Investment Office ANRS

Project Profile on SMALL SCALE

PINEAPPLE
Plantation

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...........................................................................................3
3.2 Plant Capacity..................................................................................................................3
3.3 Production Program.........................................................................................................3
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...............................................................................................5
6.3 Civil Engineering Cost....................................................................................................5
7. Human Resource and Training Requirement.................................................6
7.1 Human Resource..............................................................................................................6
7.2 Training Requirement......................................................................................................6
8. Financial Analysis..............................................................................................6
8.1 Underlying Assumption...................................................................................................6
8.2 Investment........................................................................................................................7
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 the production of 4000 quintal pineapple per annum. The total investment
requirement of the project including the working capital is estimated at about Birr 256 thousand;
of which Birr 120,000 is for machinery and equipments and Birr 67 is pre production cost. Based
on the cash flow statement, the calculated internal rate of return (IRR) and simple rate of return
(SRR) of the project are 68.8 % and 67.4 %, respectively. The net present value (NPV) at 18 %
discounting rate is about Birr 523 thousand. The plant is expected to create employment
opportunities for about 28 persons.

2. Product Description and Application

The pineapple fruit itself is made up of 100-200 berry-like fruitlets or “eyes” fused together on a
central axis or core and is borne on a stem or stalk which is an elongation of the apical meristem.
The pineapple was originally consumed only as a fresh fruit. With the development of the
processing industry, the fruit is now prepared and consumed in various forms such as pineapple
chunks, slices, juices, syrups, jams, crushed pineapple, diced pineapple etc. also the wastes from
processing the fruit are now further processed into sugar, wines, vinegar, animal feed, etc.

3. Market Study, Plant Capacity and Production Program

3.1 Market Study

3.1.1 Present Demand and Supply

At present pineapple is being produced by private peasant and some commercial holdings in
many suitable areas in the country. In this connection, the Agricultural Sample Survey of CSA
(July, 2007-Vol I) report that in Ethiopia there are about 26,877 private peasants in Ethiopia are
cultivating pineapple. Such figure is very low as compared to the number of peasants producing
other fruits such as banana, avocado, mango, papaya and orange.

At the same time there is a potential of high consumption of pineapple provided that the fruit is
supplied to the market at affordable prices. According to CSA, Annual Abstract (2008), the

1
number of population in July 2007 has reached 77.1 million in the country of which 12.7 million
residents in the urban places while the remaining 64.4 million dwells in the rural part of the
country. If we assume that at least 10 % percent of the urban residents can afford to consume 1
Kg of pineapple per head per month, the annual consumption of the fruit will amounts to 152,760
quintal (38,190 quintal for Amhara region). This figure is certainly greater than the current
supply of pineapple which is estimated to be less than 40 thousand quintal annually. This creates
at least a demand gap of 110 thousand quintals of which the share of Amhara region is estimated
to be 25 % (or 27.5 thousand quintals).

3.1.2 Projected Demand

The future demand for pineapple is promising due to two main factors. First, an increase in
population in general and urbanization in particular is expected to amplify the domestic
consumption of the output. At the same time, an increase in income inevitably improves the per
capita consumption of fruits in the future. Consequently, with a conservative growth rate of 3%
per annum, the future demand for orange is forecasted as shown in Table 3.1 below.
TABLE 3.1
DEMAND PROJECTION FOR ORANGE
IN (QUINTALS)

Year E.C At National Level At ANRS Level

2000 157343 39336
2001 162063 40516
2002 166925 41731
2003 171933 42983
2004 177091 44273
2005 182403 45601
2006 187876 46969
2007 193512 48378
2008 199317 49829
2009 205297 51324

Table 3.1 shows that there is substantial and growing demand for pineapple in the coming years.
At the same time, it suggests the relevance of establishing an pineapple plantation plant so as to
meet the future demand.

2
 3.1.3 Pricing and Distribution

Based on the market research result and the cost of the envisaged plantation, the selling price of a
quintal of pineapple is set to be Birr 150. In distributing the output the envisaged plantation shall
make use of the available fruits sales network.

