Investment Office ANRS

Project Profile on the Establishment

of Solar Cookers Making 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..............................................................................3
4.1 Availability and Source of Raw Materials.......................................................................3
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......................................................................................................6
8. Financial Analysis..............................................................................................6
8.1 Underlying Assumption...................................................................................................6
8.2 Investment........................................................................................................................8
8.3 Production Costs..............................................................................................................8
8.4 Financial Evaluation........................................................................................................9
9. Economic and Social Benefit and Justification.............................................10
ANNEXES...............................................................................................................12
 1. Executive Summary
This project envisages production of 700 units of Solar Cookers per annum. The total investment
requirement of the project including the working capital is estimated at about Birr 303 thousand;
of which nearly Birr 114 thousand is the cost of the working capital and Birr 60 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 32.4 % and 27.1 %, respectively.
The net present value (NPV) at 18 % discounting rate is about Birr 136 thousand. The plant is
expected to create employment opportunities for about 12 persons.

2. Product Description and Application

Solar Cookers have been designed to utilize solar energy directly for the purpose of cooking.
Solar cookers are made form aluminum sheets and other metal products; such as copper and
steel. The cookers have a shape of “satellite-dish” that receives the sun’s heat and collects it. The
collected heat is transferred to a stove made from steel and installed behind the transparent
(satellite dish- shape device). The sun’s heat collected by the heat collector heats the stove, and
after a few minutes cooking takes place. The cooking is done outside the house wearing special
eye-glasses and a hat to protect the eyes of the cook from the sun’s radiation.

3. Market Study, Plant Capacity and Production Program

3.1 Market Study
3.1.1 Present Demand and Supply

The sun is the most powerful source of energy. Nowadays, solar energy has become increasingly
an attractive source of energy because of its free and inexhaustible supply, and its non-pollution
characters which are in stark contrast to fossil fuels, such as coal and petroleum, and firewood.
However, the most widely used fuels for cooking in Ethiopia are firewood and cooking gas, such
as kerosene. In big cities and some other areas, electricity is also used for cooking purpose.
Because of this, the demand for firewood and cooking gas is steadily increasing form time to
time. The soaring price of cooking gas and the continued tariff increase in electricity has forced
people to use more firewood, which in turn has led to serious deforestation that has already

1
passed a grave threat on the environment. This is also true in the ANRS, which is one of the
seriously affected areas in the country because of deforestation and environmental imbalance.

The introduction of the solar cooker in the Region will decrease reliance on petroleum products
(such as kerosene), fire wood and electricity for cooking. It will decrease the rate of deforestation
and the threat on the environment.

3.1.2 Projected Demand

Since solar cookers are not known in Ethiopia it is not possible to make sensible future demand
projection. However, as a substitute to any other cooking means and for its unique advantages
over them it is possible to create demand for solar cooker by introducing it to the public. In
connection to this, however, the minimum possible economically viable production capacity
should be chosen, and this chosen capacity should be very little fraction of the total demand for
cookers.

3.1.3 Pricing and Distribution

The factory gate price of the new product is set at Birr 700 per unit. Though the price may not
seem competitive as compared to other low price cooking equipments, it is actually cheap since
it does not involve any running cost in using it.

3.2 Plant Capacity

The minimum economically viable production capacity for solar cooker making plant is 700
pieces per annum; and this is a very little fraction of the total demand for cookers both in
Ethiopia and ANRS. 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 for the purpose of market
penetration. Accordingly, 75 % and 85 % capacity utilization are assumed for the first and the
second years of the operation, respectively. The third year onwards, 100 % capacity utilization is
assumed.

2
 4. Raw Materials and Utilities
4.1 Availability and Source of Raw Materials

The required raw materials are GI.G. R sheets, wooden reapers, polyester films, glass panes,
hardware and other consumables.

4.2 Annual Requirement and Cost of Raw Materials and Utilities

The annual requirements of main raw materials at 100 % capacity utilization with their
associated costs are given in Table 4.1.

TABLE 4.1
ANNUAL RAW MATERIAL REQUIREMENT
(AT FULL CAPACITY)

Cost(In Birr)
No Raw Material Unit Qty.
F.C L.C Total
1 GI.G. R Sheets 26250 26250
2 Wooden Reapers 8750 8750
3 Polyester Films 43750 43750
4 Hardware 70000 70000
5 Glass Panes 17500 17500
6 Other
Consumables 8750 8750
Total 131,250 43,750 175,000

The total cost of the major raw materials and other consumables is roughly estimated to reach at
Birr 175 thousand per annum; of which Birr 131 thousand (75 %) is required in foreign currency.
The only utilities required by the plant are electricity and water. Electricity and water
requirements are about 99 MWH and 100 m3, respectively; and the total annual cost of utility at
full capacity is equal to Birr 54,715.

