PROJECT PROPOSAL ON

GRANITE STONE CUTTING AND PROCESSING FACTORY

 Project Location: -Oromiya Regional state surrounding fininfine Burayu City
Administration

Promoted by: Amina Simbo Tufa

May 2015

Contents
1. EXECUTIVE SUMMARY ....................................................................................................4
2. Introduction .............................................................................................................................6
2.1. Background ................................................................................................................. 6
2.2. Production description and application ....................................................................... 6
2.3. Project Objectives and benefits ................................................................................... 7
3. Project location and Socio Economic status ...........................................................................8
3.1. Project location ............................................................................................................ 8
3.2. Demography ................................................................................................................ 9
3.3. Physical characteristics information............................................................................ 9
3.4. Socio-Economic information ...................................................................................... 9
4. MARKET STUDY AND PLANT CAPACITY ...................................................................10
4.1. Past Supply andPresent Demand ............................................................................... 10
4.2. Projected Demand ..................................................................................................... 11
4.3. Pricing andDistribution ............................................................................................. 12
4.4. PLANT CAPACITY AND PRODUCTION PROGRAMME .................................. 12
4.4.1. Plant Capacity .................................................................................................... 12

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 4.4.2. Production Programme ...................................................................................... 12
5. Technical study .....................................................................................................................13
5.1. ProductionProcess ..................................................................................................... 13
5.2. Raw Materials, feeding and Utilities ......................................................................... 14
5.2.1. Raw Material ...................................................................................................... 14
5.2.2. Utilities................................................................................................................... 14
5.3. Machinery and equipment ......................................................................................... 15
5.4. Land, Buildings and Civil Works.............................................................................. 15
5.4.1. Land lease .......................................................................................................... 15
5.4.2. Land use plan of the project ............................................................................... 15
5.5. Environmental impact assessment ............................................................................ 16
5.6. Implementation Schedule .......................................................................................... 17
6. ORGANIZATIONS AND MANAGEMENT ......................................................................17
6.1. Organizational Structure ........................................................................................... 17
6.2. Management .............................................................................................................. 18
6.3. Manpower Requirement ............................................................................................ 18
7. FINANCIAL STUDY ...........................................................................................................20
7.1. General ...................................................................................................................... 20
7.2. Investment cost .......................................................................................................... 21
7.2.1. Fixed costs ......................................................................................................... 21
7.2.2. Production costs ................................................................................................. 23
7.3. Project Capital and financing .................................................................................... 24
7.3.1. Project Capital .................................................................................................... 25
7.3.2. Financing............................................................................................................ 25
7.4. Revenue projection .................................................................................................... 29
7.5. Financial statements .................................................................................................. 30
7.5.1. Projected Profit/loss statement ............................................................................... 30
7.5.2. Projected cash flow statement ................................................................................ 31
7.5.3. Viability and other measurement ....................................................................... 33
8. SENSITIVITY ANALYSIS .................................................................................................37
9. RISK ANALYSIS .................................................................................................................37
10. MONITORING AND EVALUATION ................................................................................38
11. CONCLUSION AND RECOMMENDATION ....................................................................38

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 1. EXECUTIVE SUMMARY

Name of the Promoter: AminaSimbo Tufa

Contact Address:
Type of the Project:Granite cutting and processing factory
Type of Business:Sole proprietor ship
Project Location: Oromiya Regional state surrounding fininfine,BurayuCity Administration

Project Capital: The total investment capital of the project is estimated isbirr 62,260,888of
whichbirr 40,025,000(64.3%) is for fixed investment items while the remaining balance ofbirr
22,235,888(35.7%) Will be initial working capital.

Source of finance:The total investment capital of the project is to be financed from the
promoter’s equity and bank loan.
 birr18,678,266 (30%) is contributed by the promoter AminaSimbo Tufa
 birr43,582,622 (70%) is to be financed by local banks.
Man power requirement: 200 employees, 116permanent(62 skilled &52 unskilled) and 64
casual (34 skilled 50 unskilled) workers
Land requirement: The total area of 8000 m2 of land is required for the project

Profitability: The financial analysis of the envisaged project was carried out for the
following ten years. Based on the 10 years financial projections using the income statement,
cash flow statement and financial internal rate of return (FIRR) and the following results are
obtained.
 Income statement: According to the projected income statement the project will
generate profit beginning from the first year of operation. Based on the 10 years
financial projections the project average annual net profit after payment of bank
interest, depreciation and tax amounts to birr 2,474,608
 Cash flow statement: The cash flow statement also shows a substantial amount of
cash surplus right from the firstyear of project operation life. The cash balance grows

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 from birr 1,820,869in the first year to cumulativebalance ofbirr 171,152,520during
the 10th year of operation indicating the capacity of the project to finance itself and
generate cash surplus for further investments.
 FIRR Computation: The computation of the project FIRR shows that the project will
profitably generate reasonable return on investment. Before tax financial internal
rate of return is calculated to be 34.0%this indicates the project is profitable and its
implementation entails no financial risks.
 Socio economic benefits:The socio economic benefit of the project is also very high.
The project will provide 200 employees, 116permanent (62 skilled &52 unskilled)
and84 casual (34 skilled 50 unskilled) workers. It produce food crops and supply the
market at competitive price, generate foreign currency by promoting exports,
generate revenue for the government in form of taxes, facilitate the transfer of modern
agricultural technologies and also contribute towards promoting the linkage between
agriculture and various sectors of the economy.

Conclusion:The Project is found to be operationally profitable & has significant socio-

economic benefits. According to the projected income statement, the envisaged project starts
earning profit from the first year of production. The income statement and other profitability
indicators show that the project is viable. The project is believed to have significant social and
economic benefits that accrue to the society beyond those financial returns to its owner. The
most remarkable social benefits can be expressed in terms of job creation that leads to
reduction in the level of unemployment.
Recommendation:Therefore, considering the attractive financial and economic benefits the
project is to produce, the promoter has made the necessary preparation hoping that all the
concerned offices & financial institutions should give their support to facilitate the
implementation of this plan.

