Investment Office ANRS

Project Profile on the Establishment

of Carpet making plant

Development Studies
Associates (DSA)

October 2008
Addis Ababa

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

3. Raw Materials and Utilities..............................................................................4

3.1
3.2

Availability and Source of Raw Materials.......................................................................4

Annual Requirement and Cost of Raw Materials and Utilities.......................................4

4. Location and Site...............................................................................................5

5. Technology and Engineering............................................................................5
5.1
5.2
5.3

Production Process...........................................................................................................5
Machinery and Equipment...............................................................................................6
Civil Engineering Cost....................................................................................................7

6. Human Resource and Training Requirement.................................................7

6.1
6.2

Human Resource..............................................................................................................7
Training Requirement......................................................................................................8

7. Financial Analysis..............................................................................................8
7.1
7.2
7.3
7.4

Underlying Assumption...................................................................................................8
Investment........................................................................................................................9
Production Costs............................................................................................................10
Financial Evaluation......................................................................................................10

8. Economic and Social Benefit and Justification.............................................11

ANNEXES..............................................................................................................13

1. Executive Summary
This project profile deals with carpet making plant in Amhara National Regional State. The
following presents the main findings of the study.
Demand projection divulges that the domestic demand for carpet is substantial and is increasing
with time. Accordingly, the planned plant is set to produce 100 thousand square meters annually.
The total investment cost of the project including working capital is estimated at Birr 3.15
million and creates 45 jobs and Birr 480.96 thousand of income
The financial result indicates that the project will generate profit beginning from the first year of
operation. Moreover, the project will break even at 19.4% of capacity utilization and it will
payback fully the initial investment less working capital in 2 years. The result further shows that
the calculated IRR of the project is 32.2% and NPV discounted at 18% of Birr 1,242,293.23
In addition to this, the proposed project possesses wide range of economic and social benefits
such as increasing the level of investment, tax revenue, employment creation and import
substitution.
Generally the project is technically feasible, financially and commercially viable as well as
socially and economically acceptable. Hence the project is worth implementing.

1. Product Description and Application

By technical definition, a carpet is a decorative woven textile, which is produced by knotting
thick colored threads (yarns) on the warp, compressed by the weft. Weft yarns are horizontal and
warp yarns are vertical. That is, a carpet is a thick covering for floors or stairs, made of wooden
and cotton yarns usually with a pattern or designs woven into it.
Several distinct types of knot are used to produce carpets internationally. Carpet is used as floor
and stair covering and furnishing item. It is widely used in office buildings as well as in medium
and high income households.

2. Market Study, Plant Capacity and Production Program

3.1

Market Study
3.1.1 Present Demand and Supply

At present the demand for carpet is met through domestic production and import. Data available
on domestic production is only on industrial manufactured carpets and do not include the hand
loom section. Thus, the available data is likely to understate the actual total domestic production.
Accordingly, the local production and import of carpet is presented in table 1 below
Table 1: Domestic Production and Import of Carpet (in m2)

Year

Domestic
Production

Import

Effective
Demand

2000/01

4,779

106,321

111,100

2001/02

1,855

117,833

119,688

2002/03

2,000

114,758

116,758

2003/04

7,070

145,484

152,554

2004/05

4,809

159,829

164,638

2005/06

4,416

202,870

207,286

2006/07

4,730

297,711

302,441

Source: CSA (various Years) and Customs Authority, (various yeas)

The above table shows except for 2002/03, the trend in the effective demand has shown a
moderate increase with annual average growth rate of 19 percent.

3.1.2 Projected Demand

Basically, the demand for carpets is directly related to the need to cover and /or furnish floor
spaces. In this regard the major end-users are mainly service giving establishments, such as,
government non government offices, hotels, business enterprises and families with middle and
high income. Thus, if we conservatively assume that the service sector increases by about 5% per
year, the forecasted demand would be as shown in table 2 below.

Table 2: Projected Demand for Carpet.

