Investment Office ANRS

Project Profile on the

GYPSUM BOARD

Development Studies
Associates (DSA)

October 2008
Addis Ababa
 Table of Contents

1. Executive Summary...............................................................................................1
2. Product Description and Application.................................................................1
3. Market Study and Plant Capacity.....................................................................2
3.1 Market Study..........................................................................................................................2
3.1.1 Present Supply and Demand...........................................................................................2
3.1.2 Demand Projection..........................................................................................................3
3.1.3 Pricing and Distribution..................................................................................................3
3.2 Plant Capacity........................................................................................................................4
3.3 Production Program...............................................................................................................4
4. Raw Materials and Utilities...............................................................................4
4.1 Availability and Sources of Raw Materials............................................................................4
4.2 Annual Requirements of Utilities...........................................................................................5
5. Location................................................................................................................5
6. Technology and Engineering...............................................................................5
6.1 Production Process.................................................................................................................5
6.2 Machinery and Equipment.....................................................................................................6
6.3 Building and Civil Engineering Cost.....................................................................................7
7. Manpower and Training Requirements.............................................................7
7.1 Human Resource Requirement..............................................................................................7
7.2 Training Requirement............................................................................................................8
8. Financial Analysis.............................................................................................8
8.1 Underlying Assumption.........................................................................................................8
8.2 Investment............................................................................................................................10
8.3 Production Cost....................................................................................................................10
8.4 Financial Evaluation............................................................................................................11
9. Economic and Social Benefit and Justification............................................12
ANNEXES...............................................................................................................14
1. Executive Summary
This project profile deals with the establishment of gypsum board producing plant in Amhara
National Regional State. The following presents the main findings of the study

Demand projection divulges that the domestic demand for gypsum board is substantial and is
increasing with time. Accordingly, the planned plant is set to produce 343,750m 2 or 137,500
(each 2.5m2) units annually. The total investment cost of the project including working capital is
estimated at birr 15.4 million and creates 47 job opportunity and 1.03 million birr of income
annually.

The financial result indicates that the project will generate profit beginning from the first year of
operation. Moreover, the project will break even at 20.74% of capacity utilization and it will
payback fully the initial investment less working capital in second year of operation. The result
further show that the calculated IRR of the project is 38.5%

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.

2. Product Description and Application

Gypsum board is a widely used construction material mainly for interior finishing like partition
walls, ceiling and acoustic boards. Gypsum is the commercial name for hydrous calcium
sulphate (CaSO4. 2 H2O).

Gypsum board consists of mainly two sections. The core of the board is gypsum and the external
cover is made out of layers of paper adhered to the core on both sides.

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3. Market Study and Plant Capacity

3.1 Market Study

The market for gypsum board is assessed based on the applications stated below. Although
demand assessment is generally analyzed using the trend of supplies from local production and
imports if any, in this particular case there is no recorded data of both. It is also clear there is no
local production neither any import records.

3.1.1 Present Supply and Demand

There is no local production of properly calcined gypsum board. Import figures for gypsum are
insignificant as the use of low quality plastering and partitioning materials such as impure lime
and chipboard and other products is customary. Therefore, demand estimation cannot be based
on historical supply trends.

Based on the applications of gypsum board described earlier, it is found to be logical to estimate
the demand for gypsum board as follows:-

- Gypsum bard is to be used on buildings made form bricks, stone and mud and blockets.
According to the 1984 CSA survey, these types of houses account for about 20.5% all
urban dwellings.
- Only high income households (above Birr 670/month) afford the above types of houses.
- About 100 m2 of gypsum board per villa on the average and about 500 m 2 of gypsum
board for other buildings will be required for internal partitioning as per civil engineers
rough estimates.
- According to the 1984 CSA survey, about 70% of the houses mentioned above are villa
type or nearly so while 30% are tall buildings of 4 to 11 floors.

Previous studies (PADCO/WAAS, 1995) indicated that about 25,000 houses will be required
yearly between 1994 and the year 2000 in urban centers. If this represents 70%, then 30% of
high buildings (4 to 11 or more floors) will be about 7500/year.

2
Based on the above, the demand for gypsum board during the period 1994-2000 will be:-

Villas: 25,000 x 100 = 2,500,000 m2/year to the year 2,000.