3
 TABLE 4.2
UTILITIES REQUIREMENT

No. Utility Requirement Unit Price Cost

(Annual) (Birr)
1. Electricity 99,000 KWH Birr0.55 /KWH 54,450
2. Water 100 m3 Birr2.65 /m3 265
Total 54,715

5. Location and Site

For its convenience to introduce the product and to distribute it to different parts of the region,
Bahir-Dar is an appropriate choice for the Solar Cooker making plant in the region.

6. Technology and Engineering

6.1 Production Process

The process of solar cooker manufacturing is very simple. All the process can easily be
completed by a skilled sheet metal worker and a semi-skilled carpenter in a workshop. All the
operations can be done manually by using of simple machines. The production process involves
collection of raw materials, such as aluminum sheets prepared for the purpose, steel and copper
(wire). Then a typical active, and “satellite dish-shaped” plate with transparent aluminum sheets
facing the sum is made. A blackened metal plate is also prepared at the back of the plate. A stove
made of steel is connected with the blackened plate that transfers the sun’s heat from the heat
collector (the dish) to the stove.

6.2 Machinery and Equipment

The machinery and equipment required and the cost estimate is presented in Table 6.1.
TABLE 6.1
MACHINERY & EQUIPMENT
Item
1. Hand Lever Shearing Machine 150 mm Blade Length
2. Hand Operated Bending Folding Machine 20 G X 610 mm Length
3. Bench Drilling Machine 13 mm Capacity With 0.5 HP
4. DE Bench Grinder 150 mm Wheel Size With 0.5 HP
5. Hand Tools, Carpentry Tools and other Work Shop Equipments

4
The total cost of machinery/equipment is estimated at Birr 60,000 all of which is in local
currency.

Machinery Supplier’s Address:

Machinery Suppliers located at Piassa, Addis Ababa.

6.3 Civil Engineering Cost

The building area required by the plant is estimated to be 50 m 2, and it costs Birr 100,000. This
would include cost of land preparation and associated civil works. The total land area of the
plant, including the open space, is 200 m2 and its lease cost equals Birr 12,000. The cost of the
land lease is as per ANRS land lease rate for Bahi-Dar which is equal to Birr 60 per square meter
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

5
 Table 7.1
MANPOWER REQUIREMENT

Description No Monthly Salary Annual

(Birr) Salary (Birr)
A. Administration
1. Manager 1 2000 24000
2.Seretary/Cashier 1 800 9600
3.Slaesman 1 800 9600
4.Guards 2 300 7200
Sub-total 5 50,400
B. Production
1. Skilled workers (Operators) 5 800 48000
2. Unskilled Workers 2 300
(assistants) 7200
Benefits (20%) 21,120

12 126,720

The total annual wages and salary, including 20 % benefits, amount to Birr 126,720.

7.2 Training Requirement

One month on job training is required for the technical personnel. And this can be managed by
hiring one expert in the area locally.

8. Financial Analysis
8.1 Underlying Assumption

The financial analysis of Solar Cooker making plant is based on the data provided in the
preceding chapters and the following assumptions.

6
 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

7
 8.2 Investment
The total investment cost of the project including working capital is estimated at Birr 302
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
600 600
Building And Civil Works
100,000 100,000
Office Equipment
20,000 20,000
Vehicles
0 0
Plant Machinery & Equipment
60,000 0 60,000
Total Fixed Investment Cost
180,600 0 180,600
Pre Production Capital
Expenditure* 9,030 9,030
Total Initial Investment
189,630 0 189,630
Working Capital at Full Capacity
56,392 57,273 113,665
Total 246,022 57,273 303,295
*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 accounts for Birr 57 thousand or 18.9 % of the total
investment cost.

8.3 Production Costs

The total production cost at full capacity operation is estimated at Birr 395 thousand (See Table
8.2). Raw materials and utilities account for 58.2 %.