Year
2007/08
2008/09
2009/10
2010/11
2011/12
2012/13
2013/14
2014/15
2015/16
2016/17
2017/18
2018/19

Projected Demand
(square Meters)
317,563
333,441
350,113
367,619
386,000
405,300
425,565
446,843
469,185
492,644
517,277
543,140

According to table 2, the demand for carpet will reach to 350.1 thousand square meters in
2009/10 and jumps to 543 .1 thousand square meters within 10 years. The presence of such
demand suggests the viability of establishing carpet manufacturing plant.

3.1.3 Pricing and Distribution

Based on the market research result and the capacity of the envisaged plant, the selling price of
carpet is set to be Birr 96 per square meter. The available wholesale network shall be used by the
envisaged plant.

3.2

Plant Capacity

In consideration of the expected demand for carpet as presented earlier, and the planned
technology, the envisaged plant is set to produce 100,000 m 2 (meter square) annually. For a plant
that starts manufacturing of carpet in 2009/10, the above stated capacity is equivalent to the
current 30% of total import. Based on the existing demand, 70% of the production shall have a
size of 3m by 4m while the remaining will have a size of 2m by 3m. Nonetheless, the size of
production can be adjusted on the prevailing demand in the market.

3.3

Production Program

The program is scheduled based on the consideration that the envisaged plant will work 300 days
in a year in 1 shift, where the remaining days will be holidays and for maintenance. During the
first year of operation the plant will operate at 45 percent capacity and then it grows to 60
percent in the 2nd year, 75 percent in the 3rd year and 90 percent in the 4 th year. The capacity will
grow to 100 percent starting from the 5 th year. This consideration is developed based on the
assumption that market and logistics barriers will be controlled within the first four years of
operation.

3. Raw Materials and Utilities

3.1

Availability and Source of Raw Materials

In manufacturing carpets the major raw materials required are woolen yarn, cotton yarn, dyes,
chemicals, detergents other auxiliaries. Except the chemicals, the whole raw material is locally
available.

3.2

Annual Requirement and Cost of Raw Materials and Utilities

The annual raw material and utility requirement and the associated cost for the envisaged plant is
listed in table 3 here under.
Table 3 Material and Utility Requirement

Material and Input

Woollen Yarn
Cotton Yarn
Dyes, Chemicals and
Auxiliaries
Total Material Cost

Quantity
300 ton
150 ton

L.C.

Total Cost
F.C.

4,800,000
2,910,000

20 tons
6,710,000

515,000
515,000

Utility
Electricity
Water
Total Utility Cost

22,000 kwh
110,000m3

12,100
291,500
303,600

Based on the information obtained from table 3 above, the total material and utility requirement
at full capacity of operation is estimated to be Birr 7,528,600.

4. Location and Site

The appropriate locations for the envisaged project in view of the availability of input, and
infrastructure is Debre Birhan. However, the plant can also be established in other major towns
of the region.

5. Technology and Engineering

5.1

Production Process

In a formal carpet-manufacturing unit the operations generally undertaken are described

below.
Carding: Carding is the process of combing and cleaning the wool. Since wool is the basic raw
material for carpet making, it should be fine and clean. In an effective carding, no fiber is
intermingled with another and all foreign particles and dirt are removed. This helps in spinning
and blending. Carding is done both by hand and using machines.
Spinning: After carding, the wool fibers are drawn and twisted to make yarns of desired
thickness. This process is called spinning. The yarn of soft 5-7 twist per inch is said to be ideal
for carpets. The wool should be well carded to obtain even yarns of desired thickness.
Dyeing: The wool can be dyed either using natural dyes or synthetic dyes. Synthetic dyes
provide brighter colors in various shades with relative ease which is not possible with natural
dyes. Chemical dyes are therefore used but natural dyes are also used whenever demanded.
Weaving: The real making of carpets begins with weaving. This involves setting up the loom
and performs the weaving with the help of some drawings. A loom is a wooden frame which
holds the carpet while it is being woven. There are two major kinds. One is the vertical loom and
the other is the horizontal loom. A vertical loom consists of four bars. Two are horizontalone at
the top and one at the bottom. The other two go vertically from side to side so that it looks like a
5

