Investment Office ANRS

Project Profile on the Establishment of

Galvanized Iron BUCKETS Fabrication
Plant

Development Studies
Associates (DSA)

October 2008
Addis Ababa
 Table of Contents

1. Executive Summary............................................................................................1
2. Product Description and Application..............................................................1
3. Market Study, Plant Capacity and Production Program..............................1
3.1 Market Study...................................................................................................................1
3.1.1 Present Demand and Supply....................................................................................1
3.1.2 Projected Demand....................................................................................................2
3.1.3 Pricing and Distribution...........................................................................................2
3.2 Plant Capacity..................................................................................................................2
3.3 Production Program.........................................................................................................2
4. Raw Materials and Utilities..............................................................................2
4.1 Availability and Source of Raw Materials.......................................................................2
4.2 Annual Requirement and Cost of Raw Materials and Utilities.......................................3
5. Location and Site...............................................................................................4
6. Technology and Engineering............................................................................4
6.1 Production Process...........................................................................................................4
6.2 Machinery and Equipment...............................................................................................4
6.3 Civil Engineering Cost....................................................................................................5
7. Human Resource and Training Requirement.................................................5
7.1 Human Resource..............................................................................................................5
7.2 Training Requirement......................................................................................................5
8. Financial Analysis..............................................................................................6
8.1 Underlying Assumption...................................................................................................6
8.2 Investment........................................................................................................................7
8.3 Production Costs..............................................................................................................7
8.4 Financial evaluation.........................................................................................................8
9. Economic and Social Benefit and Justification...............................................9
ANNEXES...............................................................................................................11
 1. Executive Summary
This project envisages production of 30,500 of Galvanized Iron (G I) Buckets per annum. The
total investment requirement of the project including the working capital is estimated at about
Birr 513 thousand; of which nearly Birr 191 thousand is the cost of the working capital and Birr
100 thousand is for machinery and equipments. Based on the cash flow statement, the calculated
internal rate of return (IRR) and simple rate of return (SRR) of the project are 32.8 % and 27.9
%, respectively. The net present value (NPV) at 18 % discounting rate is about Birr 235
thousand. The plant is expected to create employment opportunities for about 17 persons.

2. Product Description and Application

A wide range of essential items can be fabricated from galvanized iron (GI) in an establishment
equipped with more or less common and basic processing facilities. The envisaged plant
produces buckets for carrying water and other liquids from galvanized iron.

3. Market Study, Plant Capacity and Production Program

3.1 Market Study

3.1.1 Present Demand and Supply

The need for products produced from galvanized iron (GI) is very high both in urban and rural
areas of Ethiopia. There is high demand for GI buckets both in rural and urban areas of the
Amhara region; the population uses them for different purposes. These items are relatively bulky
and can be transported to distant markets at high transport cost. Presently, the regional demand
for GI buckets is met from the suppliers located in far places like Addis Ababa. Since there is no
a separate recording of those products, it is not possible to have reliable figures. However, given
the above mentioned facts, it is possible to conclude that there is a demand- supply gap regarding
the products. Thus, it is very important to manufacture these products in the region so that it is
possible to resolve the supply problem.

1
 3.1.2 Projected Demand

Since there is no separate recording of those products it is not possible to have reliable figures.
Besides, such items have very close substitutes. Thus, it is not possible to have a reliable demand
projection. However, it is possible to be certain that a small scale workshop fabricating some tens
of thousands of pieces of GI buckets per annum faces unlimited demand to its output.

3.1.3 Pricing and Distribution

The current market price of the items ranges from Birr 50 to Birr 55 per piece. The envisaged
plant plans to sell its products at an average factor gate price of Birr 40 per piece.

3.2 Plant Capacity

The envisaged plant capacity is estimated at 110 pieces of buckets per a day (8 hrs) or 30,250
pieces per annum in a single shift basis. The plant is assumed to operate in a single shift basis for
275 working days in a year; and this is set by deducting 52 Sundays, 13 public holidays, 15 days
for annual maintenance and 10 days for unexpected work interruptions.

3.3 Production Program

The production program follows gradual capacity utilization due to technical reason. This refers
to the speed with which the operators assimilate the process know how. Accordingly, 85 %
capacity utilization is assumed for the first year of the operation while the second year onwards
100 % capacity utilization is assumed.

