intersectional linkages

14

ANNEXES

15

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

CONSTRUCTION
Year 1
Capacity Utilization (%)

Year 2

PRODUCTION
1

0%

0%

75%

85%

100%

100%

12,019,724

13,622,354

16,026,299

16,026,299

5,345,174

6,057,864

7,126,899

7,126,899

Raw Material-Local

458,739

519,904

611,651

611,651

Raw Material-Foreign

4,886,435

5,537,960

6,515,247

6,515,247

Factory Supplies in Stock

17,418

19,740

23,224

23,224

Spare Parts in Stock and Maintenance

5,627

6,377

7,502

7,502

Work in Progress

435,444

493,503

580,592

580,592

Finished Products

870,888

987,006

1,161,184

1,161,184

2. Accounts Receivable

1,963,636

2,225,455

2,618,182

2,618,182

3. Cash in Hand

31,916

36,171

42,554

42,554

8,670,102

9,826,116

11,560,136

11,560,136

4. Current Liabilities

1,963,636

2,225,455

2,618,182

2,618,182

Accounts Payable

1,963,636

2,225,455

2,618,182

2,618,182

TOTAL NET WORKING CAPITAL REQUIREMENTS

6,706,466

7,600,661

8,941,955

8,941,955

INCREASE IN NET WORKING CAPITAL

6,706,466

894,195

1,341,293

1. Total Inventory
Raw Materials in Stock- Total

CURRENT ASSETS

ANNEX 1: Continued
PRODUCTION
5

10

100%

100%

100%

100%

100%

100%

16,026,299

16,026,299

16,026,299

16,026,299

16,026,299

16,026,299

7,126,899

7,126,899

7,126,899

7,126,899

7,126,899

7,126,899

611,651

611,651

611,651

611,651

611,651

611,651

6,515,247

6,515,247

6,515,247

6,515,247

6,515,247

6,515,247

23,224

23,224

23,224

23,224

23,224

23,224

7,502

7,502

7,502

7,502

7,502

7,502

580,592

580,592

580,592

580,592

580,592

580,592

Finished Products

1,161,184

1,161,184

1,161,184

1,161,184

1,161,184

1,161,184

2. Accounts Receivable

2,618,182

2,618,182

2,618,182

2,618,182

2,618,182

2,618,182

42,554

42,554

42,554

42,554

42,554

42,554

11,560,136

11,560,136

11,560,136

11,560,136

11,560,136

11,560,136

4. Current Liabilities

2,618,182

2,618,182

2,618,182

2,618,182

2,618,182

2,618,182

Accounts Payable

2,618,182

2,618,182

2,618,182

2,618,182

2,618,182

2,618,182

TOTAL NET WORKING CAPITAL REQUIREMENTS

8,941,955

8,941,955

8,941,955

8,941,955

8,941,955

8,941,955

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

3. Cash in Hand
CURRENT ASSETS

INCREASE IN NET WORKING CAPITAL

ANNEX 2: Cash Flow Statement (in Birr)

CONSTRUCTION

PRODUCTION

Year 1

Year 2

1,203,458

10,145,412

19,963,636

20,661,818

24,392,727

24,000,000

1,203,458

10,145,412

1,963,636

261,818

392,727

Total Equity

481,383

4,058,165

Total Long Term Loan

722,075

6,087,247

1,963,636

261,818

392,727

2. Inflow Operation

18,000,000

20,400,000

24,000,000

24,000,000

Sales Revenue

18,000,000

20,400,000

24,000,000

24,000,000

Interest on Securities

TOTAL CASH OUTFLOW

1,203,458

1,203,458

26,152,714

21,101,402

25,273,102

23,443,751

4. Increase In Fixed Assets

1,203,458

1,203,458

1,146,150

1,146,150

57,308

57,308

5. Increase in Current Assets

8,670,102

1,156,014

1,734,020

6. Operating Costs

15,879,328

17,993,383

21,164,464

21,164,464

7. Corporate Tax Paid

558,798

599,654

8. Interest Paid

1,603,284

817,119

680,932

544,746

9. Loan Repayments

1,134,887

1,134,887

1,134,887

10 .Dividends Paid

Surplus(Deficit)