standing frame. The length of a carpet is determined by the distance between the top and bottom
bars
Washing: After a carpet is woven, it is washed to remove dirt and to restore the original shine of
the wool. Washing brings sheen and luster, and therefore, it is as important a step as coloring,
designing and weaving. This is the final stage of carpet weaving and hence requires a lot of
careful handling. Washing is done with water mixed with soap, bleaching powder and other
natural chemicals.
The alternative manufacturing technology involves the use of more labor in the production
process. For instance, spinning of wools can be performed manually. Although this provides
special look in a carpet, it is not efficient for a relatively large volume of production and hence is
not recommended for the envisaged plant.

5.2

Machinery and Equipment

The machineries and equipment required for manufacturing carpets is detailed in table 4 below
Table 4: Machinery and Equipment
Machinery and Equipment
Looms (hand operated)
Winders
Pin Winding

Quantity
15
2
2

The total cost of machinery and equipment including freight insurance and bank cost is estimated
to be about Birr 375,000.
The following is machineries supplier address for the envisaged project
QINGGONG SEWING MACHINE CO., LTD
North Industrial Area of Qing county
Cangzhou, Hebei, 062650, China
Tel: [86] (317) 4261078
Fax: [86] (317) 4261078
6

5.3

Civil Engineering Cost

The total site area for the envisaged plant is estimated to be 400m 2 where 300m2 is allocated to
the manufacturing place and the remaining space is left for stores (50m 2), office buildings and
facilities (50m2).

6. Human Resource and Training Requirement

6.1

Human Resource

The list of required manpower for the envisaged plant is stated in table 5 below.
Table 5: Human Resource Requirement

Position
Manager
Accountant
Secretary
Sales Clerk
Store Keeper
Technician
Supervisor
Operators
Daily Laborers
Cleaners
Driver
Guards
Benefit (20%)
Total

No.
Required
1
1
1
1
1
2
2
15
15
2
1
3
45

Monthly Salary
4000
1200
800
800
800
1000
1500
800
400
400
800
400

Total Annual Salary

48000
14400
9600
9600
9600
24000
36000
144000
72000
9600
9600
14400
80,160
480,960

The envisaged plant creates 45 jobs opportunity and about Birr 480.96 thousand of income. The
professionals and support staff for the envisaged plant shall be recruited from Amhara region.

6.2

Training Requirement

Training of key personnel is very essential and shall be conducted in collaboration with the
suppliers of the plant machineries. The training should primarily focus on the production
technology and machinery maintenance and trouble shooting. Birr 20,000 will be allocated as
training expense.

7. Financial Analysis
7.1

Underlying Assumption

The financial analysis of carpet manufacturing plant is based on the data provided in the
preceding sections and the following assumptions.
A. Construction and Finance
Construction period
Source of finance
Tax holidays
Bank interest rate
Discount for cash flow
Value of land
Spare Parts, Repair & Maintenance

2 years
40% equity and 60% loan
2 years
12%
18%
Based on lease rate of ANRS
1% of fixed investment

B. Depreciation
Building
Machinery and equipment
Office furniture
Vehicles
Pre-production (amortization)

5%
10%
10%
20%
20%

C. Working Capital (Minimum Days of Coverage)

Raw Material-Local
Raw Material-Foreign
Factory Supplies in Stock
Spare Parts in Stock and Maintenance
Work in Progress
Finished Products
Accounts Receivable
Cash in Hand
Accounts Payable

7.2

30
120
30
30
10
15
30
30
30

Investment

The total investment cost of the project including working capital is estimated at Birr 3.15
million as shown in table 6 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 6: 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

1,200

1,200

800,000

800,000

30,000

30,000

150,000

150,000

75,000

300,000

375,000

1,056,200

300,000

1,356,200

67,810

67,810

1,124,010

300,000

1,424,010

1,499,751
2,623,761

224,727
524,727

1,724,479
3,148,489

*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 16.7% of the total investment cost.