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 2. Introduction
2.1. Background
Ethiopia is now becoming more and more investment friendly country. The Government is
creating favorable condition that would highly encourage the private Sector to be engaged
inalmost allareas of the economy.The country with population of come 80 million offers
significant domestic market for locally for Locally produced goods and service the
country is also a member of the common Market for eastern and southern Africa
Comesa offering huge benefit of Exporting commodities in preferential tariff rates to
a wider regional market.
Privet investment should be encouraged to increase form year to year and Investment
constraints have to be alleviated in order to pave development ways so That
investment sector happens to be determinant about factor of economic development of
the country like Ethiopia.
it is usually considered as the engine of the economy .both private and government
Bodies in many ways have commonly agreed this idea .economic development in Any
case needs both efforts of the privet as well as the public sector. There are
Investments that could not be undertaken by privet sector due to its difficult nature
I .e high initial capital and long gestation period.

However, the passed command economy system and the lack of experience Between
both sides have made it so hard for a private sector to flourish .
But now a day as Ethiopia follows free market economy ‘the roll of private sector for
the achievement of the economy policy. Accordingly, the Ethiopia federal democratic
government is encouraging investors to invest their records to contribute to the development
of the country in all sectors by avoiding all barriers and facilitating all the mince for the
investment
By taking this encouraging as an opportunity the promoter project plan to establish Granite
cutting and processing factoryin Oromiyaregional state Burayucity Administrationfor
the benefit of the promoter, the district community as well as the country as a whole.

2.2. Production description and application

Granite is a natural igneous rock composed of granular limestone or dolomite, which is
crystallized bythe influenceof heat,pressureandaqueoussolutions. ThisMetamorphicrock

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canbefoundinnaturewithdifferentattractivecolorsandvariegatedvarietiesaswellas quality.

Dimension stoneisthecollective description ofnaturalstone,whichhasbeenextracted

fromtheearthin anorderlymanner,furtherworkedby cuttingandprocessing,thenusedin
variousbuildingactivitieseitherstructurallyorfordecorativepurposes.Itincludespanels
andtilesfrommarble,granite,slate,sandstonebasaltandotherrelatedmaterials.

Theterm"Granite"is derivedfromLatinword"Granum"meaning"grain"becauseofits
granularnature.Graniteoccupiesaprominentplaceamongdimensionalstonesonaccount
ofitshardness,durability,capabilitytotakemirrorpolishandfascinatingcolours.

Mostcommonapplications ofgraniteareinthemanufacture ofslabsandblocksforthe

buildingconstructionsector.

Blocksizesmayvaryaccordingtothedeposit.Themostcommonblocksizeis22tonnesof
asizeapproximately3.0mx1.5mx1.5m.However,blocksassmallas6tonnesandoften11
tonnescould be produced, 22 tonnesis generally the largest due to transport requirements.
.
Cutting granite has got wide application in the building construction sector and can be
processed in industries to produce various kinds of dimension stones. The products of
dimension stone processing industries can be used for monuments, interiors
decoration, statuary,tabletopsandnovelties.
Buttheprincipalapplicationofgraniteisforexterior building works to provide
alastingendurancetowalls.

2.3. Project Objectives and benefits

The main objective of the project is aimed at to maximize the return on invested capital in the
form of profit for the promoter. However, its implementation will benefit the employee, the
consumer society and the government at different levels. In this respect the project is aimed
to promote the following objectives:-
 To maximize the return on invested capital through granite stone cutting and
processing factory

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  To raise the significance and importance of the sector and thereby raising its
contribution to the national economic development,
 To distribute Granite cutting and processing factory for customer markets at
competitive prices,
 By raising the quality and volume of granite cutting and processing factory
 To provide gainful employment to a large segment of the population of the project
area and augment earning capacity at the grassroots level,
 Increase government revenue through the different forms of taxes, which in turn used
to facilitate social and economic development.

In general, the project is believed to have significant social and economic benefits that accrue
to the society, the region and the country beyond the financial returns to its owner.

3. Project location and Socio Economic status

3.1. Project location

The proposed project of Granite cutting and processing Factory will planned to be located in
oromiya regional state surrounding Finfine Burayu city Administration. Burayu is located in
Oromia National Regional State, Oromia Special Zone Surrounding Finfine at a distance of
15 km from Addis Ababa. Its astronomical location is 9º02’30’’North Latitude and
38º03’30’’- 38º41’30’’ East Longitude.

The town was founded in 1953.Burayu is one of the reform towns in the region and has a city
administration, municipality and six kebelles. The town has Integrated Development Plan
which was prepared in 2006.

The total land size the promoter requesting for the implementation of the project is estimated
at 8,000 square meters, which will been obtained from investment commission of Oromia

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regional state on current region and the district Hence the owners select Burayu for proposed
project by looking every aspects of business integrity.

3.2. Demography

According to the National Population and Housing Census carried out in 2007, the population
of the town was 48,876. Out of these, 24,003 (49%) were males and 24,873 (50.89%) were
females. Regarding age distribution 15,857 (32.4%) were within the age group of 0-15 years,
31,728 (64.9%) 16-60 years and 1,291 (2.6%) 60 years and above. The average household
size in the town is calculated to be 4.2.

3.3. Physical characteristics information

The built up area of Burayu town is 6361 ha excluding Gujekebele and it has linear shape. Its
altitude is 2450–2560 m above sea level; major or dominant soil is red soil. It has Mean
Annual Temperature of 14ºC and Mean annual rainfall of 1,188 mm. The prevailing wind
direction is from East to West. The principal natural constraints for the physical expansion of
the town is the steep topography of the land and flooding while manmade constrains are
existence of informal settlement, high tension lines, rugged and steep slopes in Gujekebele.

3.4. Socio-Economic information

Urban Economy and Role of the Town: The town serves as administration and industrial
center. There are 105 manufacturing, 12 wholesale, 631 retail trade, 347 service trade, four
fuel stations and three garages in the town. There are three banks and three micro financial
institutions giving financial services in the town. Economic rate activity for both sex is 59.7%
while unemployment rate is 16%. The average annual revenue of the municipality within the
2005-2010 period was 43,902,029.14 Birr and the major sources of revenue were taxes and
service charges.