3.2 Plant Capacity

Thus, given the expected demand for pine apple as presented earlier, and the planned technology,
the envisaged plantation plans to produce 4,000 quintal of pineapple per annum on 10 hectares of
land.

3.3 Production Program

Pineapple plants flower 10-12 months after planting and attain harvesting stage 15-18 months
after planting, depending on the variety, time of planting, the type and size of plant material used
and the prevailing temperature during fruit development. Thus, the production during the first
two years is 0 % of the plantation capacity. In the third year, there will be production at 75 % of
the plantation capacity. Starting from the fourth year, 100 % of capacity utilization is assumed.
The capacity build up is established by considering the time required for maturity the plant.

4. Raw Materials and Utilities

4.1 Availability and Source of Raw Materials

In the production of pineapple the main inputs are fertilizer, chemicals for killing insects, water
as well as semi-skilled and unskilled labor. While fertilizer and chemicals can be purchased from
domestic suppliers operating in the region, the firm shall make use of water pump equipments to
pump water from the nearby river or other source.

4.2 Annual Requirement and Cost of Raw Materials and Utilities

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

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 TABLE 4.1
RAW MATERIALS REQUIREMENT

Total Cost
Material and Input Quantity L.C. F.C.
Fertilizer (Urea) 15000 kg 45000
Chemicals 1000 kg 10000
Total Material Cost 55,000
Utility
Electricity 20,000kwh 11,000
Furnace Oil 8,000 lit 56,000
Water 1000m3 2,650
Total Utility Cost 69,650

According to the above table the annual cost of input and utility is estimated to be Birr 124,650.

5. Location and Site

For its good environment to produce pineapple, Shewa-Robit is an appropriate choice for the
establishment of pineapple plantation in the Amhara region.

6. Technology and Engineering

6.1 Production Process

Where cultivation is to be done for the first time, on forested new lands, the ‘’ slash and burn ‘’
method of land clearing could be used. This method has the advantage of releasing nutrients to
the soil, and destroys or reduces weeds and ants nests in the fields. Following this clearing,
certain options are available.
 On the upland sandy soils, little additional preparation is required before planting.

 On the heavier riverain soils, when replanting old pineapple cultivation or using lands
previously used for other crops, the area should be ploughed and left to weather for 3-4
weeks. The land is then harrowed and the crop can be planted.

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  On riverain and potential acid-sulphate soils where water control is critical, a system of
raised beds and drains will be required. The width of the beds will depend on whether
single or double rows of plants will be used. If single rows are to be used the beds should
be made 240 cm (8 ft) wide and for double rows the beds should be 390 cm (13 ft) wide.
Drains on either side of the bed should be made 60 cm (2 ft) deep. This will enhance the
removal of excess water from the plants’ rooting zone. Control of weeds can be initiated
at this land preparation stage.

The yield of pineapple fruit varies with the variety, agro-climate, agro-techniques and planting
density. The fruit yield with a plant density of 35000-40000 plants/ha was about 40-50 tones and
that of 43,300-50000 plants/ha was 50-60 tones.
Pineapple needs light and frequent irrigation due to its shallow root system. Irrigation is done
only during the dry months from January till the break of the monsoon. However, 4-6 irrigations
in the summer months at 20-25 days interval help in increasing the yield.

6.2 Machinery and Equipment

Basically, the planting and harvesting of pineapple do not require much machinery and
equipment. Tractor is used while preparing the land for the first planting period and therefore, the
envisaged plantation shall use hired tractor while preparing the land. The plant however, needs to
acquire 10 medium capacity water pumps and the associated equipments for irrigation purpose.
In addition various hand tools are also demanded. The cost of the machinery and equipment is
estimated to be Birr 120,000. The water pumps and equipments can be purchased from local
suppliers.

