Investment Office ANRS

Project Profile on the Establishment

of Bicycle Assembling Plant

Development Studies
Associates (DSA)

October 2008
Addis Ababa

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

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

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

5.Location and Site..................................................................................................7

6.Technology and Engineering ..............................................................................7
6.1Production Process..................................................................................................................7
6.2Machinery and Equipment......................................................................................................9
6.3Civil Engineering Cost............................................................................................................9

7.Human Resource and Training Requirement..................................................10

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

8.Financial Analysis...............................................................................................11
8.1Underlying Assumption .......................................................................................................11
8.2Investment.............................................................................................................................12
8.3Production Costs...................................................................................................................12
8.4Financial Evaluation.............................................................................................................13

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

ANNEXES..............................................................................................................16

1. Executive Summary
The project envisages assembling of 5000 bicycle per annum. The total investment requirement
of the project including the working capital is estimated at about Birr 5.5 million; of which Birr 3
million is for machinery and equipments and around Birr 718 thousand is the cost of the working
capital and. Based on the cash flow statement, the calculated internal rate of return (IRR) and
simple rate of return (SRS) of the project are 23.5 % and 22.6 %, respectively. The net present
value (NPV) at 18 % discounting rate is about Birr 1131 thousand. The plant is expected to
create employment opportunities for about 30 persons.

2. Product Description and Application

A bicycle is a two wheeled vehicle that is used for human transport. Bicycles are widely used in
developing countries in both urban and rural areas.

3. Market Study, Plant Capacity and Production Program

3.1

Market Study
3.1.1 Present Demand and Supply

A bicycle is a very efficient form of personal transport. Some say Ethiopia is not suitable for
using bicycles because it is mountainous. But the experience of other countries shows that
bicycles can be as popular in mountainous countries as they are in plane countries. The main
difference is that bicycles used in mountainous countries can be with different gears. Even in
Ethiopia there are many places where bicycles can be used without any difficulty. The ever
increasing price of petroleum is a warning sign that using petroleum consuming vehicle is going
to be very expensive in the future. This requires substituting cheaper means of transport that are
least cost in terms of acquisition and operation. Such type of transport is provided by bicycles
which are relatively cheaper to buy and does not require expensive running costs.
Bicycle manufacturing would have two basic advantages for the development of an economy.
First it facilitates transport of people cheaply as it does not involve high running and acquisition
costs. Second, it facilitates the process of industrial development through the creation of
backward linkages for the manufacture of parts and components.
3

Until now the demand for bicycle in Ethiopia was met through imports. The import of bicycle
has been so little in the first half of 1990s while it has shown significant growth in the second
half of the past decade. The import of bicycles between 1989 E.C and 1999 E.C is provided in
Table 3.1.
Table 3.1
IMPORT OF BICYCLE
Year E.C
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
Total
Average Import per Year

Imports of Bicycle
18247
9169
21748
10285
13906
19841
30314
74261
52466
536
76522
327,295
29,754

Source: Compiled From CSAs Import Data of Different Years

As can be observed from the above table, the total import of bicycle between 1989 E.C and 1999
E.C was 327,295; implies, nearly 30,000 bicycles per annum have been imported in the past 11
years. Though this figure is small as compared to the population size of the country, it is an
indication for the existence of some demand for bicycle that justifies the establishment of bicycle
assembly plant in the country. The ANRS has many places where it is convenient to use bicycles.
In fact, compared to other regions of the country, more bicycles are used in the ANRS. BahirDar has more bicycles per capita than any urban center in the country. Considering these factors,
establishing a bicycle assembly plant in ANRS will be viable.

3.1.2 Projected Demand

Basically, the demand for bicycle is a function of population growth, topography and economic
growth. Of the three factors, economic growth is the most important variable influencing the
demand for bicycle. Consequently, the rate of economic growth of the country forecasted for the
4

coming 5 years has been taken to determine the rate of growth of demand for bicycle. Also, the
average volume of import for the last five years is assumed to be the current effective demand
for bicycle.
The economy of the country is anticipated to grow by 8 % in real terms for the coming 5 years.
Accordingly the projected demanded in given in table 3.2.
Table 3.2
DEMAND PROJECTION
Year
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010

Projected Demand
46820
50565
54611
58979
63698
68794
74297
80241
86660
93593
101080

As it is given in the above demand projection table, the demand for bicycle is expected to reach
68,794 in the 2005 E.C and 101,080 in 2010. And, this figure is reasonable to establish
financially viable bicycle assembly plant in the country.