4. Raw Materials and Utilities

4.1 Availability and Source of Raw Materials

The major raw material required (GI sheet) can be obtained from Addis Ababa.

2
 4.2 Annual Requirement and Cost of Raw Materials and Utilities

Raw material requirement for a full capacity single shift operation of the plant and the
corresponding cost estimates are given in Table 4.1.
TABLE 4.1
RAW MATERIALS REQUIREMENT

Qty. Cost In Birr

NO Material
Foreign Local Total
1 Galvanized Iron Sheets(for 20,625
Buckets) M2 412,500 412,500
2 Mild Steel Sheets of different
13,750
Gauges(for Dust Bins and
M2
Storage Bins) 275,000 275,000
3 Mild Steel Rods( for Bucket
Handles) 34,375 34,375
4 Mild Steel Angles( for Storage
Bins Bottom Rings) 13,750 13,750
5 Pipe Fittings and Taps( for Bath
Tubs) 6,875 6,875
6 Welding Materials 3,438 3,438
7 Rivets 1,719 1,719
8 Paints 1,800 1,800
Total 749,457 749,457
Annual electric consumption at 100 % capacity utilization in a single shift operation of the
plant shall be 110MWH. Total cost of electricity is estimated at Birr 60,500 per annum. The
plant does not need water for the purpose of production but it is normally needed for general
cleaning. Yearly water consumption is estimated to be 200 m3, and its cost amounts Birr 530.

TABLE 4.2
UTILITIES REQUIREMENT
No. Utility Requirement Unit Price Cost
(Annual) (Birr)
1. Electricity 110,000 KWH Birr0.55 /KWH 60,500
2. Water 200 m3 Birr2.65 /m3 530
Total 61,030

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 5. Location and Site
For its convenience for distribution to different parts of the region, Bahir-Dar is an appropriate
choice for the GI buckets fabricating plant in Amhara region.

6. Technology and Engineering

6.1 Production Process

Production of buckets made from GI sheet involves basically the process of shearing; rolling;
rounding or circle cutting; bottom forming; welding or riveting; assembling or fittings of
handles, lids, hinges and rings; finishing (polishing and painting) and inspection.
There is no alternative technology to produce GI buckets.

6.2 Machinery and Equipment

The list of machinery and equipment required to produces GI buckets is given below in Table
6.1.
TABLE 6.1
MACHINERY & EQUIPMENT
Item
1. Shearing Machine
2. Circle Cutting Machine
3. Bar Bending Equipment
4. Bar Cutting Equipment
5. Sheet Bending Roller
6. Press
7. Welding Set
8. Riveting Machine
9. Bench Drill
10. Other Hand Tools and Measuring Instruments
The total cost of machinery and equipment is estimated at Birr 100 thousand all of which can be
procured from the local machinery market.
Machinery Suppliers’ Address:
All the necessary machinery and equipments are procured locally from local suppliers located at
Piassa( Atiklit Terra) in Addis.

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 6.3 Civil Engineering Cost
The total land area of the plant, including the open space is 500 m 2 , and its lease cost equals Birr
30,000. Required covered area (including storage, production and facilities) is 200 m 2 of which
100 m2 is assumed to be galvanized corrugated iron sheet walled and the rest is just a simple
shed. The construction cost of the covered area including cost of land clearing and fencing is
estimated to be Birr 200 thousand. The cost of the land lease is as per ANRS land lease rate for
Bahir-Dar which is equal to Birr 60 per sq m for industrial purpose. Of the total cost of the lease,
5% is paid in the beginning while the rest will be paid in 40years.

7. Human Resource and Training Requirement

7.1 Human Resource
Details of the manpower requirement of the plant is shown in Table 7.1
Table 7.1
MANPOWER REQUIREMENT
Description No Monthly Annual
Salary Salary (Birr)
(Birr)
A. Administration
1. Manager/Supervisors/Store Keeper 1 1500 18000
2.Seretary/Cashier 1 800 9600
3.Guards 2 300 7200
Sub-total 4 34800
B. Production
1. Skilled Workers (Operators and 5 1000
Welders) 60000
2. Unskilled Workers (Assistants) 8 450 43200

Benefits (20%) 27600

17 165,600
The total annual wages and salary, including 20 % benefits, amount to Birr 165,600.

7.2 Training Requirement

Since fabricating GI buckets is very common in Ethiopia, it is not necessary to have a special
training program.