The major investment opportunities in the town are: agro-industry processing and
construction. Burayu has economic linkages with the surrounding areas, towns, and Addis
Ababa. The town gets grain products, livestock supply, natural resources (fuel wood,
charcoal) and surplus labor from surrounding areas. The town gets agricultural inputs from
Adama and Addis Ababa, manufacturing and commercial products and some construction
materials from Addis Ababa and the town itself.
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Education: There are 58 rivate kindergartens; six government and 32 private primary
schools; five government and 32 junior secondary schools; two high schools including
preparatory; one TVET, one private and one government college in Burayu town.

Infrastructure: Regarding infrastructure, the town has asphalt and gravel roads connecting it
to different woredas, zones, regions and Addis Ababa. The distribution of roads as per the
type of construction materials shows that, there are 250km gravel, 35km asphalt, 250km earth
pressed and 26.79 km cobble stone roads. In addition to these; the town gets 24 hours electric
supply from the national grid, mobile and fixed telephone lines and internet services. The
main water supply source is potable underground water distributed with pipe network system
and 18 public water points. The town has open ditch system to discharge storm water.

Housing: There are 27,726 private and government owned houses built of mud and wood
while wood, stone, sand, and Hollow Concrete Block are widely available construction
materials in the town.

Transport: There is daily inter-urban transport service to and from five towns. 11 Bajaj and
84 minibus taxis and 85 horse-drown carts are the main intra-urban transport service.

4. MARKET STUDY AND PLANT CAPACITY

4.1. Past Supply andPresent Demand

Granite is acommon type ofhardestaffordable naturalstone. Althoughavailableinawide

varietyofcolorsitisusuallywhite. Itsmassive,hardandtoughnaturemakesawidespread
useasconstructionstone. Its applicationincludesfloor,tiles,bathrooms,gardens,stepsand
manymore. Theextensiveusageofgraniteasadimensionstoneaswellasflooringandtiles
forpublicandcommercialbuildings andmonumentsconstitutethetopdemandsectorsof the
granite market. Recently, applicationof natural stone in the rapidly developing urban areas
has increased.

Supply ofgraniteismetmainlyfrom the domesticproducers. Although theexpanding

building and construction sector has given riseto granite cutting opportunities and it is a
well knownfactthatmoregraniteisproduced,officialstatisticsisnotavailable. Failingtoassess

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 the demand for granite based on the supply, end use approach is applied.

Thedemandforgraniteprimarilyisconcerned withtheconstructionsector. Accordingto a study

conducted on Problems and Prospects of Housing Development in Ethiopia with
particularemphasisonthecityofAddisAbaba,theannualnewdwellingunitsrequiredis29,272.

Assumingaminimumaverageconsumptionof5.5m2
graniteperhousingunit,thecurrenteffectivedemandforgraniteatAddisAbabaisestimatedtobe15

3,678m2. Further assuming this volume to cover 80% of the national consumption of

granite, the current effective demand for graniteis estimated at 192,098m2.

4.2. Projected Demand

The rapid development of urbanareas,high-risebuildings,housingcomplexes,malls,
governmentalandnongovernmentalbuildingsmake useofgraniteforboththeirinteriorsand
exteriors. Once limited to the wealthy, granite has now becomea part of the common
people’s use because of the supply of granitefromthe new granite industries.

turndependsontheoveralleconomicdevelopmentofthecountry. Therefore,demandis
projectedattheannualGDPgrowthrateachievedin2004/5or8.7%. Projecteddemandis
presented in Table 4.1.

Table 4.1projected demand for granite

Year Projected Demand

2008 (M2)
208,811
2009 226,977
2010 246,724
2011 268,189

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 2012 291,521
2013 316,884
2014 344,453
2015 374,420
2016 406,995
2017 442,404

4.3. Pricing andDistribution

Considering the current retail price of the product and margin for distributors and

transportationcosta factory-gatepriceofBirr150perm2 isrecommendedfortheenvisaged

plant.Theproductcanbedistributedthroughdirect deliverytoconstructioncompaniesaswell as
through the existing building material shops.

4.4. PLANT CAPACITY AND PRODUCTION PROGRAMME

4.4.1. Plant Capacity
Basedonthemarketstudyindicatedabove,the envisagedplantformanufacturingofgranite cutting
plant with a capacity of300,000 sq. meters per annum.
Thedemandforgraniteisdirectlyrelatedwiththegrowthintheconstructionsectorwhichin
theplantisexpectedtooperatein3shiftsof8hourspershiftforatotalof300workingdaysa year.
It’santicipatedthattheplantwillrunat70%,85%and100%inthefirst,secondand third years,
respectively.

4.4.2. Production Programme

The Granite cutting and processing factory will start operation at a lower production
capacity to allow timeformarketpenetrationandskilldevelopmentofworkers. Thus,production
willstart at75%of installedcapacityduringthefirstyearof operation,andthenwillgrowto85%
and100%offullcapacityinthesecondyear,andthirdyearandthenafter. Thedetailsof production
programme are shown in Table 4.2 below.

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Table 4.2.Productionprogramme

Year 1 2 3 and above

Annual production (million pieces) 3.75 4.25 5.0
Capacity utilization (%) 75 85 100

5. Technical study
5.1. ProductionProcess

The processing of granite dimension stones essentially involves the following major
operations: quarry opening; blasting;cutting; polishing and ornamenting.

Quarry
Blasting Cutting Polishing Ornamenting
openining

Quarrying for dimension stone requires a specialized method of extraction. Normal

quarrying methodsuselargequantitiesof explosivestomovehugevolumesforbreakingdowninto
aggregate. This creates cracking throughout the stone, which renders it unsuitable for this
purpose. Many a dimension stone quarry has been rendered useless by the over use of
explosives.

Wiresawingisusedforprimaryblockextraction.Thesystemconsistsofalongstrandedwire
ordiamondtippedwirefedthroughaseriesofpulleys and assisted by abrasives. Stranded wire
has been used for many years in marbleand sandstone, whilst improvements in diamond
technology, hasseen therecentintroductionofwiresawingingranitequarries.Theyieldfrom wire
sawing is much higher and gives a semi finished surface which allows a close examination
of the material before further working.