6.3 Civil Engineering Cost

The envisaged orange plantation requires 10 hectares of land only. And this can be obtained by
renting land from the local government at a rate of Birr 48 per hectare per year. This rate is the
average rent for rural land of North Shewa. Except a small house for guards and for storage of
raw materials, it does not require any office. This is estimated to cost Birr 50,000.

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 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

No. Monthly Total Annual

Position Required Salary Salary
Manager/Agronomist 1 2000 24000
Foreman 2 800 19200
Cashier 1 800 9600
Store Keeper 1 600 7200
Laborers 20 400 96000
Guards 4 400 19200
Benefit (20%) 35,040
Total 28 210,240

The total annual wages and salary, including 20 % benefits, amount to Birr 210,240.

7.2 Training Requirement

On job training of personnel shall be conducted with the aim of production technology
machinery maintenance and trouble shooting.

8. Financial Analysis
8.1 Underlying Assumption

The financial analysis of Pineapple Plantation is based on the data provided in the preceding
chapters and the following assumptions.

A. Construction and Finance

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 Land Preparation Period 6 months
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 Land Rent 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%

Working Capital (Minimum Days of Coverage)

Spare Parts In Stock and Maintenance 30 Days

Accounts Receivable 30 Days
Cash In Hand 30 Days
Accounts Payable 30 Days

8.2 Investment
The total investment cost of the project including working capital is estimated at Birr 256
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

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Items L.C F.C Total
Land
0 0
Building And Civil Works
50,000 50,000
Office Equipment
10,000 10,000
Vehicles
0 0
Plant Machinery & Equipment
120,000 0 120,000
Total Fixed Investment Cost
180,000 0 180,000
Pre Production Capital
Expenditure* 9,000 0 9,000
Total Initial Investment
189,000 0 189,000
Working Capital at Full Capacity
66,770 0 66,770
Total 255,770 0 255,770
*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 amounts zero.

8.3 Production Costs

The total production cost at full capacity operation is estimated at Birr 397 thousand (See Table
8.2). Raw materials and utilities account for 31.4 %.

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 TABLE 8.2
PRODUCTION COST AT FULL CAPACITY

Raw Material
Requirement Cost
1. Local Raw Materials 55,000
2. Foreign Raw Materials 0
Total Production Cost at full Capacity
Items Cost
1. Raw Materials 55,000
2. Utilities 69,650
3. Wages and Salaries 210,240
4. Spares and Maintenance 5,400
Factory Costs 340,290
5. Depreciation 17,300
6. Financial Costs
39,890
Total Production Cost 397,480

8.4 Financial Evaluation

I. Profitability
According to the projected income statement (See Annex 4) the project will generate profit
beginning from the fourth year after plantation (the first year of production) 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 29.9 % of capacity utilization

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 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 first year
after plantation.

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 67.4 % 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 68.8 % and the net present value (NPV) at 18 % discount is Birr 523 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 165 thousand
per year and Birr 1.7 million within the project life. Such result induces the project promoters to
reinvest the profit which, therefore, increases the investment magnitude in the region.

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 B. Tax Revenue

In the project life under consideration, the region will collect about Birr 571 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 28 professionals as well as support
stuffs. Consequently the project creates income of Birr 210 thousands per year. This would be
one of the commendable accomplishments of the project.

D. Pro Environment Project

The proposed production process is environment friendly.

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ANNEXES

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 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 31677.41 35901.07 42236.55 42236.55