7.3

Production Costs

The total production cost at full capacity operation is estimated at Birr 8.36 million as detailed in
table 7 below.
Table 7: Production Cost

Items
1.
2.
3.
4.

Raw materials
Utilities
Wages and Salaries
Spares and Maintenance
Factory costs
5. Depreciation
6. Financial costs

Total Production Cost

7.4

Cost
7,225,000
303,600
480,960
40,686
8,050,246
124,062
188,909
8,363,217

Financial Evaluation
I.

Profitability

According to the projected income statement attached in the annex part (see annex 4) the project
will generate profit beginning from the first year of operation. Ratios such as the percentage of
net profit to total sales, return on equity and return on total investment are 2%, 6% and 25%
respectively in the first year and are gradually rising. Furthermore, the income statement and
other profitability indicators show that the project is viable.
II.

Breakeven Analysis

The breakeven point of the project is estimated by using income statement projection.
Accordingly, the project will break even at 19.4% 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 2 years.
10

IV.

Simple Rate of Return

For the envisaged plant the simple rate of return equals to 31.6%
V.

Internal Rate of Return and Net Present Value

Based on cash flow statement described in the annex part, the calculated IRR of the project is
32.2% and the net present value at 18 % discount is Birr 1,242,293.23
VI.

Sensitivity Analysis

The envisaged plant is sensitive to an increase in cost of production. That is, the plant incurs loss
of Birr 280.6 thousand in the first year of operation when 10 % cost increment takes place in the
sector. The envisaged plant obtains profit beginning from the second year of operation. This
result is accompanied with payback period of 3 years and 6 months.

8. Economic and Social Benefit and Justification

The envisaged project possesses wide range of benefits that help promote the socio-economic
goals and objectives stated in the strategic plan of the Amhara National Regional State. It boosts
inter sectorial linkage between the agricultural (livestock) and industrial sector. At the same time,
therefore, it helps diversify the economic activity of the region. The other major benefits are
listed as follows:
A. Profit Generation
The project is found to be financially viable and earns a profit of Birr 7.67 million within the
project life. Such result induces the project promoters to reinvest the profit which, therefore,
increases the investment magnitude in the region.
B. Tax Revenue
In the project life under consideration, the region will collect about Birr 3.02 million from
corporate tax payment alone (i.e. excluding income tax, sales tax and VAT). Such result creates
additional fund for the regional government that will be used in expanding social and other basic
services in the region.

11

C. Import Substitution and Foreign Exchange Saving

Based on the projected figure we learn that in the project life an estimated amount of US Dollar
8.35 million will be saved as a result of the proposed project. This will create room for the saved
hard currency to be allocated to other vital and strategic sectors.
D. Employment and Income Generation
The proposed project is expected to create employment opportunity to several citizens of the
region. That is, it will provide permanent employment to 45 professionals as well as support
staff. Consequently the project creates income of Birr 480.96 thousand per year. This would be
one of the commendable accomplishments of the project.

12

ANNEXES

13

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

CONSTRUCTION

PRODUCTION

Year 1

Year 2

Capacity Utilization (%)