8,941,955

-6,189,078

-439,584

-880,375

556,249

Cumulative Cash Balance

8,941,955

2,752,876

2,313,293

1,432,918

1,989,167

TOTAL CASH INFLOW

1. Inflow Funds

Total Short Term Finances

3. Other Income

Fixed Investments
Pre-production Expenditures

ANNEX 2: Continued
PRODUCTION
5
24,000,000

6
24,000,000

7
24,000,000

8
24,000,000

9
24,000,000

10
24,000,000

Total Equity

Total Long Term Loan

Total Short Term Finances

2. Inflow Operation

24,000,000

24,000,000

24,000,000

24,000,000

24,000,000

24,000,000

Sales Revenue

24,000,000

24,000,000

24,000,000

24,000,000

24,000,000

24,000,000

TOTAL CASH OUTFLOW

23,348,421

23,298,967

23,203,636

21,973,419

21,973,419

21,973,419

4. Increase In Fixed Assets

Fixed Investments

Pre-production Expenditures

21,164,464

21,164,464

21,164,464

21,164,464

21,164,464

21,164,464

7. Corporate Tax Paid

640,510

727,243

768,099

808,955

808,955

808,955

8. Interest Paid

408,559

272,373

136,186

1,134,887

1,134,887

1,134,887

10. Dividends Paid

Surplus(Deficit)

651,579

701,033

796,364

2,026,581

2,026,581

2,026,581

2,640,746

3,341,780

4,138,143

6,164,724

8,191,305

10,217,886

TOTAL CASH INFLOW

1. Inflow Funds

Interest on Securities
3. Other Income

5. Increase in Current Assets

6. Operating Costs

9. Loan Repayments

Cumulative Cash Balance

ANNEX 3 : DISCOUNTED CASH FLOW-TOTAL CAPITAL INVESTED

CONSTRUCTION
Year 1

PRODUCTION

Year 2

TOTAL CASH INFLOW

18,000,000

20,400,000

24,000,000

24,000,000

1. Inflow Operation

18,000,000

20,400,000

24,000,000

24,000,000

Sales Revenue

18,000,000

20,400,000

24,000,000

24,000,000

Interest on Securities

TOTAL CASH OUTFLOW

1,203,458

1,203,458

22,585,794

18,887,578

23,064,556

21,764,118

3. Increase in Fixed Assets

1,203,458

1,203,458

Fixed Investments

1,146,150

1,146,150

57,308

57,308

4. Increase in Net Working Capital

6,706,466

894,195

1,341,293

5. Operating Costs

15,879,328

17,993,383

21,164,464

21,164,464

6. Corporate Tax Paid

558,798

599,654

NET CASH FLOW

-1,203,458

-1,203,458

-4,585,794

1,512,422

935,444

2,235,882

CUMULATIVE NET CASH FLOW

-1,203,458

-2,406,915

-6,992,709

-5,480,287

-4,544,843

-2,308,961

Net Present Value (at 18%)

-1,203,458

-1,019,879

-3,293,446

920,507

482,492

977,324

Cumulative Net present Value

-1,203,458

-2,223,337

-5,516,783

-4,596,276

-4,113,784

-3,136,460

2. Other Income

Pre-production Expenditures

ANNEX 3: Continued
PRODUCTION
5

10

TOTAL CASH INFLOW

24,000,000

24,000,000

24,000,000

24,000,000

24,000,000

24,000,000

1. Inflow Operation

24,000,000

24,000,000

24,000,000

24,000,000

24,000,000

24,000,000

Sales Revenue

24,000,000

24,000,000

24,000,000

24,000,000

24,000,000

24,000,000

21,804,974

21,891,707

21,932,563

21,973,419

21,973,419

21,973,419

3. Increase in Fixed Assets

Fixed Investments

Pre-production Expenditures

21,164,464

21,164,464

21,164,464

21,164,464

21,164,464

21,164,464

640,510

727,243

768,099

808,955

808,955

808,955

2,195,026

2,108,293

2,067,437

2,026,581

2,026,581

2,026,581

CUMULATIVE NET CASH FLOW

-113,936

1,994,357

4,061,794

6,088,375

8,114,956

10,141,538

Net Present Value (at 18%)