3.1.3 Pricing and Distribution

The retail of bicycles in Addis Ababa ranges from Birr 1100 to Birr 2200 depending on the
origin of import and type of brands. To determine the sales revenue of this project an average
5

factory gate price of Birr 900 per bicycle is adopted. The product will find its market outlet
through the existing bicycle dealers in Bahir-Dar and Addis Abba and other regional towns.

3.2

Plant Capacity

This profile envisages the production of roadster model bicycles in various adult sizes. The
capacity of the plant in one shift operation and 275 working days per annum basis would be 5000
bicycles. The working days are set by deducting all Sundays and public holidays in a year and 25
days for annual maintenance and unexpected interruption of work.

3.3

Production Program

The production program follows gradual capacity utilization due to market and technological
reasons. Market reasons refer to the competition that the firm faces from bicycle importers while
the technology refers to the speed with which the operators assimilate the process know how.
Accordingly, 50 %, 75% and 100 % capacity utilization are assumed for the first and the second
years of the operation, respectively. The third year onwards, 100 % capacity utilization is
assumed.

4. Raw Materials and Utilities

4.1

Availability and Source of Raw Materials

The raw material requirement of the project has to be met from imports until local ancillary
industries are developed and large scale bicycle and tricycle production starts in the country.

4.2

Annual Requirement and Cost of Raw Materials and Utilities

The raw material requirement is provided in Table 4.1

Table 4.1
RAW MATERIAL REQUREMENT

Item
1. Bicycle Frame Tubing
2. Rubbing for Bottom
3. Flat Strip and Sheet Steel
4. Lugs and Bottom Bract
5. Components
6. Lugs and Bottom Bract
Total

F.C
115038
121275
103950
180180
194040
228690
943,173

Cost Birr
L.C
49302
51975
44550
77220
83160
98010
404,217

Total
164340
173250
148500
257400
277200
326700
1,347,390

The total cost of raw material would be Birr 1.3 million of which the foreign currency
component is 70 %.
The annual cost of utilities amounts Birr 74,600. The annual electrical energy requirement is
estimated to be 126,000 KWH and the annual water requirement is estimated to be 2000 cubic
meters. The corresponding annual costs will be Birr 69,300 and Birr 5,300, respectively.

5. Location and Site

For its convenience for distribution to different parts of the country and ANRS, Combolcha is an
appropriate choice for the bicycle assembling plant in ANRS.

6. Technology and Engineering

6.1

Production Process

In general, to assemble bicycle the following process would be required:

Cutting, forming and bending of steel tubing and sheet
Joining of frame component and forks by welding in jigs
7

 Painting
Baking
Strength testing
Assembly of wheels
Bicycle Assembly
A recent development, has been a legless design using MIG welding techniques and suitable jigs
and futures allowing semi-skilled workers to produce high quality frames efficiently. This design
would eliminate import of lugs and also allow the bottom bracket to be made from a simple
threaded tube. This technique has been adopted for the project under consideration.
Alternatively, instead of using a legless design using MIG welding techniques, the traditional
bicycle frames have been built using lugs at brazed joints. In this case, the lugs and complex
button bracket (which houses the pedai-axle) should be imported.