Cutting is performed by a gang-saw for producing granite slabs. Gang sawing uses a

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 reciprocatingframewithupto 120steelbladesworking theirs way throughtheblock.Itcan take
up to one week to saw each block.

Surface finishing or polishing of shaped marble blocks by rubbing beds and polishing
machines in order to attain attractive color and uniformtexture,

5.2. Raw Materials, feeding and Utilities

5.2.1. Raw Material
Themajorrawmaterialrequiredforjutebagproductionisjuteyarn. Juteyarnisnot produced
locally, and therefore it has to be imported fromabroad.Auxiliary materials include oils,
chemicals and other required inputs.

Therawmaterialsusedfordimensionstonecuttingaregraniterock.The annual requirement of

granite or other dimension stonesis indicated in the Table 5.1. The raw materials required for

the production 30,000m2 of granite slabs per annum isindicated inTable4.1below.

Theabrasives aresupposed tobeobtained fromforeign sources.

Table 5.1Annualrequirementofrawand auxiliary materials

Description Qty Cost ‘000 Birr

Marble or dimension stones (Tons) 18,000 11,500,000
Total 11,500,000

5.2.2. Utilities

Annualrequirementofelectricity,waterandfuelisestimatedat879,000kwh,15,000m 3and
450liters,respectively.Thetotalcostsofutilitiesare,therefore,aboutBirr1,018,000per annum.
Table 5.2 utilities
Sr. Description Unit of Qty. Cost in birr
No. Measure
1 Electricity kWh 879,000 1.4 1,230,600
2 Water m3 15,000 5.5 2,500
3 Oil and lubricants Kg 450 56 5,200

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 Total 1,338,300

5.3. Machinery and equipment

Thelistofmachineryandequipmentrequiredforthemanufactureofgraniteslabsisgiven in

Table5.2below.Foranannualcapacityof150,000m2ofslabs,totalcostofmachineryand
equipment is estimated at Birr 15.9million, out of which Birr 75% of investment is in
foreign currency.

Table 5.2list of machinery and equipment

S/n Description Quantity Total Cost (Br.)

1 Gang Saw 2 940,000

2 Slide Cutting Machine 2 350,000
3 Circular Cutting Machine 2 390,000
4 Polishing Machine 1 750,000
5 Chamfering & Trimming Machine 2 185,000
6 Polishing Machine (Hand Operated) 2 150,000
7 Mining Equipment L.S 11,500,000
7 Quarry Equipment L.S 1,425,000
8 Tools L.S 250,000
Total 15,940,000

5.4. Land, Buildings and Civil Works

5.4.1. Land lease
The overall land required is about8,000 square meters. Land lease cost at the rate of Birr 6
birrper m2 and for 70 years land holding is estimated to be Birr 3.4million. Thus, the total
land & construction cost assuming that the total land lease cost will be paid in advance (5%)
amounts to Birr 168,000. government has following significances the remaining amount paid
within 40 years per year .
5.4.2. Land use plan of the project
Building designing will be constructed which insures smooth functioning of all operations.
The building will have well-ventilated appropriate Granite Cutting factory area the structure

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includes separate rooms and other different activates the detail as follows

Table 5.3. Description of Land use plan

S/n Description Area/m2
1 Factory building 2000
2 Office building and cafeteria 800
3 Staff residence 1000
4 Store for raw material 1000
5 packaging and store for output product 1000
6 sales shop 100
7 Generator and pump house 70
8 Guard house 30
9 parking area 1000
10 garden area 1000
Total 8000

5.5. Environmental impact assessment

The project will seriously involve itself protecting conserving and developing the natural
and flora of the project area in line with the millennium development goal. To this to will
play a vital role in participating the varies organization and the community around the
project area to from an environmental commute in charge of all environmental issues to be
handled in accordance to varies environmental and water policies of 97/99.
The owner of the project believes to undertake several environmental issues for the
conservation development and creation of sustainable environmental around the project
area.
The discharges of this project that may be discharge to the atmosphere during car wash and
little discharge of oil. The liquid discharges are managed by constructing

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 5.6. Implementation Schedule
The actual implementation of the Granite cutting and processing factoryis planned to begin
on the July 2015. The major activities envisaged are processing of land preparation,
construction and delivery, installation and commissioning of the factory line. Undertaking of
civil design works and execution of construction works which will be carried out by side
which opening and processing of L/C will take 3 months. The FOB delivery of plant
machinery and equipment will take 4 months. Allowing additional one month for sea freight
and clearing, the delivery of plant of project site and thus commencement of installation work
requires 5 month. Plant installation and commissioning will take place for 4 months.
The provision of infrastructural facilities such as Electric Power and water will be carried out
in the course of project implementation schedule. Other activities such us man power
recruitment and training, system development, and procurement of raw and other supplies
will also be duty performed to ensure that everything is in place by the time the plant is ready
for operation. All in all the project is expected to take 12 months for completion as per the
below detailed implementation schedule.
Table 5.4. Implementation schedule
(Months) in Gregorian Calendar
Description 7 8 9 10 11 12 1 2 3 4 5
Acquisition of Investment Land
(July2015)
Opening & Processing of L/C x x x
Building Construction x x x x x x
Delivery of Plant machinery and x x x x x
Clearing
Installation and Commissioning x x x x
Recruitment of man power arranging x x x x x x
for other works
Customers, timely availability all the week including week end days, customer care, and
quick response to the feedback from clients.
6. ORGANIZATIONS AND MANAGEMENT
6.1. Organizational Structure

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The organizational structure of the project is designed by including all the necessary personal
under the right division. At the top of the organizational structure, there will be a general
manager with the responsibility of supervising the overall activity of plant. Depending up on
the nature of the center and the amount of work to be performs under each will be supervised
by the unit head that is accountability for general manager