Raw Materials in Stock- Total 0.00 0.00 4500.00 5100.00 6000.00 6000.00

Raw Material-Local 0.00 0.00 4500.00 5100.00 6000.00 6000.00

Raw Material-Foreign 0.00 0.00 0.00 0.00 0.00 0.00

Factory Supplies in Stock 0.00 0.00 292.57 331.58 390.10 390.10

Spare Parts in Stock and Maintenance 0.00 0.00 441.82 500.73 589.09 589.09

Work in Progress 0.00 0.00 7314.34 8289.59 9752.45 9752.45

Finished Products 0.00 0.00 14628.68 16579.17 19504.91 19504.91

2. Accounts Receivable 0.00 0.00 49090.91 55636.36 65454.55 65454.55

3. Cash in Hand 0.00 0.00 22900.09 25953.44 30533.45 30533.45

CURRENT ASSETS 0.00 0.00 99168.41 112390.87 132224.55 132224.55

4. Current Liabilities 0.00 0.00 49090.91 55636.36 65454.55 65454.55

Accounts Payable 0.00 0.00 49090.91 55636.36 65454.55 65454.55

TOTAL NET WORKING CAPITAL REQUIRMENTS 0.00 0.00 50077.51 56754.51 66770.01 66770.01

INCREASE IN NET WORKING CAPITAL 0.00 0.00 50077.51 6677.00 10015.50 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 42236.55 42236.55 42236.55 42236.55 42236.55 42236.55

Raw Materials in Stock-Total 6000.00 6000.00 6000.00 6000.00 6000.00 6000.00

Raw Material-Local 6000.00 6000.00 6000.00 6000.00 6000.00 6000.00

Raw Material-Foreign 0.00 0.00 0.00 0.00 0.00 0.00

Factory Supplies in Stock 390.10 390.10 390.10 390.10 390.10 390.10

Spare Parts in Stock and Maintenance 589.09 589.09 589.09 589.09 589.09 589.09

Work in Progress 9752.45 9752.45 9752.45 9752.45 9752.45 9752.45

Finished Products 19504.91 19504.91 19504.91 19504.91 19504.91 19504.91

2. Accounts Receivable 65454.55 65454.55 65454.55 65454.55 65454.55 65454.55

3. Cash in Hand 30533.45 30533.45 30533.45 30533.45 30533.45 30533.45

CURRENT ASSETS 132224.55 132224.55 132224.55 132224.55 132224.55 132224.55

4. Current Liabilities 65454.55 65454.55 65454.55 65454.55 65454.55 65454.55

Accounts Payable 65454.55 65454.55 65454.55 65454.55 65454.55 65454.55

TOTAL NET WORKING CAPITAL REQUIRMENTS 66770.01 66770.01 66770.01 66770.01 66770.01 66770.01

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 94500.00 161270.01 499090.91 516545.45 609818.18 600000.00
1. Inflow Funds 94500.00 161270.01 49090.91 6545.45 9818.18 0.00
Total Equity 37800.00 64508.00 0.00 0.00 0.00 0.00
Total Long Term Loan 56700.00 96762.00 0.00 0.00 0.00 0.00
Total Short Term Finances 0.00 0.00 49090.91 6545.45 9818.18 0.00
2. Inflow Operation 0.00 0.00 450000.00 510000.00 600000.00 600000.00
Sales Revenue 0.00 0.00 450000.00 510000.00 600000.00 600000.00
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 94500.00 94500.00 394707.89 346710.91 469149.15 447167.00
4. Increase In Fixed Assets 94500.00 94500.00 0.00 0.00 0.00 0.00
Fixed Investments 90000.00 90000.00 0.00 0.00 0.00 0.00
Pre-production Expenditures 4500.00 4500.00 0.00 0.00 0.00 0.00
5. Increase in Current Assets 0.00 0.00 99168.41 13222.46 19833.68 0.00
6. Operating Costs 0.00 0.00 255649.43 289496.02 340265.90 340265.90
7. Corporate Tax Paid 0.00 0.00 0.00 0.00 68126.37 69047.14
8. Interest Paid 0.00 0.00 39890.05 18415.44 15346.20 12276.96
9.Loan Repayments 0.00 0.00 0.00 25577.00 25577.00 25577.00
10.Dividends Paid 0.00 0.00 0.00 0.00 0.00 0.00
Surplus(Deficit) 0.00 66770.01 104383.02 169834.54 140669.03 152833.00
Cumulative Cash Balance 0.00 66770.01 171153.03 340987.57 481656.60 634489.60