6.2

Machinery and Equipment

The list of machinery and equipment that are required to assemble bicycle is given below:

Power Press and Diers

2sets

Tube Threading Machine

Shearing Machine

Drilling Machine

MIG Welding Equipment

Frame and Fork Assembly Jigs

Phosphatining and Rinse Tank

Painting Both With Dipping Tanks

Baking Oven

Load Testing Jig

Grinder

The cost of machinery and equipment would be Birr 3 million including erection and
commissioning fees as well as 20 % local costs.
Machinery Suppliers Address:
Diversified Machine, Inc.
307-31st Avenue South,
Waite Park, MN 56387
USA

6.3

Civil Engineering Cost

The building area required by the plant is estimated to be 750m2, and it costs Birr 1,500,000.
This would include cost of land preparation and associated civil works. The total land area of the
plant, including the open space, is 2000 m2 and its lease cost equals Birr 109,000. The cost of the
land lease is as per ANRS land lease rate for Combolcha which is equal to Birr 54.50 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
A. Administration
1. Manager
2.Engineers
3. Supervisors
4.Seretary
5.Slaesman
6. Cashier
7. Storekeeper
8.Guards
Sub-total
B. Production
1. Skilled Workers
2. Semi-skilled Workers

No

Monthly Salary
(Birr)

1
2
1
1
2
1
1
3
12

3000
2000
1000
800
800
600
600
400

36000
48000
12000
9600
19200
7200
7200
14400
153,600

6
12

1200
600

7200

Benefits (20%)
30

Annual
Salary (Birr)

7200
65,280
391,680

The total annual wages and salary, including 20 % benefits, amount to Birr 391,680.

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 from the technology suppliers.

10

8. Financial Analysis
8.1

Underlying Assumption

The financial analysis of Bicycle Assembling 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

2Years

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
Finished Products
Accounts Receivable
Cash In Hand
Accounts Payable

10 Days
15 Days
30 Days
30 Days
30 Days

11

8.2

Investment

The total investment cost of the project including working capital is estimated at Birr 5.5 million
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
Land
Building and Civil Works
Office Equipment
Vehicles
Plant Machinery & Equipment
Total Fixed Investment Cost
Pre Production Capital
Expenditure*
Total Initial Investment
Working Capital at Full Capacity
Total

L.C

F.C

Total

5,450

5,450

1,500,000

1,500,000

50,000

50,000

600,000

2,400,000

3,000,000

2,155,450

2,400,000

4,555,450

107,773

227,773

2,263,223

2,400,000

4,783,223

306,855
2,570,077

411,566
2,811,566

718,421
5,501,644

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

The foreign component of the project accounts for Birr 2.8 million or 51.1 % of the total
investment cost.

8.3

Production Costs

The total production cost at full capacity operation is estimated at Birr 2.7 (see Table 8.2). Raw
materials and utilities account for 52.5 %

12

Table 8.2
PRODUCTION COST AT FULL CAPACITY
Raw Material
Requirement

Cost

1.Local Raw Materials

2.Foreign Raw Materials

404,217
943,173

Total Production Cost at full Capacity

Items
Cost
1. Raw materials

1,347,390

2. Utilities

74,600

3. Wages and Salaries

391,680

4. Spares and Maintenance

136,664

Factory costs

1,950,334

5. Depreciation

425,555

6. Financial costs

330,099

Total Production Cost

8.4

2,705,987

Financial Evaluation
I.

Profitability

According to the projected income statement (see Annex 4) the project will generate profit
beginning from the second 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.

13

The project will break even at 27.2 % of capacity utilization

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 four years.
IV.

Simple Rate of Return

The projects 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 22.6 % 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 23.5 % and the net present value (NPV) at 18 % discount is Birr 1131 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 941 thousand
per year and Birr 9.4 million within the project life. Such result induces the project promoters to
reinvest the profit which, therefore, increases the investment magnitude in the region.
14

B. Tax Revenue
In the project life under consideration, the region will collect about Birr 3.8 million from
corporate tax payment alone (i.e. excluding income tax, sales tax and VAT). Such result create
additional fund for the regional government that will be used in expanding social and other basic
services in the region
C. Import Substitution and Foreign Exchange Saving
As there is Bicycle Assembling Plant in the country, the commencement of this project relieves a
portion of the import burden. That is, based on the projected figure we learn that in the project
life an estimated amount of US Dollar 3.7 million will be saved as a result of the proposed
project. This will create room for the saved hard currency to be allocated on other vital and
strategic sectors
D. 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 30 professionals as well as support
stuffs. Consequently the project creates income of Birr 392 thousands per year. This would be
one of the commendable accomplishments of the project.
E. Pro Environment Project
The proposed production process is environment friendly.