0.00

0.00

45%

60%

75%

90%

1. Total Inventory

0.00

0.00

1168027.86

1557370.48

1946713.10

2336055.72

0.00

0.00

430527.27

574036.36

717545.45

861054.55

Raw Material-Local

0.00

0.00

329400.00

439200.00

549000.00

658800.00

Raw Material-Foreign

0.00

0.00

101127.27

134836.36

168545.45

202254.55

Factory Supplies in Stock

0.00

0.00

4012.84

5350.46

6688.07

8025.68

Spare Parts in Stock and Maintenance

0.00

0.00

1997.31

2663.08

3328.85

3994.63

Work in Progress

0.00

0.00

100321.05

133761.40

167201.75

200642.11

Finished Products

0.00

0.00

200642.11

267522.81

334403.51

401284.21

2. Accounts Receivable

0.00

0.00

471272.73

628363.64

785454.55

942545.45

3. Cash in Hand

0.00

0.00

38514.76

51353.02

64191.27

77029.53

0.00

0.00

1247288.08

1663050.77

2078813.46

2494576.15

4. Current Liabilities

0.00

0.00

471272.73

628363.64

785454.55

942545.45

Accounts Payable

0.00

0.00

471272.73

628363.64

785454.55

942545.45

TOTAL NET WORKING CAPITAL REQUIRMENTS

0.00

0.00

776015.35

1034687.13

1293358.92

1552030.70

INCREASE IN NET WORKING CAPITAL

0.00

0.00

776015.35

258671.78

258671.78

258671.78

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%

2595617.46

2595617.46

2595617.46

2595617.46

2595617.46

2595617.46

956727.27

956727.27

956727.27

956727.27

956727.27

956727.27

Raw Material-Local

732000.00

732000.00

732000.00

732000.00

732000.00

732000.00

Raw Material-Foreign

224727.27

224727.27

224727.27

224727.27

224727.27

224727.27

Factory Supplies in Stock

8917.43

8917.43

8917.43

8917.43

8917.43

8917.43

Spare Parts in Stock and Maintenance

4438.47

4438.47

4438.47

4438.47

4438.47

4438.47

Work in Progress

222935.67

222935.67

222935.67

222935.67

222935.67

222935.67

Finished Products

445871.35

445871.35

445871.35

445871.35

445871.35

445871.35

2. Accounts Receivable

1047272.73

1047272.73

1047272.73

1047272.73

1047272.73

1047272.73

85588.36

85588.36

85588.36

85588.36

85588.36

85588.36

2771751.28

2771751.28

2771751.28

2771751.28

2771751.28

2771751.28

4. Current Liabilities

1047272.73

1047272.73

1047272.73

1047272.73

1047272.73

1047272.73

Accounts Payable

1047272.73

1047272.73

1047272.73

1047272.73

1047272.73

1047272.73

TOTAL NET WORKING CAPITAL REQUIRMENTS

1724478.55

1724478.55

1724478.55

1724478.55

1724478.55

1724478.55

INCREASE IN NET WORKING CAPITAL

172447.86

0.00

0.00

0.00

0.00

0.00

Capacity Utilization (%)

1. Total Inventory
Raw Materials in Stock-Total

3. Cash in Hand
CURRENT ASSETS

Annex 2: Cash Flow Statement (in Birr)

CONSTRUCTION

PRODUCTION

Year 1

Year 2

712005.00

2436483.55

4791272.73

5917090.91

7357090.91

8797090.91

712005.00

2436483.55

471272.73

157090.91

157090.91

157090.91

Total Equity

284802.00

974593.42

0.00

0.00

0.00

0.00

Total Long Term Loan

427203.00

1461890.13

0.00

0.00

0.00

0.00

0.00

0.00

471272.73

157090.91

157090.91

157090.91

2. Inflow Operation

0.00

0.00

4320000.00

5760000.00

7200000.00

8640000.00

Sales Revenue

0.00

0.00

4320000.00

5760000.00

7200000.00

8640000.00

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

712005.00

712005.00

5368384.99

5826216.57

7243455.98

8498595.50

4. Increase In Fixed Assets

712005.00

712005.00

0.00

0.00

0.00

0.00

Fixed Investments

678100.00

678100.00

0.00

0.00

0.00

0.00

Pre-production Expenditures

33905.00

33905.00

0.00

0.00

0.00

0.00

5. Increase in Current Assets

0.00

0.00

1247288.08

415762.69

415762.69

415762.69

6. Operating Costs

0.00

0.00

3655218.39

4868913.85

6082609.31

7296304.77

7. Corporate Tax Paid

0.00

0.00

0.00

0.00

241325.81

320551.73

8. Interest Paid

0.00

0.00

465878.53

226691.18

188909.31

151127.45

9.Loan Repayments

0.00

0.00

0.00

314848.86

314848.86

314848.86

10.Dividends Paid

0.00

0.00

0.00

0.00

0.00

0.00

Surplus(Deficit)