CEO

Adviser G/Manager Internal Auditing

& Inspection

Coordinator
Manager

Secretary

Sales& technical Marketing Admin &

Unit Unit finance Unit

As clearly shown the organizational structure, the integrated projected center has CEO three
Departments under the general manager, Addition and the internal Auditing and inspection.
The departments are the production Department, the marketing department and the general
service department under each department there are different section which are undertaking
different activities
6.2. Management
As to the management of the project is concerned the owner will be responsible for the
overall project planning, co-ordination and implementation. After project implementation the
promoter serves as a top management body and frequently visits and supervises the
organization.
Cattle fattening farm a business man who has a long year experience in managing business
activities. Therefore, the extensive experience he has enables him to organize and properly
manage the envisaged Granite cutting and processing factory
6.3. Manpower Requirement

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For smooth and efficient operation of the organization, it has been anticipated that each units
will have adequate number of qualified and experienced manpower. The labor component of
the Jute and Granite cutting and processing factoryG/manager will hire qualified and
experienced in management whose main responsibility is to coordinate the overall activity
of the project.
The distinct units have their own operational teams under them. To fill in all these work units
with the required manpower the project needs200workers, 116 permanent and84 casual
employees,out of 116permanent workers 62 are skilled and 52 unskilled and out of 84 casual
workers 34 skilledand 50 unskilledworkers. For smooth operation of the project, employees
will be given on job training, clear duties and responsibilities under the direct supervision of
their respective units.

Table 6.1: Manpower Requirement

Monthly Annual
S/n Description of Job Qualification No.
salary Salary(Br)

1 General Manager CEO 1 7,000.00 84,000.00

2 Secretary Ba in secretarial 2 6,000.00 144,000.00
Production & Technical 2
3 bsc in marketing 6,000.00 144,000.00
Head
4 Commercial Head bsc in marketing 3 5,000.00 180,000.00
5 Finance & Administration bsc in Accounting 3 5,000.00 180,000.00

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 Head
6 Personnel bsc in management 3 5,000.00 180,000.00
7 Accountant bsc in Accounting 2 6,000.00 144,000.00
8 Accounts Clerk bsc in marketing 3 5,000.00 180,000.00
cashier diploma in 2
9 2,500.00 60,000.00
accounting
10 Sales person diploma in marketing 5 2,000.00 120,000.00
11 Purchaser diploma in marketing 2 3,000.00 72,000.00
Store Keeper diploma in 2
12 2,000.00 48,000.00
accounting
13 Quality Controller bsc in chemistry 1 5,000.00 60,000.00
14 Shift Leader diploma 3 2,500.00 90,000.00
15 Operator 12 th complete 9 2,000.00 216,000.00
16 Assistant Operation 12th complete 10 1,599.00 191,880.00
17 Laboer no skill 40 1,000.00 480,000.00
Mechanic diploma in 3
18 36,000.00
engineering 1,000.00
Electrician diploma in 4
19 96,000.00
engineering 2,000.00
20 Driver 10+3 4 2,000.00 96,000.00
21 Guard 8th graduate 2 2,000.00 48,000.00
22 cleaner 8 th grade 5 1,000.00 60,000.00
gardener 6th grade 5 1,000.00 60,000.00
116 2,969,880.00

7. FINANCIAL STUDY
7.1. General
Financial analysis of the proposed project of Granite cutting and processing factory will be
projected to test the financial visibility if the investigated organization. Quantifying both
project cost and benefits over the assumed project life, which is five years, made the project
visible. Besides it has been tried to make a realistic forecasting of costs and the benefits based
in current market price of all necessary materials. Once the anticipated stone cutting

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operation has been attained both projects cost and revenue is estimated to be consumed to be
compensated by increasing in sales revenue
7.2. Investment cost
The cost of the project is classified as fixed incitement cost and initial working capital.
With regards to fixed investment cost of the project, the land lease, building and civil works
cost, machinery and equipment cost office furniture costs and fuel costs will be required. As
to working and operating cost a brief illustration will be given as to utilities, salary expense,
maintenance cost and depreciation cost and the other related costs
7.2.1. Fixed costs
Fixed cost that include Land development, Building and civil work, machinery equipment
and vehicles and office furniture estimated birr 40,025,000.which is 64.3 % of the total
project.
Table 7.1 land development
Unit Price
S/n Description Qty Total Price (Br)
(Br)
1 Land clearing and leveling 800m2 2,500 525,000
2 Water well drilling 500,000 500,000
3 Water reservoirs 1 500,000 500,000
Total - - 1,525,000

Table 7.2 Building and civil works

Unit
S/n Description Area/m2 Price Total Price (Br)
(Br)
1 Factory building 2000 3,000 6,000,000.00
2 Office building and cafeteria 800 4,500 3,600,000.00
3 Staff residence 1000 3,000 3,000,000.00
4 Store for raw material 1000 3,000 3,000,000.00
packaging and store for output
5 1000 3,000 3,000,000.00
product
6 sales shop 100 3,000 300,000.00
7 Generator and pump house 70 2,000 80,000.00

Page 21
 8 Guard house 30 2,000 30,000.00
9 parking area 1000
10 garden area 1000
Total 8000 - 19,010,000

Table 7.3 List of machinery and equipment’s and cost

S/n Description Quantity Total Cost (Br.)

1 Gang Saw 2 940,000

2 Slide Cutting Machine 2 350,000
3 Circular Cutting Machine 2 390,000
4 Polishing Machine 1 750,000
5 Chamfering & Trimming Machine 2 185,000
6 Polishing Machine (Hand Operated) 2 150,000
7 Mining Equipment L.S 11,500,000
7 Quarry Equipment L.S 1,425,000
8 Tools L.S 250,000
Total 15,940,000
Table 7.4. Procurement of Vehicles and furniture’s
S/n Description Qty Unit cost Total Cost (Br.)
1 ISIZU track 2 1,200,000.00 2,400,000
2 Min bas 1 350,000.00 350,000
3 Pick Up (D4WD) car 1 500,000.00 500000
4 Computers and accessories Ls - 150,000
5 Office furniture 150,000
Total 3,550,000

Table 7.5 Summary of Fixed asset

S/n Description Estimate Cost birr
1 Land development 1,525,000
2 Building & Constructions 19,010,000
3 Machinery and equipment 15,940,000

Page 22
 vehicles and office furniture 3,550,000
Total 40,025,000

7.2.2. Production costs

Production cost of the project includes direct production and overhead costs. The major cost
item under this category includes cost of material and labour inputs, fuel and lubricants, repair
and maintenance, employee salary and benefits, insurance, office supplies and other
miscellaneous expenses; the total estimated production cost is birr 22,235,888 million which35.7
% of the total project capital is.