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 8. Financial Analysis
8.1 Underlying Assumption

The financial analysis of GI Buckets fabricating plant is based on the data provided in the
preceding chapters and the following assumptions.

A. Construction and Finance

Construction Period 2 Years

Source Of Finance 40% Equity and 60% Loan
Tax Holidays 2 Years
Bank Interest Rate 12%
Discount For Cash Flow 18%
Value Of Land Based on Lease Rate of ANRS
Spare Parts, Repair & Maintenance 3% of the Fixed Investment

B. Depreciation

Building 5%
Machinery And Equipment 10%
Office Furniture 10%
Vehicles 20%
Pre-Production (Amortization) 20%

C. Working Capital (Minimum Days of Coverage)

Raw Material-Local 30 Days
Raw Material-Foreign 120 Days
Factory Supplies In Stock 30 Days
Spare Parts In Stock And Maintenance 30 Days
Work In Progress 10 Days
Finished Products 15 Days
Accounts Receivable 30 Days
Cash In Hand 30 Days
Accounts Payable 30 Days

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 8.2 Investment
The total investment cost of the project including working capital is estimated at Birr 513
thousand as shown in Table 8.1 below. The Owner shall contribute 40% of the finance in the
form of equity while the remaining 60% is to be financed by bank loan.
TABLE 8.1
TOTAL INITIAL INVESTMENT

Items L.C F.C Total

Land
1,500 1,500
Building and Civil Works
200,000 200,000
Office Equipment
5,000 5,000
Vehicles
0 0
Plant Machinery & Equipment
100,000 100,000
Total Fixed Investment Cost
306,500 0 306,500
Pre Production Capital
Expenditure* 15,325 0 15,325
Total Initial Investment
321,825 0 321,825
Working Capital at Full Capacity
191,128 0 191,128
Total 512,953 0 512,953
*Pre-production capital expenditure includes - all expenses for pre-investment studies, consultancy fee during
construction and expenses for company‘s establishment, project administration expenses, commission expenses,
preproduction marketing and interest expenses during construction.
The foreign component of the project is zero.

8.3 Production Costs

The total production cost at full capacity operation is estimated at Birr 1.1 million (See Table
8.2). Raw materials and utilities account for 74.5 %.

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 Table 8.2
PRODUCTION COST AT FULL CAPACITY

Raw Material
Requirement Cost
1.Local Raw Materials 749,457
2.Foreign raw Materials 0

Total Production Cost at full Capacity

Items Cost
1. Raw Materials 749,457
2. Utilities 61,030
3. Wages and Salaries 165,600
4. Spares and Maintenance 9,195
Factory Costs 985,282
5. Depreciation 23,565
6. Financial Costs
78,405
Total Production Cost 1,087,252

8.4 Financial evaluation

I. Profitability
According to the projected income statement (See Annex 4) the project will generate profit
beginning from the first year of operation and increases on wards. The income statement and
other profitability indicators also show that the project is viable.
II. Breakeven Analysis
The breakeven point of the projects is given by the formula:

BEP = Fixed Cost

Sale –Variable Cost at full capacity.
The project will break even at 32.3 % of capacity utilization
III. Payback Period

8
Investment cost and income statement projection are used in estimating the project payback
period. The project will payback fully the initial investment less working capital within two years
its operation.

IV. Simple Rate of Return

The project’s simple rate of return (SRR) is given by the formula:

SRR= (Net Profit + Interest)/ (Total Investment Outlay) at full capacity utilization.

The SRR would be 27.9 % at full capacity utilization.

V. Internal Rate of Return and Net Present Value

Based on cash flow statement (See Annex 2) the calculated internal rate of return (IRR) of the
project is 37.4 % and the net present value (NPV) at 18 % discount is Birr 235 thousands.

VI. Sensitivity Analysis

The sensitivity test result which undertaken by increasing the cost of production by 10 % still
indicates that the project would be viable.

9. Economic and Social Benefit and Justification

Based on the foregoing presentation and analysis, we can learn that the proposed project
possesses wide range of benefits that complement the financial feasibility obtained earlier. In
general, the envisaged project promotes the socio-economic goals and objectives stated in the
strategic plan of the Amhara National Regional State. These benefits are listed as follows:

A. Profit Generation

The project is found to be financially viable and earns on average a profit of Birr 127 thousand
per year and Birr 1.3 million within the project life. Such result induces the project promoters to
reinvest the profit which, therefore, increases the investment magnitude in the region.