0.00

1724478.55

-577112.27

90874.34

113634.93

298495.41

Cumulative Cash Balance

0.00

1724478.55

1147366.29

1238240.63

1351875.55

1650370.96

TOTAL CASH INFLOW

1. Inflow Funds

Total Short Term Finances

3. Other Income

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

3

PRODUCTION
5
9704727.27

6
9600000.00

7
9600000.00

8
9600000.00

9
9600000.00

10
9600000.00

104727.27

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

104727.27

0.00

0.00

0.00

0.00

0.00

2. Inflow Operation

9600000.00

9600000.00

9600000.00

9600000.00

9600000.00

9600000.00

Sales Revenue

9600000.00

9600000.00

9600000.00

9600000.00

9600000.00

9600000.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

9187951.85

8897398.02

8870950.72

8529654.56

8529654.56

8529654.56

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

277175.13

0.00

0.00

0.00

0.00

0.00

6. Operating Costs

8105435.08

8105435.08

8105435.08

8105435.08

8105435.08

8105435.08

7. Corporate Tax Paid

377147.20

401550.36

412884.92

424219.48

424219.48

424219.48

8. Interest Paid

113345.59

75563.73

37781.86

0.00

0.00

0.00

9. Loan Repayments

314848.86

314848.86

314848.86

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

Surplus(Deficit)

516775.42

702601.98

729049.28

1070345.44

1070345.44

1070345.44

Cumulative Cash Balance

2167146.38

2869748.36

3598797.64

4669143.09

5739488.53

6809833.98

TOTAL CASH INFLOW

1. Inflow Funds

Total Short Term Finances

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

4320000.00

5760000.00

7200000.00

8640000.00

1. Inflow Operation

0.00

0.00

4320000.00

5760000.00

7200000.00

8640000.00

Sales Revenue

0.00

0.00

4320000.00

5760000.00

7200000.00

8640000.00

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

712005.00

712005.00

4431233.74

5127585.63

6582606.91

7875528.29

3. Increase in Fixed Assets

712005.00

712005.00

0.00

0.00

0.00

0.00

Fixed Investments

678100.00

678100.00

0.00

0.00

0.00

0.00

Pre-production Expenditures

33905.00

33905.00

0.00

0.00

0.00

0.00

4. Increase in Net Working Capital

0.00

0.00

776015.35

258671.78

258671.78

258671.78

5. Operating Costs

0.00

0.00

3655218.39

4868913.85

6082609.31

7296304.77

6. Corporate Tax Paid

0.00

0.00

0.00

0.00

241325.81

320551.73

NET CASH FLOW

-712005.00

-712005.00

-111233.74

632414.37

617393.09

764471.71

CUMMULATIVE NET CASH FLOW

-712005.00

-1424010.00

-1535243.74

-902829.37

-285436.27

479035.44

Net Present Value (at 18%)

-712005.00

-603394.07

-79886.34

384906.91

318444.49

334157.63

Cumulative Net present Value

-712005.00

-1315399.07

-1395285.40

-1010378.50

-691934.01

-357776.38

2. Other Income

Annex 3: DISCOUNTED CASH FLOW-TOTAL CAPITAL INVESTED

(Continued)

PRODUCTION
5

10

TOTAL CASH INFLOW

9600000.00

9600000.00

9600000.00

9600000.00

9600000.00

9600000.00

1. Inflow Operation

9600000.00

9600000.00

9600000.00

9600000.00

9600000.00

9600000.00

Sales Revenue

9600000.00

9600000.00

9600000.00

9600000.00

9600000.00

9600000.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

8655030.14

8506985.44

8518320.00

8529654.56

8529654.56

8529654.56

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

172447.86

0.00

0.00

0.00

0.00

0.00

5. Operating Costs

8105435.08

8105435.08

8105435.08

8105435.08

8105435.08

8105435.08

6. Corporate Tax Paid

377147.20

401550.36

412884.92

424219.48

424219.48

424219.48

NET CASH FLOW

944969.86

1093014.56

1081680.00

1070345.44

1070345.44

1070345.44

CUMMULATIVE NET CASH FLOW

1424005.30

2517019.87

3598699.87

4669045.31

5739390.76

6809736.20

Net Present Value (at 18%)