15

ANNEXES

16

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

CONSTRUCTION

PRODUCTION

Year 1

Year 2

50%

75%

100%

100%

0.00

0.00

561608.53

842412.79

1123217.06

1123217.06

0.00

0.00

227831.40

341747.10

455662.80

455662.80

Raw Material-Local

0.00

0.00

22048.20

33072.30

44096.40

44096.40

Raw Material-Foreign

0.00

0.00

205783.20

308674.80

411566.40

411566.40

Factory Supplies in Stock

0.00

0.00

1295.94

1943.91

2591.88

2591.88

Spare Parts in Stock and Maintenance

0.00

0.00

7454.37

11181.56

14908.75

14908.75

Work in Progress

0.00

0.00

32398.47

48597.71

64796.95

64796.95

Finished Products

0.00

0.00

64796.95

97195.42

129593.89

129593.89

2. Accounts Receivable

0.00

0.00

218181.82

327272.73

436363.64

436363.64

3. Cash in Hand

0.00

0.00

25433.45

38150.18

50866.91

50866.91

0.00

0.00

577392.40

866088.60

1154784.81

1154784.81

4. Current Liabilities

0.00

0.00

218181.82

327272.73

436363.64

436363.64

Accounts Payable

0.00

0.00

218181.82

327272.73

436363.64

436363.64

TOTAL NET WORKING CAPITAL REQUIRMENTS

0.00

0.00

359210.58

538815.88

718421.17

718421.17

INCREASE IN NET WORKING CAPITAL

0.00

0.00

359210.58

179605.29

179605.29

0.00

Capacity Utilization (%)

1. Total Inventory
Raw Materials in Stock- Total

CURRENT ASSETS

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

(continued)

PRODUCTION
5

10

100%

100%

100%

100%

100%

100%

1123217.06

1123217.06

1123217.06

1123217.06

1123217.06

1123217.06

455662.80

455662.80

455662.80

455662.80

455662.80

455662.80

Raw Material-Local

44096.40

44096.40

44096.40

44096.40

44096.40

44096.40

Raw Material-Foreign

411566.40

411566.40

411566.40

411566.40

411566.40

411566.40

Factory Supplies in Stock

2591.88

2591.88

2591.88

2591.88

2591.88

2591.88

Spare Parts in Stock and Maintenance

14908.75

14908.75

14908.75

14908.75

14908.75

14908.75

Work in Progress

64796.95

64796.95

64796.95

64796.95

64796.95

64796.95

Finished Products

129593.89

129593.89

129593.89

129593.89

129593.89

129593.89

2. Accounts Receivable

436363.64

436363.64

436363.64

436363.64

436363.64

436363.64

3. Cash in Hand

50866.91

50866.91

50866.91

50866.91

50866.91

50866.91

1154784.81

1154784.81

1154784.81

1154784.81

1154784.81

1154784.81

4. Current Liabilities

436363.64

436363.64

436363.64

436363.64

436363.64

436363.64

Accounts Payable

436363.64

436363.64

436363.64

436363.64

436363.64

436363.64

TOTAL NET WORKING CAPITAL REQUIRMENTS

718421.17

718421.17

718421.17

718421.17

718421.17

718421.17

0.00

0.00

0.00

0.00

0.00

0.00

Capacity Utilization (%)

1. Total Inventory
Raw Materials in Stock-Total

CURRENT ASSETS

INCREASE IN NET WORKING CAPITAL

Annex 2: Cash Flow Statement (in Birr)