B. Tax Revenue

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In the project life under consideration, the region will collect about Birr 448 thousand from
corporate tax payment alone (i.e. excluding income tax, sales tax and VAT). Such result create
additional fund for the regional government that will be used in expanding social and other basic
services in the region

C. Employment and Income Generation

The proposed project is expected to create employment opportunity to several citizens of the
country. That is, it will provide permanent employment to 17 skilled labor as well as support
stuffs. Consequently the project creates income of Birr 166 thousands per year. This would be
one of the commendable accomplishments of the project.

D. Pro Environment Project

The proposed production process is environment friendly.

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ANNEXES

11
 Annex 1: Total Net Working Capital Requirements (in Birr)
CONSTRUCTION PRODUCTION
Year 1 Year 2 1 2 3 4

Capacity Utilization (%) 0 0 85% 90% 100% 100%

1. Total Inventory 0.00 0.00 210939.03 223347.21 248163.57 248163.57

Raw Materials in Stock- Total 0.00 0.00 69495.10 73583.05 81758.95 81758.95

Raw Material-Local 0.00 0.00 69495.10 73583.05 81758.95 81758.95

Raw Material-Foreign 0.00 0.00 0.00 0.00 0.00 0.00

Factory Supplies in Stock 0.00 0.00 935.48 990.50 1100.56 1100.56

Spare Parts in Stock and Maintenance 0.00 0.00 852.63 902.78 1003.09 1003.09

Work in Progress 0.00 0.00 23386.91 24762.61 27514.01 27514.01

Finished Products 0.00 0.00 46773.82 49525.22 55028.02 55028.02

2. Accounts Receivable 0.00 0.00 112200.00 118800.00 132000.00 132000.00

3. Cash in Hand 0.00 0.00 21014.78 22250.95 24723.27 24723.27

CURRENT ASSETS 0.00 0.00 274658.71 290815.11 323127.90 323127.90

4. Current Liabilities 0.00 0.00 112200.00 118800.00 132000.00 132000.00

Accounts Payable 0.00 0.00 112200.00 118800.00 132000.00 132000.00

TOTAL NET WORKING CAPITAL REQUIRMENTS 0.00 0.00 162458.71 172015.11 191127.90 191127.90

INCREASE IN NET WORKING CAPITAL 0.00 0.00 162458.71 9556.39 19112.79 0.00

1
 Annex 1: Total Net Working Capital Requirements (in Birr) (continued)
PRODUCTION
5 6 7 8 9 10

Capacity Utilization (%) 100% 100% 100% 100% 100% 100%

1. Total Inventory 248163.57 248163.57 248163.57 248163.57 248163.57 248163.57

Raw Materials in Stock-Total 81758.95 81758.95 81758.95 81758.95 81758.95 81758.95

Raw Material-Local 81758.95 81758.95 81758.95 81758.95 81758.95 81758.95

Raw Material-Foreign 0.00 0.00 0.00 0.00 0.00 0.00

Factory Supplies in Stock 1100.56 1100.56 1100.56 1100.56 1100.56 1100.56

Spare Parts in Stock and Maintenance 1003.09 1003.09 1003.09 1003.09 1003.09 1003.09