350046.64

343124.63

287768.16

241315.88

204504.98

173309.31

-7729.73

335394.90

623163.06

864478.94

1068983.92

1242293.23

Interest on Securities
2. Other Income
TOTAL CASH OUTFLOW

Cumulative Net present Value

Net Present Value (at 18%)
Internal Rate of Return

1,242,293.23

32.2%

Annex 4: NET INCOME STATEMENT ( in Birr)

6

PRODUCTION
1

45%

60%

75%

90%

100%

4320000.00

5760000.00

7200000.00

8640000.00

9600000.00

4320000.00

5760000.00

7200000.00

8640000.00

9600000.00

Other Income

0.00

0.00

0.00

0.00

0.00

2. Less Variable Cost

3554513.59

4739351.45

5924189.31

7109027.17

7898919.08

765486.41

1020648.55

1275810.69

1530972.83

1701080.92

17.72

17.72

17.72

17.72

17.72

224766.80

253624.40

282482.00

311339.60

330578.00

540719.61

767024.15

993328.69

1219633.23

1370502.92

13

13

14

14

14

4. Less Cost of Finance

465878.53

226691.18

188909.31

151127.45

113345.59

5. GROSS PROFIT

74841.08

540332.98

804419.38

1068505.78

1257157.33

0.00

0.00

241325.81

320551.73

377147.20

74841.08

540332.98

563093.56

747954.04

880010.13

Gross Profit/Sales

2%

9%

11%

12%

13%

Net Profit After Tax/Sales

2%

9%

8%

9%

9%

Return on Investment

25%

31%

28%

30%

32%

Return on Equity

6%

43%

45%

59%

70%

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

7

PRODUCTION
6

10

100%

100%

100%

100%

100%

9600000.00

9600000.00

9600000.00

9600000.00

9600000.00

9600000.00

9600000.00

9600000.00

9600000.00

9600000.00

Other Income

0.00

0.00

0.00

0.00

0.00

2. Less Variable Cost

7898919.08

7898919.08

7898919.08

7898919.08

7898919.08

1701080.92

1701080.92

1701080.92

1701080.92

1701080.92

18

18

18

18

18

287016.00

287016.00

287016.00

287016.00

287016.00

1414064.92

1414064.92

1414064.92

1414064.92

1414064.92

15

15

15

15

15

75563.73

37781.86

0.00

0.00

0.00

5. GROSS PROFIT

1338501.19

1376283.06

1414064.92

1414064.92

1414064.92

6. Income (Corporate) Tax

401550.36

412884.92

424219.48

424219.48

424219.48

7. NET PROFIT

936950.84

963398.14

989845.44

989845.44

989845.44

Gross Profit/Sales

14%

14%

15%

15%

15%

Net Profit After Tax/Sales

10%

10%

10%

10%

10%

Return on Investment

32%

32%

31%

31%

31%

Return on Equity

74%

76%

79%

79%

79%

Capacity Utilization (%)

1. Total Income
Sales Revenue

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

RATIOS (%)

Annex 5: Projected Balance Sheet (in Birr)

8

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

Year 1
712005.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
712005.00
0.00
678100.00
33905.00
0.00
0.00
0.00
712005.00
0.00
0.00
0.00
427203.00
427203.00
0.00
284802.00
284802.00
0.00
0.00
0.00
0.00
0.00
0.00

Year 2
3148488.55
1724478.55
0.00
0.00
0.00
0.00
0.00
1724478.55
0.00
1424010.00
678100.00
678100.00
67810.00
0.00
0.00
0.00
3148488.55
0.00
0.00
0.00
1889093.13
1889093.13
0.00
1259395.42
1259395.42
0.00
0.00
0.00
0.00
0.00
0.00