High buildings: 7,500 x 500 = 3,750,000 m2/year to the year 2,000
Total yearly demand 1996-2,000= 3,750,000+2,500,000 = 6,250,000 m2

3.1.2 Demand Projection

The anticipated demand between 1996 and the year 2000 is given above based on the forecast for
houses. The demand after the year 2,000 is assumed to increase at the rate of 5% per year. The
projected demand for the following periods is given in Table 3.1 based on the above
assumptions.

Table 1: Demand Projection

Year Quantity (Mill./m2

1996-2000 6.25
2001 6.56
2002 6.89
2003 7.24
2004 7.60
2005 7.98
2006 8.38

3.1.3 Pricing and Distribution

Selling prices are determined by general market indicators. The current market price for Gypsum
board is birr 150 for 2.5 m2 board deducting 20% retailer margin and 10% wholesaler margin
Birr 105 per unit or Birr 42 per meter 2 is adopted for the projections of the plant’s revenue.
Gypsum board is used by many contractors and building maintenance workers and therefore its
sales and distribution system has to be wide. Therefore, the recommended channel is producer-
wholesalers retailer-end user or consumer.

3.2 Plant Capacity

3
The plant under consideration will have a production capacity of 343,750 m2/year of gypsum
board of standard sizes. The boards could be 7mm, 9mm, 12mm and 15mm thick and will have
an area of 2.5 m x 2.5 m.

3.3 Production Program

The plant will be running in two shifts of 8 hours each. Full capacity production is to be achieved
in three years time as production process is not that complex. In the 1st year of production, the
plant would operate at 75% of its capacity. The second and third year of operations will be at
85% and at 100%, respectively. 275 working days are assumed per annum. By considering the
operators need to acquire experience working with the plant machinery and coordination of
sufficient supplies and inputs as well as penetration of the market is also to be achieved
gradually.

4. Raw Materials and Utilities

4.1 Availability and Sources of Raw Materials

The major portion of the material requirement is gypsum which is 90% by weight and the rest
will be paper, pulp & additives. Gypsum is available locally while sum paper & additive would
be imported from abroad. Table 4.1 shows annual requirement of raw materials and inputs.

Table 2: Annual Raw Material requirement

Quantity
Item (tons)
Gypsum 2240
Paper 180
Pulp 140
Additives 350

4.2 Annual Requirements of Utilities

At full capacity the plant will require the following utilities per annum. This is estimated about
Birr 205,950.
Fuel Oil 1,050,000 litres
Process water 42,000 m3

4
 Industrial Water 140,000 m3
Electric power 2,100 MWhr.

5. Location
A site in the region which very close to the source of gypsum should be considered as gypsum
makes up 90% of the total raw material consumption.

6. Technology and Engineering

6.1 Production Process

Gypsum, which is locally available in abundance, normally contains 10 to 20% moisture by
weight. The wet gypsum is dried in a drier, and calcined to form plaster in a calcinations unit.
The calcined product (plaster) is milled and stored in silos. Fuel oil is used for drying and
calcinations.

In the board forming process; plaster, pulp (filler), water and additives are fed in the right
proportion to a mixer. The slurry coming out of the mixer is sent to a forming unit and is
sandwiched between the top and bottom paper layers that feed continuously through a feeding
machine.

The setting of the plaster in the sandwiched slurry takes place on the belt conveyor of the
gypsum board forming unit. The gypsum board is then cut into the standard size. The cut gypsum
board pieces are passed slowly in a drying unit and then taken out cooled through a cooling
section.

6.2 Machinery and Equipment

The machinery and equipment requirement is presented in Table 4.

Table 3: Machinery and Equipment Requirement

Item Quantity (pcs)
Gypsum Drying Section
Fuel Oil Tank 1
Furnace 1

5
 Gypsum feeder and conveyor 1 set
Gypsum drier 1
Cyclone 2
Exhaust gas blower 1
Sober 1
Dry gypsum hopper 1
Gypsum Calcining Section
Kettle 2
Furnace 1
Hot Pit 2
Pulverizer 2
Silo 3
Plaster Hopper 1
Electrical dust collector 1
Bag filter 1
Scrubber 1
Exhaust gas blower 1
Feeder & conveyor 1 set
Forming and Drying Section
Mixer 1
Additives preparation unit a few
Paper feed unit 1
Cutter 1
Frying unit 1 set
Conveyor a few
Utility Section
Boiler Unit 1 set
Oil storage tank 1
Others
Instruments 1 set
Electrical equipment 1 set

The total cost of the machines and equipment is estimated about Birr 13 million.
The technology could be secured form Japan suppliers.