Work in Progress 27514.01 27514.01 27514.01 27514.01 27514.01 27514.01

Finished Products 55028.02 55028.02 55028.02 55028.02 55028.02 55028.02

2. Accounts Receivable 132000.00 132000.00 132000.00 132000.00 132000.00 132000.00

3. Cash in Hand 24723.27 24723.27 24723.27 24723.27 24723.27 24723.27

CURRENT ASSETS 323127.90 323127.90 323127.90 323127.90 323127.90 323127.90

4. Current Liabilities 132000.00 132000.00 132000.00 132000.00 132000.00 132000.00

Accounts Payable 132000.00 132000.00 132000.00 132000.00 132000.00 132000.00

TOTAL NET WORKING CAPITAL REQUIRMENTS 191127.90 191127.90 191127.90 191127.90 191127.90 191127.90

INCREASE IN NET WORKING CAPITAL 0.00 0.00 0.00 0.00 0.00 0.00

2
 Annex 2: Cash Flow Statement (in Birr)
CONSTRUCTION PRODUCTION
Year 1 Year 2 1 2 3 4
TOTAL CASH INFLOW 160912.50 352040.40 1140700.00 1095600.00 1223200.00 1210000.00
1. Inflow Funds 160912.50 352040.40 112200.00 6600.00 13200.00 0.00
Total Equity 64365.00 140816.16 0.00 0.00 0.00 0.00
Total Long Term Loan 96547.50 211224.24 0.00 0.00 0.00 0.00
Total Short Term Finances 0.00 0.00 112200.00 6600.00 13200.00 0.00
2. Inflow Operation 0.00 0.00 1028500.00 1089000.00 1210000.00 1210000.00
Sales Revenue 0.00 0.00 1028500.00 1089000.00 1210000.00 1210000.00
Interest on Securities 0.00 0.00 0.00 0.00 0.00 0.00
3. Other Income 0.00 0.00 0.00 0.00 0.00 0.00
TOTAL CASH OUTFLOW 160912.50 160912.50 1195090.63 995719.72 1154049.68 1117428.09
4. Increase In Fixed Assets 160912.50 160912.50 0.00 0.00 0.00 0.00
Fixed Investments 153250.00 153250.00 0.00 0.00 0.00 0.00
Pre-production Expenditures 7662.50 7662.50 0.00 0.00 0.00 0.00
5. Increase in Current Assets 0.00 0.00 274658.71 16156.39 32312.79 0.00
6. Operating Costs 0.00 0.00 842026.65 891335.42 989952.97 989952.97
7. Corporate Tax Paid 0.00 0.00 0.00 0.00 49711.46 51558.09
8. Interest Paid 0.00 0.00 78405.27 36932.61 30777.17 24621.74
9.Loan Repayments 0.00 0.00 0.00 51295.29 51295.29 51295.29
10.Dividends Paid 0.00 0.00 0.00 0.00 0.00 0.00
Surplus(Deficit) 0.00 191127.90 -54390.63 99880.28 69150.32 92571.91
Cumulative Cash Balance 0.00 191127.90 136737.26 236617.55 305767.87 398339.78

3
 Annex 2: Cash Flow Statement (in Birr): Continued
PRODUCTION
5 6 7 8 9 10
TOTAL CASH INFLOW 1210000.00 1210000.00 1210000.00 1210000.00 1210000.00 1210000.00
1. Inflow Funds 0.00 0.00 0.00 0.00 0.00 0.00
Total Equity 0.00 0.00 0.00 0.00 0.00 0.00
Total Long Term Loan 0.00 0.00 0.00 0.00 0.00 0.00
Total Short Term Finances 0.00 0.00 0.00 0.00 0.00 0.00
2. Inflow Operation 1210000.00 1210000.00 1210000.00 1210000.00 1210000.00 1210000.00
Sales Revenue 1210000.00 1210000.00 1210000.00 1210000.00 1210000.00 1210000.00
Interest on Securities 0.00 0.00 0.00 0.00 0.00 0.00
3. Other Income 0.00 0.00 0.00 0.00 0.00 0.00
TOTAL CASH OUTFLOW 1113119.28 1109729.98 1105421.17 1049817.08 1049817.08 1049817.08
4. Increase In Fixed Assets 0.00 0.00 0.00 0.00 0.00 0.00
Fixed Investments 0.00 0.00 0.00 0.00 0.00 0.00
Pre-production
Expenditures 0.00 0.00 0.00 0.00 0.00 0.00
5. Increase in Current Assets 0.00 0.00 0.00 0.00 0.00 0.00
6. Operating Costs 989952.97 989952.97 989952.97 989952.97 989952.97 989952.97
7. Corporate Tax Paid 53404.72 56170.85 58017.48 59864.11 59864.11 59864.11
8. Interest Paid 18466.30 12310.87 6155.43 0.00 0.00 0.00
9. Loan Repayments 51295.29 51295.29 51295.29 0.00 0.00 0.00
10.Dividends Paid 0.00 0.00 0.00 0.00 0.00 0.00
Surplus(Deficit) 96880.72 100270.02 104578.83 160182.92 160182.92 160182.92
Cumulative Cash Balance 495220.50 595490.52 700069.35 860252.27 1020435.19 1180618.11

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 Annex 3: DISCOUNTED CASH FLOW-TOTAL CAPITAL INVESTED
CONSTRUCTION PRODUCTION
Year 1 Year 2 1 2 3 4
TOTAL CASH INFLOW 0.00 0.00 1028500.00 1089000.00 1210000.00 1210000.00