CONSTRUCTION

PRODUCTION

Year 1

Year 2

2391611.25

3110032.42

2218181.82

3109090.91

4109090.91

4000000.00

2391611.25

3110032.42

218181.82

109090.91

109090.91

0.00

Total Equity

956644.50

1244012.97

0.00

0.00

0.00

0.00

Total Long Term Loan

1434966.75

1866019.45

0.00

0.00

0.00

0.00

0.00

0.00

218181.82

109090.91

109090.91

0.00

2. Inflow Operation

0.00

0.00

2000000.00

3000000.00

4000000.00

4000000.00

Sales Revenue

0.00

0.00

2000000.00

3000000.00

4000000.00

4000000.00

Interest on Securities

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

TOTAL CASH OUTFLOW

2391611.25

2391611.25

2422301.17

2661193.82

3462163.74

3127253.74

4. Increase In Fixed Assets

2391611.25

2391611.25

0.00

0.00

0.00

0.00

Fixed Investments
Pre-production
Expenditures

2277725.00

2277725.00

0.00

0.00

0.00

0.00

113886.25

113886.25

0.00

0.00

0.00

0.00

5. Increase in Current Assets

0.00

0.00

577392.40

288696.20

288696.20

0.00

6. Operating Costs

0.00

0.00

966857.69

1426214.91

1885572.13

1885572.13

7. Corporate Tax Paid

0.00

0.00

0.00

0.00

407632.42

427438.34

8. Interest Paid

0.00

0.00

878051.08

396118.34

330098.62

264078.90

9.Loan Repayments

0.00

0.00

0.00

550164.37

550164.37

550164.37

10.Dividends Paid

0.00

0.00

0.00

0.00

0.00

0.00

Surplus(Deficit)

0.00

718421.17

-204119.35

447897.09

646927.17

872746.26

Cumulative Cash Balance

0.00

718421.17

514301.82

962198.90

1609126.07

2481872.33

TOTAL CASH INFLOW

1. Inflow Funds

Total Short Term Finances

3. Other Income

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

PRODUCTION
5
4000000.00

6
4000000.00

7
4000000.00

8
4000000.00

9
4000000.00

10
4000000.00

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

4000000.00

4000000.00

4000000.00

4000000.00

4000000.00

4000000.00

Sales Revenue

4000000.00

4000000.00

4000000.00

4000000.00

4000000.00

4000000.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

3081039.93

3048492.47

3002278.66

2405900.49

2405900.49

2405900.49

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

0.00

0.00

0.00

0.00

0.00

0.00

6. Operating Costs

1885572.13

1885572.13

1885572.13

1885572.13

1885572.13

1885572.13

7. Corporate Tax Paid

447244.26

480716.53

500522.44

520328.36

520328.36

520328.36

8. Interest Paid

198059.17

132039.45

66019.72

0.00

0.00

0.00

9. Loan Repayments

550164.37

550164.37

550164.37

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

Surplus(Deficit)

918960.07

951507.53

997721.34

1594099.51

1594099.51

1594099.51

Cumulative Cash Balance

3400832.41

4352339.93

5350061.27

6944160.78

8538260.29

10132359.80

TOTAL CASH INFLOW

1. Inflow Funds

Interest on Securities
3. Other Income
TOTAL CASH OUTFLOW
4. Increase In Fixed Assets

5. Increase in Current Assets

10.Dividends Paid

Annex 3: DISCOUNTED CASH FLOW-TOTAL CAPITAL INVESTED

CONSTRUCTION

PRODUCTION

Year 1

Year 2

TOTAL CASH INFLOW

0.00

0.00

2000000.00

3000000.00

4000000.00

4000000.00

1. Inflow Operation

0.00

0.00

2000000.00

3000000.00

4000000.00

4000000.00

Sales Revenue

0.00

0.00

2000000.00

3000000.00

4000000.00

4000000.00

Interest on Securities

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

TOTAL CASH OUTFLOW

2391611.25

2391611.25

1326068.27

1605820.20

2065177.42

2313010.47

3. Increase in Fixed Assets

2391611.25

2391611.25

0.00

0.00

0.00

0.00

Fixed Investments

2277725.00

2277725.00

0.00

0.00

0.00

0.00

Pre-production Expenditures

113886.25

113886.25

0.00

0.00

0.00

0.00

4. Increase in Net Working Capital

0.00

0.00

359210.58

179605.29

179605.29

0.00

5. Operating Costs

0.00

0.00

966857.69

1426214.91

1885572.13

1885572.13

6. Corporate Tax Paid

0.00

0.00

0.00

0.00

0.00

427438.34

NET CASH FLOW

-2391611.25

-2391611.25

673931.73

1394179.80

1934822.58

1686989.53

CUMMULATIVE NET CASH FLOW

-2391611.25

-4783222.50

-4109290.77

-2715110.98

-780288.40

906701.13

Net Present Value (at 18%)