6.3 Building and Civil Engineering Cost

The plant requires a production hall of 30 m x 200 m (6000 m 2). The site is estimated to be 100
meters by 250 meters (25,000 m2) of land. Cost of civil works will be Birr 460,000. It requires a
lot of open space for the rage of gypsum.

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7. Manpower and Training Requirements

7.1 Human Resource Requirement

For the two shifts operation of the plant, the manpower requirement together with the salary will
be as shown in Table 4.

7
 Table 4: Man Power Requirement

Salary/Wage (Birr)
Required
Job Title No. Monthly Annual
1 General Manager 1 4,000 48,000
2 Mechanical Engineer 2 3,000 72,000
3 Foreman 2 2,500 60,000
4 Operators 24 1,800 518,400
5 Inspector 1 2,000 24,000
6 Stores 2 850 20,400
7 Accountant 2 1,200 28,800
8 Sells Man 1 850 10,200
9 Casher 1 800 9,600
10 Secretary 1 800 9,600
11 Security 4 400 19,200
12 Clerks 2 700 16,800
13 Genitor 4 400 19,200
Total 47 19,300 856,200
Employment Benefits 20% of Annual
Salary 171,240
1,027,440

7.2 Training Requirement

As a new plant, the operators as well as the technical staff need to be rained on the job by the
supplier’s experts. A 6 months training will be appropriate to ensure the safe and proper running
of the plant.

8. Financial Analysis

8.1 Underlying Assumption

The financial analysis of gypsum board Producing plant is based on the data provided in the
preceding chapters and the following assumptions.

8
 A. Construction and Finance

Construction period 2 year

Source of finance 40% equity and 60% loan
Tax holidays 2 years
Bank interest rate 12%
Discount for cash flow 18%
Value of land Based on lease rate of ANRS
Spare Parts, Repair & Maintenance 3% of fixed investment

B. Depreciation

Building 5%
Machinery and equipment 10%
Office furniture 10%
Pre-production (amortization) 20%

C. Working Capital (Minimum Days of Coverage)

Raw Material-Local 30
Raw Material-Foreign 120
Factory Supplies in Stock 30
Spare Parts in Stock and Maintenance 30
Work in Progress 10
Finished Products 15
Accounts Receivable 30
Cash in Hand 30
Accounts Payable 30

8.2 Investment
The total investment cost of the project including working capital is estimated at Birr 15.4
million as shown in table 5 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.

9
 Table 5: Total Initial Investment

Total Initial Investment

Item Cost
Land 3,000.00
Building and civil works 400,000.00
Office equipment 80,000.00
Vehicles
Plant machinery & equipment 12,964,285.29
Total Fixed Investment 13,447,285.29
Pre production capital expenditure 672,364.26
Total Initial Investment 14,119,649.55
Working capital at full capacity 1,320,914.19
Total 15,440,563.74

*Pre-production capital expenditure includes - all expenses for pre-investment studies,

consultancy fee during construction and expenses for company‘s establishment, project
administration expenses, commission expenses, preproduction marketing and interest expenses
during construction.

The foreign component of the project accounts for Birr 13 million or 85% of the total investment
cost.

8.3 Production Cost

The total production cost at full capacity operation is estimated at Birr 8.1 million as detailed in
table 6 below.

Table 6: Production Cost

Total Production Cost at Full Capacity

Items Cost
1. Raw materials 3,873,200.00
2. Utilities 205,950.00
3. Wages and Salaries 1,027,440.00

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 4. Spares and Maintenance 403,418.56
Factory costs 5,510,008.56
5. Depreciation 1,458,901.38
6. Financial costs
1,111,720.59
Total Production Cost 8,080,630.53

8.4 Financial Evaluation

I. Profitability
According to the projected income statement attached in the annex part (see annex 3) 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 26.48%, 35.41% and
46.43% 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 20.74% of capacity utilization.

III. Payback Period

Investment cost and income statement projection are used in estimating the project payback
period. The projects will payback fully the initial investment less working capital in second year.

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 IV. Simple Rate of Return

For the envisaged plant the simple rate of return equals to 22.5%.

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
38.5% and the net present value at 18 % discount is Birr 12.9 million.