Table 7.6.Raw materials

Description Qty Cost ‘Birr
Marble or dimension stones 18,000 11,500,000
(Tons)
Total 11,500,000

Table 7.7 Utilities

Sr. Descriptio Unit of Qty. Unit price Cost ('000 Birr)
No. n Measure (Birr)
1 Electricity kWh 879,000 1.4 1,230,600
2 Water m3 15,000 5.5 82,500
3 Oil and lubricants Kg 450 56 25,200
Total 1,338,300

 Employee benefits : It includes medical expense, uniform and other incentive

package and assumed to be 25% of annual salary expense = birr 742,470
 Travel expense: It is assumed to be 10% of annual salary expense i.e. birr 296,988
 Repair and maintenance
Cost estimate/ year
Item
% Price
Land development 2 800500

Page 23
Building & Constructions 2 800500
Machinery and equipment 3 1200750
Vehicles & furniture’s 5 2001250
Total - 4803000

 Insurance:It is assumed to be 1% of fixed investment cost = birr 400,250

 Office supplies: Including stationery and sanitary supplies annual cost of birr
50,000is considered.
 Miscellaneous expense: It includes cost of land rent, telephone and postage, audit,
legal and license fees and other miscellaneous expenses. The total annual cost of these
cost components is estimated to be birr 75,000 /year.

Table 7.8 Determination of Initial Working capital requirement

S/n Cost item Annual cost
1 raw materials
1.1 raw materials 11,500,000
1.3 Utilities 1,338,300
Sub total 12,838,300
2 Administrative costs
2.1 Salary and wage 2,969,880
2.2 Employee benefits 742,470
2.3 Travel expense 296,988
2.4 Repair and maintenance 4,803,000
2.5 Insurance 400,250
2.6 Advertizing expense 60,000
2.7 Office supplies 50,000
2.8 Miscellaneous expense 75,000
Sub total 9,397,588
Initial W.C. requirement 22,235,888

7.3. Project Capital and financing

Page 24
 7.3.1. Project Capital
The total investment capital of the project is estimated at birr62,260,888of which birr
40,025,000(64.3%) is for fixed investment items while the remaining balance of birr
22,235,888(35.7%) will be initial working capital. The detail of investment capital of the
project is given below:
Table 7.9 Project capital
Investment capital
S/n
Item (Br.)
1 Land development 1,525,000
2 Building & Constructions 19,010,000
3 Machinery and equipment 15,940,000
4 vehicles and furniture 3,550,000
Sub total 40,025,000
5 Working Capital 22,235,888
Total 62,260,888

7.3.2. Financing
The total investment capital of the project is to be financed from the promoter’s equity and
bank loan. Out of the total capital birr 18,678,266(30%) is contributed by the promoter,
AminaSimbo Tufawhile the remaining balance of birr 43,582,622(70%) is to be financed by
local banks. The bank loan will be repaid based on the following terms and conditions:
 Loan amount = birr43,582,622
 Installment period/ term = 10 years
 Interest on loan (including service charge) = 8.5%
Table 7.10 Loan Repayment Schedule
Principal Interest Year ending
Year
Repayment Payment Balance
0 - - 43,582,622
1 4,358,262 3,704,523 39,224,359
2 4,358,262 3,334,071 34,866,097
3 4,358,262 2,963,618 30,507,835
4 4,358,262 2,593,166 26,149,573

Page 25
 5 4,358,262 2,222,714 21,791,311
6 4,358,262 1,852,261 17,433,049
7 4,358,262 1,481,809 13,074,786
8 4,358,262 1,111,357 8,716,524
9 4,358,262 740,905 4,358,262
10 4,358,262 370,452 0
0
Depreciation of fixed investment items
The straight-line method has been used to depreciate/amortize all fixed items of the project.
The depreciation rate applied for all fixed assets is given below:
Table 7.11 Depreciation Schedule
Annual Depreciation
S/n Item Original Value
% Amount (Br.)
1 Land development 1,525,000 10 152,500
2 Building & Constructions 19,010,000 10 1,901,000
3 Machinery and equipment 15,940,000 10 1,594,000
4 vehicles and furniture 3,550,000 10 355,000
Total 40,025,000 - 4,002,500

Page 26
Table 7.12 Summary of project Annual production costs
S/
Cost item Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10
n
1 Direct cost
1. 11,500,0 12,075,0 12,678,7 13,312,6 13,978,3 14,677,2 15,411,1 16,181,6 16,990,7 17,840,2
Raw materials
1 00 00 50 88 22 38 00 55 38 74
1. 1,338,30 1,405,21 1,475,47 1,549,25 1,626,71 1,708,04 1,793,45 1,883,12 1,977,27 2,076,14
Utilities
3 0 5 6 0 2 8 0 2 9 3
12,838,3 13,480,2 14,154,2 14,861,9 15,605,0 16,385,2 17,204,5 18,064,7 18,968,0 19,916,4
Sub total
00 15 26 37 34 86 50 77 16 17
Administrative
2
costs
2. 2,969,88 3,118,37 3,274,29 3,438,00 3,609,90 3,790,40 3,979,92 4,178,91 4,387,86 4,607,25
Salary and wage
1 0 4 3 7 8 3 3 9 5 9
2. Employee 1,044,73 1,096,96 1,151,81
742,470 779,594 818,573 859,502 902,477 947,601 994,981
2 benefits 0 6 5
2.
Travel expense 296,988 311,837 327,429 343,801 360,991 379,040 397,992 417,892 438,787 460,726
3
2. Repair and 4,803,00 5,043,15 5,295,30 5,560,07 5,838,07 6,129,98 6,436,47 6,758,30 7,096,21 7,451,02
4 maintenance 0 0 8 3 7 0 9 3 8 9
2. Insurance 400,250 420,263 441,276 463,339 486,506 510,832 536,373 563,192 591,352 620,919