8
 TABLE 8.2
PRODUCTION COST AT FULL CAPACITY

Raw Material
Requirement Cost
1. Local Raw Materials 43,750
2. Foreign Raw Materials 131,250

Total Production Cost at full Capacity

Items Cost
1. Raw materials 175,000
2. Utilities 54,750
3. Wages and Salaries 126,720
4. Spares and Maintenance 5,418
Factory Costs 361,888
5. Depreciation 14,806
6. Financial Costs
18,198
Total Production Cost 394,892

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 37.5 % of capacity utilization

9
 III. Payback Period
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 in two years.

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 27.1 % 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 32.4 % and the net present value (NPV) at 18 % discount is Birr 136 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:

10
 A. Profit Generation

The project is found to be financially viable and earns on average a profit of Birr 71 thousand per
year and Birr 706 thousand 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

In the project life under consideration, the region will collect about Birr 257 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 12 professionals as well as support
stuffs. Consequently the project creates income of Birr 127 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. As there is no Solar Cooker Making
plant in the country, the commencement of this project substitutes the use of other means of
cooking that are not environmentally friendly.

11
ANNEXES

12
 Annex 1: Total Net Working Capital Requirements (in Birr)
CONSTRUCTION PRODUCTION
Year 1 Year 2 1 2 3 4

Capacity Utilization (%) 0 0 75% 85% 100% 100%

1. Total Inventory 0.00 0.00 116934.99 132526.32 155913.32 155913.32

Raw Materials in Stock- Total 0.00 0.00 46534.09 52738.64 62045.45 62045.45

Raw Material-Local 0.00 0.00 3579.55 4056.82 4772.73 4772.73

Raw Material-Foreign 0.00 0.00 42954.55 48681.82 57272.73 57272.73

Factory Supplies in Stock 0.00 0.00 308.20 349.30 410.94 410.94

Spare Parts in Stock and Maintenance 0.00 0.00 443.29 502.40 591.05 591.05

Work in Progress 0.00 0.00 7705.10 8732.45 10273.47 10273.47

Finished Products 0.00 0.00 15410.21 17464.90 20546.95 20546.95

2. Accounts Receivable 0.00 0.00 40090.91 45436.36 53454.55 53454.55

3. Cash in Hand 0.00 0.00 14847.55 16827.22 19796.73 19796.73

CURRENT ASSETS 0.00 0.00 125339.35 142051.27 167119.14 167119.14

4. Current Liabilities 0.00 0.00 40090.91 45436.36 53454.55 53454.55

Accounts Payable 0.00 0.00 40090.91 45436.36 53454.55 53454.55

TOTAL NET WORKING CAPITAL REQUIRMENTS 0.00 0.00 85248.45 96614.90 113664.59 113664.59

INCREASE IN NET WORKING CAPITAL 0.00 0.00 85248.45 11366.46 17049.69 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 155913.32 155913.32 155913.32 155913.32 155913.32 155913.32

Raw Materials in Stock-Total 62045.45 62045.45 62045.45 62045.45 62045.45 62045.45