PRODUCTION
1
3694602.36
2394654.36
436537.43
100321.05
200642.11
471272.73
38514.76
1147366.29
0.00
1299948.00
1356200.00
0.00
67810.00
124062.00
0.00
0.00
3694602.36
471272.73
471272.73
0.00
1889093.13
1889093.13
0.00
1259395.42
1259395.42
0.00
0.00
0.00
74841.08
0.00
74841.08

2
4077177.39
2901291.39
582049.90
133761.40
267522.81
628363.64
51353.02
1238240.63
0.00
1175886.00
1356200.00
0.00
67810.00
248124.00
0.00
0.00
4077177.39
628363.64
628363.64
0.00
1574244.28
1574244.28
0.00
1259395.42
1259395.42
0.00
0.00
74841.08
540332.98
0.00
540332.98

3
4482513.01
3430689.01
727562.38
167201.75
334403.51
785454.55
64191.27
1351875.55
0.00
1051824.00
1356200.00
0.00
67810.00
372186.00
0.00
0.00
4482513.01
785454.55
785454.55
0.00
1259395.42
1259395.42
0.00
1259395.42
1259395.42
0.00
0.00
615174.06
563093.56
0.00
563093.56

4
5072709.11
4144947.11
873074.86
200642.11
401284.21
942545.45
77029.53
1650370.96
0.00
927762.00
1356200.00
0.00
67810.00
496248.00
0.00
0.00
5072709.11
942545.45
942545.45
0.00
944546.57
944546.57
0.00
1259395.42
1259395.42
0.00
0.00
1178267.62
747954.04
0.00
747954.04

Annex 5: Projected Balance Sheet (in Birr):

Continued

PRODUCTION
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

5
5742597.66
4938897.66
970083.17
222935.67
445871.35
1047272.73
85588.36
2167146.38
0.00
803700.00
1356200.00
0.00
67810.00
620310.00
0.00
0.00
5742597.66
1047272.73
1047272.73
0.00
629697.71
629697.71
0.00
1259395.42
1259395.42
0.00
0.00
1926221.67
880010.13
0.00
880010.13

6
6364699.64
5641499.64
970083.17
222935.67
445871.35
1047272.73
85588.36
2869748.36
0.00
723200.00
1356200.00
0.00
67810.00
700810.00
0.00
0.00
6364699.64
1047272.73
1047272.73
0.00
314848.86
314848.86
0.00
1259395.42
1259395.42
0.00
0.00
2806231.80
936950.84
0.00
936950.84

7
7013248.92
6370548.92
970083.17
222935.67
445871.35
1047272.73
85588.36
3598797.64
0.00
642700.00
1356200.00
0.00
67810.00
781310.00
0.00
0.00
7013248.92
1047272.73
1047272.73
0.00
0.00
0.00
0.00
1259395.42
1259395.42
0.00
0.00
3743182.64
963398.14
0.00
963398.14

8
8003094.37
7440894.37
970083.17
222935.67
445871.35
1047272.73
85588.36
4669143.09
0.00
562200.00
1356200.00
0.00
67810.00
861810.00
0.00
0.00
8003094.37
1047272.73
1047272.73
0.00
0.00
0.00
0.00
1259395.42
1259395.42
0.00
0.00
4706580.78
989845.44
0.00
989845.44

9
8992939.81
8511239.81
970083.17
222935.67
445871.35
1047272.73
85588.36
5739488.53
0.00
481700.00
1356200.00
0.00
67810.00
942310.00
0.00
0.00
8992939.81
1047272.73
1047272.73
0.00
0.00
0.00
0.00
1259395.42
1259395.42
0.00
0.00
5696426.22
989845.44
0.00
989845.44

10
9982785.26
9581585.26
970083.17
222935.67
445871.35
1047272.73
85588.36
6809833.98
0.00
401200.00
1356200.00
0.00
67810.00
1022810.00
0.00
0.00
9982785.26
1047272.73
1047272.73
0.00
0.00
0.00
0.00
1259395.42
1259395.42
0.00
0.00
6686271.66
989845.44
0.00
989845.44

10