-2391611.25

-2026789.19

484007.27

848540.87

997959.96

737398.67

Cumulative Net present Value

-2391611.25

-4418400.44

-3934393.17

-3085852.31

-2087892.34

-1350493.67

2. Other Income

Annex 3: DISCOUNTED CASH FLOW-TOTAL CAPITAL INVESTED

(Continued)

PRODUCTION
5

10

TOTAL CASH INFLOW

4000000.00

4000000.00

4000000.00

4000000.00

4000000.00

4000000.00

1. Inflow Operation

4000000.00

4000000.00

4000000.00

4000000.00

4000000.00

4000000.00

Sales Revenue

4000000.00

4000000.00

4000000.00

4000000.00

4000000.00

4000000.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

2332816.39

2366288.66

2386094.57

2405900.49

2405900.49

2405900.49

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

0.00

0.00

0.00

0.00

0.00

0.00

5. Operating Costs

1885572.13

1885572.13

1885572.13

1885572.13

1885572.13

1885572.13

6. Corporate Tax Paid

447244.26

480716.53

500522.44

520328.36

520328.36

520328.36

NET CASH FLOW

1667183.61

1633711.34

1613905.43

1594099.51

1594099.51

1594099.51

CUMMULATIVE NET CASH FLOW

2573884.74

4207596.08

5821501.51

7415601.02

9009700.53

10603800.04

Net Present Value (at 18%)

617577.39

512862.89

429360.44

359399.41

304575.77

258115.06

Cumulative Net present Value

-732916.28

-220053.40

209307.04

568706.45

873282.23

1131397.29

Interest on Securities
2. Other Income
TOTAL CASH OUTFLOW

4. Increase in Net Working Capital

Net Present Value (at 18%)

Internal Rate of Return

1,131,397.29

23.5%

Annex 4: NET INCOME STATEMENT ( in Birr)

PRODUCTION

50%

75%

100%

100%

100%

2000000.00

3000000.00

4000000.00

4000000.00

4000000.00

2000000.00

3000000.00

4000000.00

4000000.00

4000000.00

Other Income

0.00

0.00

0.00

0.00

0.00

2. Less Variable Cost

840378.44

1260567.66

1680756.88

1680756.88

1680756.88

1159621.56

1739432.34

2319243.12

2319243.12

2319243.12

57.98

57.98

57.98

57.98

57.98

552033.75

591201.75

630369.75

630369.75

630369.75

607587.81

1148230.59

1688873.37

1688873.37

1688873.37

30.38

38.27

42.22

42.22

42.22

4. Less Cost of Finance

878051.08

396118.34

330098.62

264078.90

198059.17

5. GROSS PROFIT

-270463.27

752112.25

1358774.75

1424794.47

1490814.20

0.00

0.00

407632.42

427438.34

447244.26

-270463.27

752112.25

951142.32

997356.13

1043569.94

Gross Profit/Sales

-13.52%

25.07%

33.97%

35.62%

37.27%

Net Profit After Tax/Sales

-13.52%

25.07%

23.78%

24.93%

26.09%

Return on Investment

11.82%

21.58%

23.29%

22.93%

22.57%

Return on Equity

-12.29%

34.18%

43.22%

45.32%

47.42%

Capacity Utilization (%)

1. Total Income
Sales Revenue

VARIABLE MARGIN
(In % of Total Income)
3. Less Fixed Costs
OPERATIONAL MARGIN
(In % of Total Income)

6. Income (Corporate) Tax

7. NET PROFIT
RATIOS (%)

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

PRODUCTION
6

10

Capacity Utilization (%)