Raw Material-Local 4772.73 4772.73 4772.73 4772.73 4772.73 4772.73

Raw Material-Foreign 57272.73 57272.73 57272.73 57272.73 57272.73 57272.73

Factory Supplies in Stock 410.94 410.94 410.94 410.94 410.94 410.94

Spare Parts in Stock and Maintenance 591.05 591.05 591.05 591.05 591.05 591.05

Work in Progress 10273.47 10273.47 10273.47 10273.47 10273.47 10273.47

Finished Products 20546.95 20546.95 20546.95 20546.95 20546.95 20546.95

2. Accounts Receivable 53454.55 53454.55 53454.55 53454.55 53454.55 53454.55

3. Cash in Hand 19796.73 19796.73 19796.73 19796.73 19796.73 19796.73

CURRENT ASSETS 167119.14 167119.14 167119.14 167119.14 167119.14 167119.14

4. Current Liabilities 53454.55 53454.55 53454.55 53454.55 53454.55 53454.55

Accounts Payable 53454.55 53454.55 53454.55 53454.55 53454.55 53454.55

TOTAL NET WORKING CAPITAL REQUIRMENTS 113664.59 113664.59 113664.59 113664.59 113664.59 113664.59

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 94815.00 208479.59 407590.91 421845.45 498018.18 490000.00
1. Inflow Funds 94815.00 208479.59 40090.91 5345.45 8018.18 0.00
Total Equity 37926.00 83391.84 0.00 0.00 0.00 0.00
Total Long Term Loan 56889.00 125087.76 0.00 0.00 0.00 0.00
Total Short Term Finances 0.00 0.00 40090.91 5345.45 8018.18 0.00
2. Inflow Operation 0.00 0.00 367500.00 416500.00 490000.00 490000.00
Sales Revenue 0.00 0.00 367500.00 416500.00 490000.00 490000.00
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 94815.00 94815.00 443948.60 377170.98 464323.46 436707.92
4. Increase In Fixed Assets 94815.00 94815.00 0.00 0.00 0.00 0.00
Fixed Investments 90300.00 90300.00 0.00 0.00 0.00 0.00
Pre-production Expenditures 4515.00 4515.00 0.00 0.00 0.00 0.00
5. Increase in Current Assets 0.00 0.00 125339.35 16711.91 25067.87 0.00
6. Operating Costs 0.00 0.00 272268.71 308292.40 362327.94 362327.94
7. Corporate Tax Paid 0.00 0.00 0.00 0.00 28400.52 29492.38
8. Interest Paid 0.00 0.00 46340.54 21837.21 18197.68 14558.14
9.Loan Repayments 0.00 0.00 0.00 30329.46 30329.46 30329.46
10.Dividends Paid 0.00 0.00 0.00 0.00 0.00 0.00
Surplus(Deficit) 0.00 113664.59 -36357.69 44674.47 33694.72 53292.08
Cumulative Cash Balance 0.00 113664.59 77306.91 121981.38 155676.10 208968.18

3
 Annex 2: Cash Flow Statement (in Birr): Continued
PRODUCTION
5 6 7 8 9 10
TOTAL CASH INFLOW 490000.00 490000.00 490000.00 490000.00 490000.00 490000.00
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 490000.00 490000.00 490000.00 490000.00 490000.00 490000.00
Sales Revenue 490000.00 490000.00 490000.00 490000.00 490000.00 490000.00
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 434160.24 432154.37 429606.69 396729.56 396729.56 396729.56
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 362327.94 362327.94 362327.94 362327.94 362327.94 362327.94
7. Corporate Tax Paid 30584.24 32217.90 33309.76 34401.62 34401.62 34401.62
8. Interest Paid 10918.61 7279.07 3639.54 0.00 0.00 0.00
9. Loan Repayments 30329.46 30329.46 30329.46 0.00 0.00 0.00
10.Dividends Paid 0.00 0.00 0.00 0.00 0.00 0.00
Surplus(Deficit) 55839.76 57845.63 60393.31 93270.44 93270.44 93270.44
Cumulative Cash Balance 264807.94 322653.58 383046.88 476317.33 569587.77 662858.21

4
 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 367500.00 416500.00 490000.00 490000.00

1. Inflow Operation 0.00 0.00 367500.00 416500.00 490000.00 490000.00

Sales Revenue 0.00 0.00 367500.00 416500.00 490000.00 490000.00

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 94815.00 94815.00 357517.15 319658.86 379377.63 391820.32

3. Increase in Fixed Assets 94815.00 94815.00 0.00 0.00 0.00 0.00

Fixed Investments 90300.00 90300.00 0.00 0.00 0.00 0.00

Pre-production Expenditures 4515.00 4515.00 0.00 0.00 0.00 0.00

4. Increase in Net Working Capital 0.00 0.00 85248.45 11366.46 17049.69 0.00

5. Operating Costs 0.00 0.00 272268.71 308292.40 362327.94 362327.94

6. Corporate Tax Paid 0.00 0.00 0.00 0.00 0.00 29492.38

NET CASH FLOW -94815.00 -94815.00 9982.85 96841.14 110622.37 98179.68

CUMMULATIVE NET CASH FLOW -94815.00 -189630.00 -179647.15 -82806.01 27816.36 125996.05

Net Present Value (at 18%) -94815.00 -80351.69 7169.53 58940.51 57057.79 42915.24

Cumulative Net present Value -94815.00 -175166.69 -167997.17 -109056.66 -51998.87 -9083.63

5
 Annex 3: DISCOUNTED CASH FLOW-TOTAL CAPITAL INVESTED (Continued)
PRODUCTION
5 6 7 8 9 10
TOTAL CASH INFLOW 490000.00 490000.00 490000.00 490000.00 490000.00 490000.00

1. Inflow Operation 490000.00 490000.00 490000.00 490000.00 490000.00 490000.00

Sales Revenue 490000.00 490000.00 490000.00 490000.00 490000.00 490000.00

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 392912.18 394545.84 395637.70 396729.56 396729.56 396729.56

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 362327.94 362327.94 362327.94 362327.94 362327.94 362327.94