Page 27
 5
2. Advertizing
60,000 63,000 66,150 69,458 72,930 76,577 80,406 84,426 88,647 93,080
6 expense
2.
Office supplies 50,000 52,500 55,125 57,881 60,775 63,814 67,005 70,355 73,873 77,566
7
2. Miscellaneous
75,000 78,750 82,688 86,822 91,163 95,721 100,507 105,533 110,809 116,350
8 expense
9,397,58 9,867,46 10,360,8 10,878,8 11,422,8 11,993,9 12,593,6 13,223,3 13,884,5 14,578,7
Sub total
8 7 41 83 27 68 67 50 18 43
Total cost working 22,235,8 23,347,6 24,515,0 25,740,8 27,027,8 28,379,2 29,798,2 31,288,1 32,852,5 34,495,1
capital 88 82 67 20 61 54 17 27 34 60

Note: Production costs are assumed to increase by 5% annually.

Page 28
 7.4. Revenue projection
The project will collect its revenue from the provision of outputs.The selling of intended output
has estimated based on the current market price of similar service provision in district.The
annual sale program is formulated based on proposed plant capacity considered the problem of
market penetration and skill development of production at the initial stage of the production
period

Table 7.13 Description of revenue projection

Unit price/ Total

Description Quantity/year
S/N m2 Revenue/year
Finishing output/m2 75,000 450 33,750,000
Total revenue 33,750,000

Page 29
 7.5. Financial statements
7.5.1. Projected Profit/loss statement

AminaSimbo TufaGranite cutting and processing factory

Projected profit/loss statement

Table 7.14 Project Profit/loss statement

In ‘birr

Project Year
Descriptio
1 2 3 4 5 6 7 8 9 10
n
33,750,00 35,437,50 37,209,37 39,069,84 41,023,33 43,074,50 45,228,22 47,489,63 49,864,12 52,357,32
Revenue
0 0 5 4 6 3 8 9 1 7
Less:
22,235,88 23,347,68 24,515,06 25,740,82 27,027,86 28,379,25 29,798,21 31,288,12 32,852,53 34,495,16
Production
8 2 7 0 1 4 7 7 4 0
costs
Gross 11,514,11 12,089,81 12,694,30 13,329,02 13,995,47 14,695,24 15,430,01 16,201,51 17,011,58 17,862,16
Income 2 8 8 4 5 9 1 2 7 7
Less:
Interest on 3,704,523 3,334,071 2,963,618 2,593,166 2,222,714 1,852,261 1,481,809 1,111,357 740,905 370,452
loan

Page 30
Less:
Depreciatio 4,002,500 4,002,500 4,002,500 4,002,500 4,002,500 4,002,500 4,002,500 4,002,500 4,002,500 4,002,500
n
Profit 11,087,65 12,268,18 13,489,21
3,807,089 4,753,247 5,728,190 6,733,358 7,770,261 8,840,487 9,945,702
before tax 5 3 5
Less:
1332481.2 1663636.4 2004866.5 2356675.2 2719591.4 3094170.6 3480995.7 3880679.2 4293864.0 4721225.0
Income tax
1 7 7 7 9 0 6 5 1 9
(35%)
Net Profit 2,474,608 3,089,611 3,723,324 4,376,683 5,050,670 5,746,317 6,464,706 7,206,976 7,974,319 8,767,989

Note: Sales revenue is assumed to increase by 5% annually

7.5.2. Projected cash flow statement

AminaSimbo Tufa Granite cutting and processing factory

Projected cash flow statement

Page 31
Table 7.15 Project cash flow Statement

Project Year
Description
0 1 2 3 4 5 6 7 8 9 1
Cash
Inflow
Equity 18,678,266 - - - - - - - -
Bank loan 43,582,622
Revenue 33,750,000 35,437,500 37,209,375 39,069,844 41,023,336 43,074,503 45,228,228 47,489,639 49,864,121 52,3
Depreciati
4,002,500 4,002,500 4,002,500 4,002,500 4,002,500 4,002,500 4,002,500 4,002,500 4,002,500 4,0
on
Total
62,260,888 29,747,500 39,440,000 41,211,875 43,072,344 45,025,836 47,077,003 49,230,728 51,492,139 53,866,621 56,3
Inflow
Cash Out
Flow
Fixed Cost 40,025,000 - - - - - - - -
Initial W.C 22,235,888 22,235,888 23,347,682 24,515,067 25,740,820 27,027,861 28,379,254 29,798,217 31,288,127 32,852,534 34,4
Tax 1,332,481 1,663,636 2,004,867 2,356,675 2,719,591 3,094,171 3,480,996 3,880,679 4,293,864 4,7
Loan
4,358,262 4,358,262 4,358,262 4,358,262 4,358,262 4,358,262 4,358,262 4,358,262 4,358,262 4,3
Repayment
Total Out
62,260,888 27,926,631 23,347,682 24,515,067 25,740,820 27,027,861 28,379,254 29,798,217 31,288,127 32,852,534 34,4
flow

Page 32
 Net Inflow - 1,820,869 16,092,318 16,696,808 17,331,524 17,997,975 18,697,749 19,432,511 20,204,012 21,014,087 21,8
Cumulative
- 1,820,869 17,913,186 34,609,995 51,941,519 69,939,494 88,637,243 108,069,754 128,273,766 149,287,853 171,1
balance

7.5.3. Viability and other measurement

AminaSimbo Tufa Granite cutting and processing factory

Financial IRR computation

Table 7.16 Financial IRR computation

In ' birr

Year 0 1 2 3 4 5 6 7 8 9 10
Gross
33,750,000 35,437,500 37,209,375 39,069,844 41,023,336 43,074,503 45,228,228 47,489,639 49,864,121 52,357,327
income
Total
62,260,888 22,235,888 23,347,682 24,515,067 25,740,820 27,027,861 28,379,254 29,798,217 31,288,127 32,852,534 34,495,160
costs
Gross - 11,514,112 12,089,818 12,694,308 13,329,024 13,995,475 14,695,249 15,430,011 16,201,512 17,011,587 17,862,167