1. Inflow Operation 0.00 0.00 1028500.00 1089000.00 1210000.00 1210000.00

Sales Revenue 0.00 0.00 1028500.00 1089000.00 1210000.00 1210000.00

Interest on Securities 0.00 0.00 0.00 0.00 0.00 0.00

2. Other Income 0.00 0.00 0.00 0.00 0.00 0.00

TOTAL CASH OUTFLOW 160912.50 160912.50 1004485.36 900891.82 1058777.22 1041511.06

3. Increase in Fixed Assets 160912.50 160912.50 0.00 0.00 0.00 0.00

Fixed Investments 153250.00 153250.00 0.00 0.00 0.00 0.00

Pre-production Expenditures 7662.50 7662.50 0.00 0.00 0.00 0.00

4. Increase in Net Working Capital 0.00 0.00 162458.71 9556.39 19112.79 0.00

5. Operating Costs 0.00 0.00 842026.65 891335.42 989952.97 989952.97

6. Corporate Tax Paid 0.00 0.00 0.00 0.00 49711.46 51558.09

NET CASH FLOW -160912.50 -160912.50 24014.64 188108.18 151222.78 168488.94

CUMMULATIVE NET CASH FLOW -160912.50 -321825.00 -297810.36 -109702.18 41520.60 210009.55

Net Present Value (at 18%) -160912.50 -136366.53 17246.94 114488.45 77999.03 73648.07

Cumulative Net present Value -160912.50 -297279.03 -280032.09 -165543.64 -87544.61 -13896.54

5
 Annex 3: DISCOUNTED CASH FLOW-TOTAL CAPITAL INVESTED (Continued)
PRODUCTION
5 6 7 8 9 10
TOTAL CASH INFLOW 1210000.00 1210000.00 1210000.00 1210000.00 1210000.00 1210000.00

1. Inflow Operation 1210000.00 1210000.00 1210000.00 1210000.00 1210000.00 1210000.00

Sales Revenue 1210000.00 1210000.00 1210000.00 1210000.00 1210000.00 1210000.00

Interest on Securities 0.00 0.00 0.00 0.00 0.00 0.00

2. Other Income 0.00 0.00 0.00 0.00 0.00 0.00

TOTAL CASH OUTFLOW 1043357.69 1046123.82 1047970.45 1049817.08 1049817.08 1049817.08

3. Increase in Fixed Assets 0.00 0.00 0.00 0.00 0.00 0.00

Fixed Investments 0.00 0.00 0.00 0.00 0.00 0.00

Pre-production Expenditures 0.00 0.00 0.00 0.00 0.00 0.00

4. Increase in Net Working Capital 0.00 0.00 0.00 0.00 0.00 0.00

5. Operating Costs 989952.97 989952.97 989952.97 989952.97 989952.97 989952.97

6. Corporate Tax Paid 53404.72 56170.85 58017.48 59864.11 59864.11 59864.11

NET CASH FLOW 166642.31 163876.18 162029.55 160182.92 160182.92 160182.92

CUMMULATIVE NET CASH FLOW 376651.86 540528.04 702557.59 862740.51 1022923.43 1183106.36

Net Present Value (at 18%) 61729.57 51444.84 43106.04 36114.21 30605.26 25936.66

Cumulative Net present Value 47833.03 99277.86 142383.91 178498.12 209103.38 235040.05

Net Present Value (at 18%) 235,040.05

Internal Rate of Return 32.8%

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 Annex 4: NET INCOME STATEMENT ( in Birr)
PRODUCTION
1 2 3 4 5
Capacity Utilization (%) 85% 90% 100% 100% 100%