6. Corporate Tax Paid 30584.24 32217.90 33309.76 34401.62 34401.62 34401.62

NET CASH FLOW 97087.82 95454.16 94362.30 93270.44 93270.44 93270.44

CUMMULATIVE NET CASH FLOW 223083.87 318538.03 412900.34 506170.78 599441.22 692711.66

Net Present Value (at 18%) 35964.39 29965.45 25103.97 21028.39 17820.67 15102.26

Cumulative Net present Value 26880.77 56846.22 81950.19 102978.58 120799.25 135901.51

Net Present Value (at 18%) 135,901.51

Internal Rate of Return 32.4%

6
 Annex 4: NET INCOME STATEMENT ( in Birr)
PRODUCTION
1 2 3 4 5
Capacity Utilization (%) 75% 85% 100% 100% 100%

1. Total Income 367500.00 416500.00 490000.00 490000.00 490000.00

Sales Revenue 367500.00 416500.00 490000.00 490000.00 490000.00
Other Income 0.00 0.00 0.00 0.00 0.00
2. Less Variable Cost 232161.71 263116.60 309548.94 309548.94 309548.94
VARIABLE MARGIN 135338.30 153383.40 180451.06 180451.06 180451.06
(In % of Total Income) 36.83 36.83 36.83 36.83 36.83
3. Less Fixed Costs 54913.00 59981.80 67585.00 67585.00 67585.00
OPERATIONAL MARGIN 80425.30 93401.60 112866.06 112866.06 112866.06
(In % of Total Income) 21.88 22.43 23.03 23.03 23.03
4. Less Cost of Finance 46340.54 21837.21 18197.68 14558.14 10918.61
5. GROSS PROFIT 34084.76 71564.39 94668.38 98307.92 101947.45
6. Income (Corporate) Tax 0.00 0.00 28400.52 29492.38 30584.24
7. NET PROFIT 34084.76 71564.39 66267.87 68815.54 71363.22
RATIOS (%)
Gross Profit/Sales 9.27% 17.18% 19.32% 20.06% 20.81%
Net Profit After Tax/Sales 9.27% 17.18% 13.52% 14.04% 14.56%
Return on Investment 29.26% 32.63% 27.85% 27.49% 27.13%
Return on Equity 28.10% 58.99% 54.62% 56.72% 58.82%

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 490000.00 490000.00 490000.00 490000.00 490000.00

Sales Revenue 490000.00 490000.00 490000.00 490000.00 490000.00
Other Income 0.00 0.00 0.00 0.00 0.00
2. Less Variable Cost 309548.94 309548.94 309548.94 309548.94 309548.94
VARIABLE MARGIN 180451.06 180451.06 180451.06 180451.06 180451.06
(In % of Total Income) 36.83 36.83 36.83 36.83 36.83
3. Less Fixed Costs 65779.00 65779.00 65779.00 65779.00 65779.00
OPERATIONAL MARGIN 114672.06 114672.06 114672.06 114672.06 114672.06
(In % of Total Income) 23.40 23.40 23.40 23.40 23.40
4. Less Cost of Finance 7279.07 3639.54 0.00 0.00 0.00
5. GROSS PROFIT 107392.99 111032.52 114672.06 114672.06 114672.06
6. Income (Corporate) Tax 32217.90 33309.76 34401.62 34401.62 34401.62
7. NET PROFIT 75175.09 77722.77 80270.44 80270.44 80270.44
RATIOS (%)
Gross Profit/Sales 21.92% 22.66% 23.40% 23.40% 23.40%
Net Profit After Tax/Sales 15.34% 15.86% 16.38% 16.38% 16.38%
Return on Investment 27.19% 26.83% 26.47% 26.47% 26.47%
Return on Equity 61.97% 64.07% 66.17% 66.17% 66.17%