Page 33
profit 62,260,888
Less:
Profit 4,029,939 4,231,436 4,443,008 4,665,158 4,898,416 5,143,337 5,400,504 5,670,529 5,954,056 9049001.6
tax
After
-
tax net 7,484,173 7,858,381 8,251,301 8,663,866 9,097,059 9,551,912 10,029,507 10,530,983 11,057,532 8,813,165
62,260,888
benefit
DF at
35% 1 0.741 0.549 0.406 0.301 0.223 0.165 0.122 0.091 0.067 0.05
rate
Present -
8,531,957 6,637,310 5,153,889 4,012,036 3,120,991 2,424,716 1,882,461 1,474,338 1,139,776 893,108
Value 62,260,888
Net
-
present - - - - - - - - - -
26,990,305
Value
DF at
30% 1 0.769 0.592 0.455 0.35 0.269 0.207 0.159 0.123 0.094 0.073
rate
Present -
8854352.1 7157172.0 5775910.4 4665158.4 3764782.8 3041916.5 2453371.8 1992786.0 1599089.2 1303938.2
Value 62,260,888
Net - - - - - - - - - - -

Page 34
present 21,652,411
Value

Page 35
  NPV (Net Present Value)

It is a method of calculating the expected net gain or loss from project by discounting rate of
all expected future cash inflow and outflows to the present point in timeIn the above table
shoes that NPV at 30% and 35 % discount rate is 26.9 million and 21.6 million respectively,
this figure is positive value or NPV>0 it is indicate that accepted the project until 30 % and
35 % of discount rate
 Payback Period (PBP)

The payback period is the amount of time required for a firm to recover its initial investment
in a project, as calculate from cash inflow
Theinvestmentcostandincomestatementprojectionareusedtoprojectthepay-back period

PBP = Initial investment Cost

Gross Profit + Depreciation

= 62,260,888
11,514,888+4,002,500

4.01=4Years
The payback period =4 is less than the maximum acceptable payback period (10) therefore
accept the project.
 IRR

The internal rate of the project is the rate of discount that radios the present value of the
investigated project to zero. In calculating the IRR, the discount rate can be adjusted until the
NPV becomes Zero or at least as to zero. Hence, the IRR of this project is calculated as
follows
After tax IRR = 30 + 5 (21.6mill/26.9 mill)
=34.0%
IRR=34.0% of the project returns its initial investment cost within its life
 8. SENSITIVITY ANALYSIS
Sensitivity analysis is variant of scenario analysis in which each scenario represents a change
in only one variable, rather than a number of variables. For the proposed project, the
sensitivity of the project has been computed at 30% and 35% for sales reduction, operating
cost increase and investment cost increased accordingly, as described in table 7.16 the result
shows that IRR at 34.0% operating cost increase and 30 and 35% investment cost increase
and 30% service sales reduction. Predicting among these sales reduction is more sensitive to
the project and it should further expand after the project proposed life time because in this
case NPV equal zero at IRR=34.0
9. RISK ANALYSIS
The major risk of this project shall be high market price fluctuation and turnover the skilled
and trained man power. These risks can be mitigated. The high staff turnover may be
lessened by creating conductive working atmosphere and providing some benefits. For this
project, 25% benefit is proposed for the permanent employees
Characteristic (Personal) Risk: This is the most important risk, which should be seriously
considered? As to this company, the promoter have sufficient years of work experience in
both government and private organization (leading private business by engaging themselves),
so personal risk is minimum under this context
Business Risk: The fate of the business is generally found to be dependable. The demand-
supply analysis exhibits the need of the service of the business organization. According to the
overall demand the effect of competitors in the sector would not be an immediate alarming
threat at least for the coming few years. In additional to this. Long year experience of the
owner in the field will help to react against any adverse situation in the business. However,
the reaction of competitors should be attended. In additional to an advanced promotional
work and sustainable goodwill development by creating new and best quality products with
good service deliveries

Collateral Risk: Since the owners of the project are engaged on different related business,
there is no any risk related to collateral. In this regard, the proposed building and other
proposed equipment and the business as a whole are dependable securities. The experience
and skill of the owner as well as the manager and the other expertise add confidence to the
lenders. Therefore, there is no risk regarding collateral in general.

37
Construction Risk: Construction risk is one of the most important areas of risk that need
great consideration during project implementation. In the case of Granite cutting and
processing factory, the construction work of the proposed building will be made by phase
with self response supervision. Hence, there is no as such serious risk related to construction
work.

All the identified risks, which are related to the universally accepted lending policy, are to the
acceptable level that keeps the lender’s interest in safe position. Furthermore, the quality of
the assets of the company is dependable and the projected finical reports show that the
company will have a capacity to pay the principal and interest without any problem with in
short period of time.

10. MONITORING AND EVALUATION

Monitoring and Evaluation (M&E) has long been recognized as a vital aspect of
development projects generally and of industrial and services projects in particular. The
monitoring of project performance consists of the tracking of human, physical and financial
resources and the recording of how they are converted into outputs (project goods and
services), and in turn, outcomes and impacts.

11. CONCLUSION AND RECOMMENDATION

Conclusion: The Project is found to be operationally profitable & has significant socio-
economic benefits. According to the projected income statement, the envisaged project starts
earning profit from the first year of production. The income statement and other profitability
indicators show that the project is viable. The project is believed to have significant social and
economic benefits that accrue to the society beyond those financial returns to its owner. The
most remarkable social benefits can be expressed in terms of job creation that leads to
reduction in the level of unemployment.

38
Recommendation: The project directly employs 250persons; therefore, considering the
attractive financial and economic benefits the project is to produce, the promoter has made
the necessary preparation hoping that all the concerned offices & financial institutions should
give their support to facilitate the implementation of this plan.

39