1. Total Income 1028500.00 1089000.00 1210000.00 1210000.00 1210000.00

Sales Revenue 1028500.00 1089000.00 1210000.00 1210000.00 1210000.00
Other Income 0.00 0.00 0.00 0.00 0.00
2. Less Variable Cost 781945.15 827941.92 919935.47 919935.47 919935.47
VARIABLE MARGIN 246554.85 261058.08 290064.53 290064.53 290064.53
(In % of Total Income) 23.97 23.97 23.97 23.97 23.97
3. Less Fixed Costs 83646.50 86958.50 93582.50 93582.50 93582.50
OPERATIONAL MARGIN 162908.35 174099.58 196482.03 196482.03 196482.03
(In % of Total Income) 15.84 15.99 16.24 16.24 16.24
4. Less Cost of Finance 78405.27 36932.61 30777.17 24621.74 18466.30
5. GROSS PROFIT 84503.08 137166.97 165704.86 171860.29 178015.73
6. Income (Corporate) Tax 0.00 0.00 49711.46 51558.09 53404.72
7. NET PROFIT 84503.08 137166.97 115993.40 120302.20 124611.01
RATIOS (%)
Gross Profit/Sales 8.22% 12.60% 13.69% 14.20% 14.71%
Net Profit After Tax/Sales 8.22% 12.60% 9.59% 9.94% 10.30%
Return on Investment 33.64% 35.25% 28.61% 28.25% 27.89%
Return on Equity 41.18% 66.85% 56.53% 58.63% 60.73%

7
 Annex 4: NET INCOME STATEMENT (in Birr):Continued
PRODUCTION
6 7 8 9 10
Capacity Utilization (%) 100% 100% 100% 100% 100%

1. Total Income 1210000.00 1210000.00 1210000.00 1210000.00 1210000.00

Sales Revenue 1210000.00 1210000.00 1210000.00 1210000.00 1210000.00
Other Income 0.00 0.00 0.00 0.00 0.00
2. Less Variable Cost 919935.47 919935.47 919935.47 919935.47 919935.47
VARIABLE MARGIN 290064.53 290064.53 290064.53 290064.53 290064.53
(In % of Total Income) 23.97 23.97 23.97 23.97 23.97
3. Less Fixed Costs 90517.50 90517.50 90517.50 90517.50 90517.50
OPERATIONAL MARGIN 199547.03 199547.03 199547.03 199547.03 199547.03
(In % of Total Income) 16.49 16.49 16.49 16.49 16.49
4. Less Cost of Finance 12310.87 6155.43 0.00 0.00 0.00
5. GROSS PROFIT 187236.16 193391.60 199547.03 199547.03 199547.03
6. Income (Corporate) Tax 56170.85 58017.48 59864.11 59864.11 59864.11
7. NET PROFIT 131065.31 135374.12 139682.92 139682.92 139682.92
RATIOS (%)
Gross Profit/Sales 15.47% 15.98% 16.49% 16.49% 16.49%
Net Profit After Tax/Sales 10.83% 11.19% 11.54% 11.54% 11.54%
Return on Investment 27.95% 27.59% 27.23% 27.23% 27.23%
Return on Equity 63.88% 65.98% 68.08% 68.08% 68.08%

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 Annex 5: Projected Balance Sheet (in Birr)
CONSTRUCTION PRODUCTION
Year 1 Year 2 1 2 3 4
TOTAL ASSETS 160912.50 512952.90 709655.98 802127.66 880025.77 949032.68
1. Total Current Assets 0.00 191127.90 411395.98 527432.66 628895.77 721467.68
Inventory on Materials and Supplies 0.00 0.00 71283.21 75476.34 83862.60 83862.60
Work in Progress 0.00 0.00 23386.91 24762.61 27514.01 27514.01
Finished Products in Stock 0.00 0.00 46773.82 49525.22 55028.02 55028.02
Accounts Receivable 0.00 0.00 112200.00 118800.00 132000.00 132000.00
Cash in Hand 0.00 0.00 21014.78 22250.95 24723.27 24723.27
Cash Surplus, Finance Available 0.00 191127.90 136737.26 236617.55 305767.87 398339.78
Securities 0.00 0.00 0.00 0.00 0.00 0.00
2. Total Fixed Assets, Net of Depreciation 160912.50 321825.00 298260.00 274695.00 251130.00 227565.00
Fixed Investment 0.00 153250.00 306500.00 306500.00 306500.00 306500.00
Construction in Progress 153250.00 153250.00 0.00 0.00 0.00 0.00
Pre-Production Expenditure 7662.50 15325.00 15325.00 15325.00 15325.00 15325.00
Less Accumulated Depreciation 0.00 0.00 23565.00 47130.00 70695.00 94260.00
3. Accumulated Losses Brought Forward 0.00 0.00 0.00 0.00 0.00 0.00
4. Loss in Current Year 0.00 0.00 0.00 0.00 0.00 0.00
TOTAL LIABILITIES 160912.50 512952.90 709655.98 802127.66 880025.77 949032.68
5. Total Current Liabilities 0.00 0.00 112200.00 118800.00 132000.00 132000.00
Accounts Payable 0.00 0.00 112200.00 118800.00 132000.00 132000.00
Bank Overdraft 0.00 0.00 0.00 0.00 0.00 0.00
6. Total Long-term Debt 96547.50 307771.74 307771.74 256476.45 205181.16 153885.87
Loan A 96547.50 307771.74 307771.74 256476.45 205181.16 153885.87
Loan B 0.00 0.00 0.00 0.00 0.00 0.00
7. Total Equity Capital 64365.00 205181.16 205181.16 205181.16 205181.16 205181.16
Ordinary Capital 64365.00 205181.16 205181.16 205181.16 205181.16 205181.16
Preference Capital 0.00 0.00 0.00 0.00 0.00 0.00
Subsidies 0.00 0.00 0.00 0.00 0.00 0.00
8. Reserves, Retained Profits Brought Forward 0.00 0.00 0.00 84503.08 221670.05 337663.45
9.Net Profit After Tax 0.00 0.00 84503.08 137166.97 115993.40 120302.20
Dividends Payable 0.00 0.00 0.00 0.00 0.00 0.00
Retained Profits 0.00 0.00 84503.08 137166.97 115993.40 120302.20