100%

100%

100%

100%

100%

4000000.00

4000000.00

4000000.00

4000000.00

4000000.00

4000000.00

4000000.00

4000000.00

4000000.00

4000000.00

Other Income

0.00

0.00

0.00

0.00

0.00

2. Less Variable Cost

1680756.88

1680756.88

1680756.88

1680756.88

1680756.88

2319243.12

2319243.12

2319243.12

2319243.12

2319243.12

57.98

57.98

57.98

57.98

57.98

584815.25

584815.25

584815.25

584815.25

584815.25

1734427.87

1734427.87

1734427.87

1734427.87

1734427.87

43.36

43.36

43.36

43.36

43.36

4. Less Cost of Finance

132039.45

66019.72

0.00

0.00

0.00

5. GROSS PROFIT

1602388.42

1668408.15

1734427.87

1734427.87

1734427.87

6. Income (Corporate) Tax

480716.53

500522.44

520328.36

520328.36

520328.36

7. NET PROFIT

1121671.90

1167885.70

1214099.51

1214099.51

1214099.51

Gross Profit/Sales

40.06%

41.71%

43.36%

43.36%

43.36%

Net Profit After Tax/Sales

28.04%

29.20%

30.35%

30.35%

30.35%

Return on Investment

22.79%

22.43%

22.07%

22.07%

22.07%

Return on Equity

50.97%

53.07%

55.17%

55.17%

55.17%

1. Total Income
Sales Revenue

VARIABLE MARGIN
(In % of Total Income)
3. Less Fixed Costs
OPERATIONAL MARGIN
(In % of Total Income)

RATIOS (%)

Annex 5: Projected Balance Sheet (in Birr)

9

CONSTRUCTION
TOTAL ASSETS
1. Total Current Assets
Inventory on Materials and Supplies
Work in Progress
Finished Products in Stock
Accounts Receivable
Cash in Hand
Cash Surplus, Finance Available
Securities
2. Total Fixed Assets, Net of Depreciation
Fixed Investment
Construction in Progress
Pre-Production Expenditure
Less Accumulated Depreciation
3. Accumulated Losses Brought Forward
4. Loss in Current Year
TOTAL LIABILITIES
5. Total Current Liabilities
Accounts Payable
Bank Overdraft
6. Total Long-term Debt
Loan A
Loan B
7. Total Equity Capital
Ordinary Capital
Preference Capital
Subsidies
8. Reserves, Retained Profits Brought
Forward
9.Net Profit After Tax
Dividends Payable
Retained Profits

PRODUCTION

Year 1
2391611.25
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
2391611.25
0.00
2277725.00
113886.25
0.00
0.00
0.00
2391611.25
0.00
0.00
0.00
1434966.75
1434966.75
0.00
956644.50
956644.50
0.00
0.00

Year 2
5501643.67
718421.17
0.00
0.00
0.00
0.00
0.00
718421.17
0.00
4783222.50
2277725.00
2277725.00
227772.50
0.00
0.00
0.00
5501643.67
0.00
0.00
0.00
3300986.20
3300986.20
0.00
2200657.47
2200657.47
0.00
0.00

1
5719825.49
1091694.22
236581.71
32398.47
64796.95
218181.82
25433.45
514301.82
0.00
4357668.00
4555450.00
0.00
227772.50
425554.50
0.00
270463.27
5719825.49
218181.82
218181.82
0.00
3300986.20
3300986.20
0.00
2200657.47
2200657.47
0.00
0.00

2
5760401.01
1828287.51
354872.57
48597.71
97195.42
327272.73
38150.18
962198.90
0.00
3932113.50
4555450.00
0.00
227772.50
851109.00
0.00
0.00
5760401.01
327272.73
327272.73
0.00
2750821.83
2750821.83
0.00
2200657.47
2200657.47
0.00
0.00

3
6270469.87
2763910.87
473163.42
64796.95
129593.89
436363.64
50866.91
1609126.07
0.00
3506559.00
4555450.00
0.00
227772.50
1276663.50
0.00
0.00
6270469.87
436363.64
436363.64
0.00
2200657.47
2200657.47
0.00
2200657.47
2200657.47
0.00
0.00