813,107

661,846

550,017

456,905

387,208

328,142

-2,323,353

-1,661,507

-1,111,490

-654,585

-267,377

60,765

Interest on Securities
2. Other Income
TOTAL CASH OUTFLOW

4. Increase in Net Working Capital

5. Operating Costs
6. Corporate Tax Paid
NET CASH FLOW

Cumulative Net present Value

Net Present Value (at 18%)
Internal Rate of Return

1264222.228

18%

ANNEX 4: NET INCOME STATEMENT (in Birr)

PRODUCTION
Capacity Utilization (%)
1. Total Income
Sales Revenue

75%

85%

100%

100%

100%

18,000,000

20,400,000

24,000,000

24,000,000

24,000,000

18,000,000

20,400,000

24,000,000

24,000,000

24,000,000

15,744,384

17,843,635

20,992,512

20,992,512

20,992,512

2,255,616

2,556,365

3,007,488

3,007,488

3,007,488

12.53

12.53

12.53

12.53

12.53

426,888

441,691

463,896

463,896

463,896

1,828,729

2,114,674

2,543,593

2,543,593

2,543,593

10.16

10.37

10.60

10.60

10.60

1,603,284

817,119

680,932

544,746

408,559

225,445

1,297,556

1,862,661

1,998,847

2,135,033

558,798

599,654

640,510

225,445

1,297,556

1,303,862

1,399,193

1,494,523

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

1.25%

6.36%

7.76%

8.33%

8.90%

Net Profit After Tax/Sales

1.25%

6.36%

5.43%

5.83%

6.23%

Return on Investment

20.07%

21.13%

17.49%

17.13%

16.77%

Return on Equity

4.97%

28.58%

28.72%

30.82%

32.92%

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

PRODUCTION
6

10

Capacity Utilization (%)

100%

100%

100%

100%

100%

1. Total Income

24,000,000

24,000,000

24,000,000

24,000,000

24,000,000

Sales Revenue

24,000,000

24,000,000

24,000,000

24,000,000

24,000,000

Other Income

2. Less Variable Cost

20,992,512

20,992,512

20,992,512

20,992,512

20,992,512

VARIABLE MARGIN

3,007,488

3,007,488

3,007,488

3,007,488

3,007,488

(In % of Total Income)

12.53

12.53

12.53

12.53

12.53

3. Less Fixed Costs

310,973

310,973

310,973

310,973

310,973

OPERATIONAL MARGIN

2,696,516

2,696,516

2,696,516

2,696,516

2,696,516

(In % of Total Income)

11.24

11.24

11.24

11.24

11.24

4. Less Cost of Finance

272,373

136,186

5. GROSS PROFIT

2,424,143

2,560,329

2,696,516

2,696,516

2,696,516

6. Income (Corporate) Tax

727,243

768,099

808,955

808,955

808,955

7. NET PROFIT

1,696,900

1,792,231

1,887,561

1,887,561

1,887,561

Gross Profit/Sales

10.10%

10.67%

11.24%

11.24%

11.24%

Net Profit After Tax/Sales

7.07%

7.47%

7.86%

7.86%

7.86%

Return on Investment

17.35%

16.99%

16.63%

16.63%

16.63%

Return on Equity

37.38%

39.48%

41.58%

41.58%

41.58%

RATIOS (%)

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
1,203,458
0
0
0
0
0
0
0
0
1,203,458
0
1,146,150
57,308
0
0
0
1,203,458
0
0
0
722,075
722,075
0
481,383
481,383
0
0
0
0
0
0