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 Annex 5: Projected Balance Sheet (in Birr): Continued
PRODUCTION
5 6 7 8 9 10
TOTAL ASSETS 1022348.40 1102118.42 1186197.25 1325880.17 1465563.09 1605246.01
1. Total Current Assets 818348.40 918618.42 1023197.25 1183380.17 1343563.09 1503746.01
Inventory on Materials and Supplies 83862.60 83862.60 83862.60 83862.60 83862.60 83862.60
Work in Progress 27514.01 27514.01 27514.01 27514.01 27514.01 27514.01
Finished Products in Stock 55028.02 55028.02 55028.02 55028.02 55028.02 55028.02
Accounts Receivable 132000.00 132000.00 132000.00 132000.00 132000.00 132000.00
Cash in Hand 24723.27 24723.27 24723.27 24723.27 24723.27 24723.27
Cash Surplus, Finance Available 495220.50 595490.52 700069.35 860252.27 1020435.19 1180618.11
Securities 0.00 0.00 0.00 0.00 0.00 0.00
2. Total Fixed Assets, Net of Depreciation 204000.00 183500.00 163000.00 142500.00 122000.00 101500.00
Fixed Investment 306500.00 306500.00 306500.00 306500.00 306500.00 306500.00
Construction in Progress 0.00 0.00 0.00 0.00 0.00 0.00
Pre-Production Expenditure 15325.00 15325.00 15325.00 15325.00 15325.00 15325.00
Less Accumulated Depreciation 117825.00 138325.00 158825.00 179325.00 199825.00 220325.00
3. Accumulated Losses Brought Forward 0.00 0.00 0.00 0.00 0.00 0.00
4. Loss in Current Year 0.00 0.00 0.00 0.00 0.00 0.00
TOTAL LIABILITIES 1022348.40 1102118.42 1186197.25 1325880.17 1465563.09 1605246.01
5. Total Current Liabilities 132000.00 132000.00 132000.00 132000.00 132000.00 132000.00
Accounts Payable 132000.00 132000.00 132000.00 132000.00 132000.00 132000.00
Bank Overdraft 0.00 0.00 0.00 0.00 0.00 0.00
6. Total Long-term Debt 102590.58 51295.29 0.00 0.00 0.00 0.00
Loan A 102590.58 51295.29 0.00 0.00 0.00 0.00
Loan B 0.00 0.00 0.00 0.00 0.00 0.00
7. Total Equity Capital 205181.16 205181.16 205181.16 205181.16 205181.16 205181.16
Ordinary Capital 205181.16 205181.16 205181.16 205181.16 205181.16 205181.16
Preference Capital 0.00 0.00 0.00 0.00 0.00 0.00
Subsidies 0.00 0.00 0.00 0.00 0.00 0.00
8. Reserves, Retained Profits Brought
Forward 457965.65 582576.66 713641.97 849016.09 988699.01 1128381.93
9. Net Profit After Tax 124611.01 131065.31 135374.12 139682.92 139682.92 139682.92
Dividends Payable 0.00 0.00 0.00 0.00 0.00 0.00
Retained Profits 124611.01 131065.31 135374.12 139682.92 139682.92 139682.92

10