4
6717661.64
3636657.14
473163.42
64796.95
129593.89
436363.64
50866.91
2481872.33
0.00
3081004.50
4555450.00
0.00
227772.50
1702218.00
0.00
0.00
6717661.64
436363.64
436363.64
0.00
1650493.10
1650493.10
0.00
2200657.47
2200657.47
0.00
0.00

0.00
0.00
0.00
0.00

0.00
0.00
0.00
0.00

0.00
0.00
0.00
0.00

-270463.27
752112.25
0.00
752112.25

481648.98
951142.32
0.00
951142.32

1432791.30
997356.13
0.00
997356.13

Annex 5: Projected Balance Sheet (in Birr):

Continued

PRODUCTION
5

10

10

TOTAL ASSETS
1. Total Current Assets
Inventory on Materials and Supplies
Work in Progress
Finished Products in Stock
Accounts Receivable
Cash in Hand
Cash Surplus, Finance Available
Securities
2. Total Fixed Assets, Net of Depreciation
Fixed Investment
Construction in Progress
Pre-Production Expenditure
Less Accumulated Depreciation
3. Accumulated Losses Brought Forward
4. Loss in Current Year
TOTAL LIABILITIES
5. Total Current Liabilities
Accounts Payable
Bank Overdraft
6. Total Long-term Debt
Loan A
Loan B
7. Total Equity Capital
Ordinary Capital
Preference Capital
Subsidies
8. Reserves, Retained Profits Brought
Forward
9. Net Profit After Tax
Dividends Payable
Retained Profits

7211067.21
4555617.21
473163.42
64796.95
129593.89
436363.64
50866.91
3400832.41
0.00
2655450.00
4555450.00
0.00
227772.50
2127772.50
0.00
0.00
7211067.21
436363.64
436363.64
0.00
1100328.73
1100328.73
0.00
2200657.47
2200657.47
0.00
0.00

7782574.74
5507124.74
473163.42
64796.95
129593.89
436363.64
50866.91
4352339.93
0.00
2275450.00
4555450.00
0.00
227772.50
2507772.50
0.00
0.00
7782574.74
436363.64
436363.64
0.00
550164.37
550164.37
0.00
2200657.47
2200657.47
0.00
0.00

8400296.08
6504846.08
473163.42
64796.95
129593.89
436363.64
50866.91
5350061.27
0.00
1895450.00
4555450.00
0.00
227772.50
2887772.50
0.00
0.00
8400296.08
436363.64
436363.64
0.00
0.00
0.00
0.00
2200657.47
2200657.47
0.00
0.00

9614395.58
8098945.58
473163.42
64796.95
129593.89
436363.64
50866.91
6944160.78
0.00
1515450.00
4555450.00
0.00
227772.50
3267772.50
0.00
0.00
9614395.58
436363.64
436363.64
0.00
0.00
0.00
0.00
2200657.47
2200657.47
0.00
0.00

10828495.09
9693045.09
473163.42
64796.95
129593.89
436363.64
50866.91
8538260.29
0.00
1135450.00
4555450.00
0.00
227772.50
3647772.50
0.00
0.00
10828495.09
436363.64
436363.64
0.00
0.00
0.00
0.00
2200657.47
2200657.47
0.00
0.00

12042594.60
11287144.60
473163.42
64796.95
129593.89
436363.64
50866.91
10132359.80
0.00
755450.00
4555450.00
0.00
227772.50
4027772.50
0.00
0.00
12042594.60
436363.64
436363.64
0.00
0.00
0.00
0.00
2200657.47
2200657.47
0.00
0.00

2430147.44
1043569.94
0.00
1043569.94

3473717.37
1121671.90
0.00
1121671.90

4595389.27
1167885.70
0.00
1167885.70

5763274.97
1214099.51
0.00
1214099.51

6977374.48
1214099.51
0.00
1214099.51

8191473.99
1214099.51
0.00
1214099.51

11