3
 Annex 2: Cash Flow Statement (in Birr): Continued
PRODUCTION
5 6 7 8 9 10
TOTAL CASH INFLOW 600000.00 600000.00 600000.00 600000.00 600000.00 600000.00
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 600000.00 600000.00 600000.00 600000.00 600000.00 600000.00
Sales Revenue 600000.00 600000.00 600000.00 600000.00 600000.00 600000.00
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 445018.53 443410.07 441261.60 413536.13 413536.13 413536.13
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 340265.90 340265.90 340265.90 340265.90 340265.90 340265.90
7. Corporate Tax Paid 69967.91 71428.69 72349.46 73270.23 73270.23 73270.23
8. Interest Paid 9207.72 6138.48 3069.24 0.00 0.00 0.00
9. Loan Repayments 25577.00 25577.00 25577.00 0.00 0.00 0.00
10.Dividends Paid 0.00 0.00 0.00 0.00 0.00 0.00
Surplus(Deficit) 154981.47 156589.93 158738.40 186463.87 186463.87 186463.87
Cumulative Cash Balance 789471.06 946061.00 1104799.40 1291263.27 1477727.14 1664191.01

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 450000.00 510000.00 600000.00 600000.00

1. Inflow Operation 0.00 0.00 450000.00 510000.00 600000.00 600000.00

Sales Revenue 0.00 0.00 450000.00 510000.00 600000.00 600000.00

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 94500.00 94500.00 305726.93 296173.02 418407.77 409313.04

3. Increase in Fixed Assets 94500.00 94500.00 0.00 0.00 0.00 0.00

Fixed Investments 90000.00 90000.00 0.00 0.00 0.00 0.00

Pre-production Expenditures 4500.00 4500.00 0.00 0.00 0.00 0.00

4. Increase in Net Working Capital 0.00 0.00 50077.51 6677.00 10015.50 0.00

5. Operating Costs 0.00 0.00 255649.43 289496.02 340265.90 340265.90

6. Corporate Tax Paid 0.00 0.00 0.00 0.00 68126.37 69047.14

NET CASH FLOW -94500.00 -94500.00 144273.07 213826.98 181592.23 190686.96

CUMMULATIVE NET CASH FLOW -94500.00 -189000.00 -44726.93 169100.05 350692.28 541379.24

Net Present Value (at 18%) -94500.00 -80084.75 103614.67 130141.70 93663.25 83351.03

Cumulative Net present Value -94500.00 -174584.75 -70970.07 59171.63 152834.88 236185.91

5
 Annex 3: DISCOUNTED CASH FLOW-TOTAL CAPITAL INVESTED (Continued)
PRODUCTION
5 6 7 8 9 10
TOTAL CASH INFLOW 600000.00 600000.00 600000.00 600000.00 600000.00 600000.00

1. Inflow Operation 600000.00 600000.00 600000.00 600000.00 600000.00 600000.00

Sales Revenue 600000.00 600000.00 600000.00 600000.00 600000.00 600000.00

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 410233.81 411694.59 412615.36 413536.13 413536.13 413536.13

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 340265.90 340265.90 340265.90 340265.90 340265.90 340265.90

6. Corporate Tax Paid 69967.91 71428.69 72349.46 73270.23 73270.23 73270.23

NET CASH FLOW 189766.19 188305.41 187384.64 186463.87 186463.87 186463.87

CUMMULATIVE NET CASH FLOW 731145.43 919450.84 1106835.48 1293299.35 1479763.22 1666227.09

Net Present Value (at 18%) 70295.38 59113.78 49851.47 42039.41 35626.62 30192.05

Cumulative Net present Value 306481.29 365595.07 415446.54 457485.95 493112.57 523304.62