Year 2
11,348,870
8,941,955
0
0
0
0
0
8,941,955
0
2,406,915
1,146,150
1,146,150
114,615
0
0
0
11,348,870
0
0
0
6,809,322
6,809,322
0
4,539,548
4,539,548
0
0
0
0
0
0

PRODUCTION
1
13,537,951
11,422,979
5,368,218
435,444
870,888
1,963,636
31,916
2,752,876
0
2,114,972
2,292,300
0
114,615
291,943
0
0
13,537,951
1,963,636
1,963,636
0
6,809,322
6,809,322
0
4,539,548
4,539,548
0
0
0
225,445
0
225,445

2
13,962,438
12,139,409
6,083,981
493,503
987,006
2,225,455
36,171
2,313,293
0
1,823,029
2,292,300
0
114,615
583,886
0
0
13,962,438
2,225,455
2,225,455
0
5,674,435
5,674,435
0
4,539,548
4,539,548
0
0
225,445
1,297,556
0
1,297,556

3
14,524,140
12,993,054
7,157,624
580,592
1,161,184
2,618,182
42,554
1,432,918
0
1,531,086
2,292,300
0
114,615
875,829
0
0
14,524,140
2,618,182
2,618,182
0
4,539,548
4,539,548
0
4,539,548
4,539,548
0
0
1,523,001
1,303,862
0
1,303,862

4
14,788,446
13,549,303
7,157,624
580,592
1,161,184
2,618,182
42,554
1,989,167
0
1,239,143
2,292,300
0
114,615
1,167,772
0
0
14,788,446
2,618,182
2,618,182
0
3,404,661
3,404,661
0
4,539,548
4,539,548
0
0
2,826,863
1,399,193
0
1,399,193

ANNEX 5: Continued
PRODUCTION
TOTAL ASSETS
1. Total Current Assets
Inventory on Materials and Supplies
Work in Progress
Finished Products in Stock
Accounts Recievable
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
15,148,083
14,200,883
7,157,624
580,592
1,161,184
2,618,182
42,554
2,640,746
0
947,200
2,292,300
0
114,615
1,459,715
0
0
15,148,083
2,618,182
2,618,182
0
2,269,774
2,269,774
0
4,539,548
4,539,548
0
0
4,226,056
1,494,523
0
1,494,523

6
15,710,096
14,901,916
7,157,624
580,592
1,161,184
2,618,182
42,554
3,341,780
0
808,180
2,292,300
0
114,615
1,598,735
0
0
15,710,096
2,618,182
2,618,182
0
1,134,887
1,134,887
0
4,539,548
4,539,548
0
0
5,720,579
1,696,900
0
1,696,900

7
16,367,440
15,698,280
7,157,624
580,592
1,161,184
2,618,182
42,554
4,138,143
0
669,160
2,292,300
0
114,615
1,737,755
0
0
16,367,440
2,618,182
2,618,182
0
0
0
0
4,539,548
4,539,548
0
0
7,417,479
1,792,231
0
1,792,231

8
18,255,001
17,724,861
7,157,624
580,592
1,161,184
2,618,182
42,554
6,164,724
0
530,140
2,292,300
0
114,615
1,876,775
0
0
18,255,001
2,618,182
2,618,182
0
0
0
0
4,539,548
4,539,548
0
0
9,209,710
1,887,561
0
1,887,561

9
20,142,562
19,751,442
7,157,624
580,592
1,161,184
2,618,182
42,554
8,191,305
0
391,120
2,292,300
0
114,615
2,015,795
0
0
20,142,562
2,618,182
2,618,182
0
0
0
0
4,539,548
4,539,548
0
0
11,097,271
1,887,561
0
1,887,561

10
22,030,123
21,778,023
7,157,624
580,592
1,161,184
2,618,182
42,554
10,217,886
0
252,100
2,292,300
0
114,615
2,154,815
0
0
22,030,123
2,618,182
2,618,182
0
0
0
0
4,539,548
4,539,548
0
0
12,984,832
1,887,561
0
1,887,561

10