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 Annex 5: Projected Balance Sheet (in Birr)
CONSTRUCTION PRODUCTION
Year 1 Year 2 1 2 3 4
TOTAL ASSETS 94815.00 303294.59 377470.26 424050.65 468007.24 506493.32
1. Total Current Assets 0.00 113664.59 202646.26 264032.65 322795.24 376087.32
Inventory on Materials and Supplies 0.00 0.00 47285.59 53590.33 63047.45 63047.45
Work in Progress 0.00 0.00 7705.10 8732.45 10273.47 10273.47
Finished Products in Stock 0.00 0.00 15410.21 17464.90 20546.95 20546.95
Accounts Receivable 0.00 0.00 40090.91 45436.36 53454.55 53454.55
Cash in Hand 0.00 0.00 14847.55 16827.22 19796.73 19796.73
Cash Surplus, Finance Available 0.00 113664.59 77306.91 121981.38 155676.10 208968.18
Securities 0.00 0.00 0.00 0.00 0.00 0.00
2. Total Fixed Assets, Net of Depreciation 94815.00 189630.00 174824.00 160018.00 145212.00 130406.00
Fixed Investment 0.00 90300.00 180600.00 180600.00 180600.00 180600.00
Construction in Progress 90300.00 90300.00 0.00 0.00 0.00 0.00
Pre-Production Expenditure 4515.00 9030.00 9030.00 9030.00 9030.00 9030.00
Less Accumulated Depreciation 0.00 0.00 14806.00 29612.00 44418.00 59224.00
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 94815.00 303294.59 377470.26 424050.65 468007.24 506493.32
5. Total Current Liabilities 0.00 0.00 40090.91 45436.36 53454.55 53454.55
Accounts Payable 0.00 0.00 40090.91 45436.36 53454.55 53454.55
Bank Overdraft 0.00 0.00 0.00 0.00 0.00 0.00
6. Total Long-term Debt 56889.00 181976.76 181976.76 151647.30 121317.84 90988.38
Loan A 56889.00 181976.76 181976.76 151647.30 121317.84 90988.38
Loan B 0.00 0.00 0.00 0.00 0.00 0.00
7. Total Equity Capital 37926.00 121317.84 121317.84 121317.84 121317.84 121317.84
Ordinary Capital 37926.00 121317.84 121317.84 121317.84 121317.84 121317.84
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 34084.76 105649.15 171917.02
9.Net Profit After Tax 0.00 0.00 34084.76 71564.39 66267.87 68815.54
Dividends Payable 0.00 0.00 0.00 0.00 0.00 0.00
Retained Profits 0.00 0.00 34084.76 71564.39 66267.87 68815.54

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 Annex 5: Projected Balance Sheet (in Birr): Continued
PRODUCTION
5 6 7 8 9 10
TOTAL ASSETS 547527.08 592372.71 639766.02 720036.46 800306.91 880577.35
1. Total Current Assets 431927.08 489772.71 550166.02 643436.46 736706.91 829977.35
Inventory on Materials and Supplies 63047.45 63047.45 63047.45 63047.45 63047.45 63047.45
Work in Progress 10273.47 10273.47 10273.47 10273.47 10273.47 10273.47
Finished Products in Stock 20546.95 20546.95 20546.95 20546.95 20546.95 20546.95
Accounts Receivable 53454.55 53454.55 53454.55 53454.55 53454.55 53454.55
Cash in Hand 19796.73 19796.73 19796.73 19796.73 19796.73 19796.73
Cash Surplus, Finance Available 264807.94 322653.58 383046.88 476317.33 569587.77 662858.21
Securities 0.00 0.00 0.00 0.00 0.00 0.00
2. Total Fixed Assets, Net of Depreciation 115600.00 102600.00 89600.00 76600.00 63600.00 50600.00
Fixed Investment 180600.00 180600.00 180600.00 180600.00 180600.00 180600.00
Construction in Progress 0.00 0.00 0.00 0.00 0.00 0.00
Pre-Production Expenditure 9030.00 9030.00 9030.00 9030.00 9030.00 9030.00
Less Accumulated Depreciation 74030.00 87030.00 100030.00 113030.00 126030.00 139030.00
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 547527.08 592372.71 639766.02 720036.46 800306.91 880577.35
5. Total Current Liabilities 53454.55 53454.55 53454.55 53454.55 53454.55 53454.55
Accounts Payable 53454.55 53454.55 53454.55 53454.55 53454.55 53454.55
Bank Overdraft 0.00 0.00 0.00 0.00 0.00 0.00
6. Total Long-term Debt 60658.92 30329.46 0.00 0.00 0.00 0.00
Loan A 60658.92 30329.46 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 121317.84 121317.84 121317.84 121317.84 121317.84 121317.84
Ordinary Capital 121317.84 121317.84 121317.84 121317.84 121317.84 121317.84
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 240732.56 312095.78 387270.87 464993.64 545264.08 625534.52
9. Net Profit After Tax 71363.22 75175.09 77722.77 80270.44 80270.44 80270.44
Dividends Payable 0.00 0.00 0.00 0.00 0.00 0.00
Retained Profits 71363.22 75175.09 77722.77 80270.44 80270.44 80270.44

10