Net Present Value (at 18%) 523,304.62

Internal Rate of Return 68.8%

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

1. Total Income 450000.00 510000.00 600000.00 600000.00 600000.00

Sales Revenue 450000.00 510000.00 600000.00 600000.00 600000.00
Other Income 0.00 0.00 0.00 0.00 0.00
2. Less Variable Cost 190777.43 216214.42 254369.90 254369.90 254369.90
VARIABLE MARGIN 259222.58 293785.59 345630.10 345630.10 345630.10
(In % of Total Income) 57.61 57.61 57.61 57.61 57.61
3. Less Fixed Costs 82172.00 90581.60 103196.00 103196.00 103196.00
OPERATIONAL MARGIN 177050.58 203203.99 242434.10 242434.10 242434.10
(In % of Total Income) 39.34 39.84 40.41 40.41 40.41
4. Less Cost of Finance 39890.05 18415.44 15346.20 12276.96 9207.72
5. GROSS PROFIT 137160.53 184788.54 227087.90 230157.14 233226.38
6. Income (Corporate) Tax 0.00 0.00 68126.37 69047.14 69967.91
7. NET PROFIT 137160.53 184788.54 158961.53 161110.00 163258.47
RATIOS (%)
Gross Profit/Sales 30.48% 36.23% 37.85% 38.36% 38.87%
Net Profit After Tax/Sales 30.48% 36.23% 26.49% 26.85% 27.21%
Return on Investment 74.06% 82.69% 68.15% 67.79% 67.43%
Return on Equity 134.07% 180.62% 155.38% 157.48% 159.58%

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

1. Total Income 600000.00 600000.00 600000.00 600000.00 600000.00

Sales Revenue 600000.00 600000.00 600000.00 600000.00 600000.00
Other Income 0.00 0.00 0.00 0.00 0.00
2. Less Variable Cost 254369.90 254369.90 254369.90 254369.90 254369.90
VARIABLE MARGIN 345630.10 345630.10 345630.10 345630.10 345630.10
(In % of Total Income) 57.61 57.61 57.61 57.61 57.61
3. Less Fixed Costs 101396.00 101396.00 101396.00 101396.00 101396.00
OPERATIONAL MARGIN 244234.10 244234.10 244234.10 244234.10 244234.10
(In % of Total Income) 40.71 40.71 40.71 40.71 40.71
4. Less Cost of Finance 6138.48 3069.24 0.00 0.00 0.00
5. GROSS PROFIT 238095.62 241164.86 244234.10 244234.10 244234.10
6. Income (Corporate) Tax 71428.69 72349.46 73270.23 73270.23 73270.23
7. NET PROFIT 166666.93 168815.40 170963.87 170963.87 170963.87
RATIOS (%)
Gross Profit/Sales 39.68% 40.19% 40.71% 40.71% 40.71%
Net Profit After Tax/Sales 27.78% 28.14% 28.49% 28.49% 28.49%
Return on Investment 67.56% 67.20% 66.84% 66.84% 66.84%
Return on Equity 162.91% 165.01% 167.11% 167.11% 167.11%

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 Annex 5: Projected Balance Sheet (in Birr)
CONSTRUCTION PRODUCTION
Year 1 Year 2 1 2 3 4
TOTAL ASSETS 94500.00 255770.01 442021.45 607778.44 750981.15 886514.15
1. Total Current Assets 0.00 66770.01 270321.45 453378.44 613881.15 766714.15
Inventory on Materials and Supplies 0.00 0.00 5234.39 5932.31 6979.19 6979.19
Work in Progress 0.00 0.00 7314.34 8289.59 9752.45 9752.45
Finished Products in Stock 0.00 0.00 14628.68 16579.17 19504.91 19504.91
Accounts Receivable 0.00 0.00 49090.91 55636.36 65454.55 65454.55
Cash in Hand 0.00 0.00 22900.09 25953.44 30533.45 30533.45
Cash Surplus, Finance Available 0.00 66770.01 171153.03 340987.57 481656.60 634489.60
Securities 0.00 0.00 0.00 0.00 0.00 0.00
2. Total Fixed Assets, Net of Depreciation 94500.00 189000.00 171700.00 154400.00 137100.00 119800.00
Fixed Investment 0.00 90000.00 180000.00 180000.00 180000.00 180000.00
Construction in Progress 90000.00 90000.00 0.00 0.00 0.00 0.00
Pre-Production Expenditure 4500.00 9000.00 9000.00 9000.00 9000.00 9000.00
Less Accumulated Depreciation 0.00 0.00 17300.00 34600.00 51900.00 69200.00
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 94500.00 255770.01 442021.45 607778.44 750981.15 886514.15
5. Total Current Liabilities 0.00 0.00 49090.91 55636.36 65454.55 65454.55
Accounts Payable 0.00 0.00 49090.91 55636.36 65454.55 65454.55
Bank Overdraft 0.00 0.00 0.00 0.00 0.00 0.00
6. Total Long-term Debt 56700.00 153462.00 153462.00 127885.00 102308.00 76731.00
Loan A 56700.00 153462.00 153462.00 127885.00 102308.00 76731.00
Loan B 0.00 0.00 0.00 0.00 0.00 0.00
7. Total Equity Capital 37800.00 102308.00 102308.00 102308.00 102308.00 102308.00
Ordinary Capital 37800.00 102308.00 102308.00 102308.00 102308.00 102308.00
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 137160.53 321949.07 480910.60
9.Net Profit After Tax 0.00 0.00 137160.53 184788.54 158961.53 161110.00
Dividends Payable 0.00 0.00 0.00 0.00 0.00 0.00
Retained Profits 0.00 0.00 137160.53 184788.54 158961.53 161110.00

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 Annex 5: Projected Balance Sheet (in Birr): Continued
PRODUCTION
5 6 7 8 9 10
TOTAL ASSETS 1024195.62 1165285.55 1308523.95 1479487.82 1650451.69 1821415.56
1. Total Current Assets 921695.62 1078285.55 1237023.95 1423487.82 1609951.69 1796415.56
Inventory on Materials and Supplies 6979.19 6979.19 6979.19 6979.19 6979.19 6979.19
Work in Progress 9752.45 9752.45 9752.45 9752.45 9752.45 9752.45
Finished Products in Stock 19504.91 19504.91 19504.91 19504.91 19504.91 19504.91
Accounts Receivable 65454.55 65454.55 65454.55 65454.55 65454.55 65454.55
Cash in Hand 30533.45 30533.45 30533.45 30533.45 30533.45 30533.45
Cash Surplus, Finance Available 789471.06 946061.00 1104799.40 1291263.27 1477727.14 1664191.01
Securities 0.00 0.00 0.00 0.00 0.00 0.00
2. Total Fixed Assets, Net of Depreciation 102500.00 87000.00 71500.00 56000.00 40500.00 25000.00
Fixed Investment 180000.00 180000.00 180000.00 180000.00 180000.00 180000.00
Construction in Progress 0.00 0.00 0.00 0.00 0.00 0.00
Pre-Production Expenditure 9000.00 9000.00 9000.00 9000.00 9000.00 9000.00
Less Accumulated Depreciation 86500.00 102000.00 117500.00 133000.00 148500.00 164000.00
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 1024195.62 1165285.55 1308523.95 1479487.82 1650451.69 1821415.56
5. Total Current Liabilities 65454.55 65454.55 65454.55 65454.55 65454.55 65454.55
Accounts Payable 65454.55 65454.55 65454.55 65454.55 65454.55 65454.55
Bank Overdraft 0.00 0.00 0.00 0.00 0.00 0.00
6. Total Long-term Debt 51154.00 25577.00 0.00 0.00 0.00 0.00
Loan A 51154.00 25577.00 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 102308.00 102308.00 102308.00 102308.00 102308.00 102308.00
Ordinary Capital 102308.00 102308.00 102308.00 102308.00 102308.00 102308.00
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 642020.60 805279.07 971946.00 1140761.40 1311725.27 1482689.14
9. Net Profit After Tax 163258.47 166666.93 168815.40 170963.87 170963.87 170963.87
Dividends Payable 0.00 0.00 0.00 0.00 0.00 0.00
Retained Profits 163258.47 166666.93 168815.40 170963.87 170963.87 170963.87

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