VI. Sensitivity Analysis

The envisaged plant is profitable even with considerable cost increment. That is the plant
maintains to be profitable starting from the first year when 10 % cost increment takes place in
the sector. This is resulted in declining, a total project life profit to Birr 41.06 million with
payback period of same year.

9. Economic and Social Benefit and Justification

The envisaged project possesses wide range of benefits where it 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 4.95 per year
and birr 49.5 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 17.76 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

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 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
13.8 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
region. That is, it will provide permanent employment to 47 professionals as well as support
stuffs. Consequently the project creates income of Birr 1.03 million per year. This would be one
of the commendable accomplishments of the project.
E. 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 0 1,313,197 1,488,290 1,750,930 1,750,930

Raw Materials in Stock- Total 0 0 423,425 479,882 564,567 564,567

Raw Material-Local 0 0 281,389 318,908 375,185 375,185

Raw Material-Foreign 0 0 142,036 160,975 189,382 189,382

Factory Supplies in Stock 0 0 5,702 6,462 7,602 7,602

Spare Parts in Stock and Maintenance 0 0 33,007 37,408 44,009 44,009

Work in Progress 0 0 142,546 161,552 190,061 190,061

Finished Products 0 0 285,092 323,104 380,122 380,122

2. Accounts Receivable 0 0 1,181,250 1,338,750 1,575,000 1,575,000

3. Cash in Hand 0 0 100,914 114,369 134,552 134,552

CURRENT ASSETS 0 0 2,171,936 2,461,527 2,895,914 2,895,914

4. Current Liabilities 0 0 1,181,250 1,338,750 1,575,000 1,575,000

Accounts Payable 0 0 1,181,250 1,338,750 1,575,000 1,575,000

TOTAL NET WORKING CAPITAL REQUIREMENTS 0 0 990,686 1,122,777 1,320,914 1,320,914

INCREASE IN NET WORKING CAPITAL 0 0 990,686 132,091 198,137 0

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 1,750,930 1,750,930 1,750,930 1,750,930 1,750,930 1,750,930

Raw Materials in Stock-Total 564,567 564,567 564,567 564,567 564,567 564,567

Raw Material-Local 375,185 375,185 375,185 375,185 375,185 375,185

Raw Material-Foreign 189,382 189,382 189,382 189,382 189,382 189,382

Factory Supplies in Stock 7,602 7,602 7,602 7,602 7,602 7,602

Spare Parts in Stock and Maintenance 44,009 44,009 44,009 44,009 44,009 44,009

Work in Progress 190,061 190,061 190,061 190,061 190,061 190,061

Finished Products 380,122 380,122 380,122 380,122 380,122 380,122

2. Accounts Receivable 1,575,000 1,575,000 1,575,000 1,575,000 1,575,000 1,575,000

3. Cash in Hand 134,552 134,552 134,552 134,552 134,552 134,552

CURRENT ASSETS 2,895,914 2,895,914 2,895,914 2,895,914 2,895,914 2,895,914

4. Current Liabilities 1,575,000 1,575,000 1,575,000 1,575,000 1,575,000 1,575,000

Accounts Payable 1,575,000 1,575,000 1,575,000 1,575,000 1,575,000 1,575,000

TOTAL NET WORKING CAPITAL REQUIREMENTS 1,320,914 1,320,914 1,320,914 1,320,914 1,320,914 1,320,914

INCREASE IN NET WORKING CAPITAL 0 0 0 0 0 0

2
 Annex 2: Cash Flow Statement (in Birr)
CONSTRUCTION PRODUCTION
Year 1 Year 2 1 2 3 4
TOTAL CASH INFLOW 7,059,825 8,380,739 12,009,375 12,429,375 14,673,750 14,437,500
1. Inflow Funds 7,059,825 8,380,739 1,181,250 157,500 236,250 0
Total Equity 2,823,930 3,352,296 0 0 0 0
Total Long Term Loan 4,235,895 5,028,443 0 0 0 0
Total Short Term Finances 0 0 1,181,250 157,500 236,250 0
2. Inflow Operation 0 0 10,828,125 12,271,875 14,437,500 14,437,500
Sales Revenue 0 0 10,828,125 12,271,875 14,437,500 14,437,500
Interest on Securities 0 0 0 0 0 0
3. Other Income 0 0 0 0 0 0
TOTAL CASH OUTFLOW 7,059,825 7,059,825 8,673,711 7,481,103 10,239,051 9,674,963
4. Increase In Fixed Assets 7,059,825 7,059,825 0 0 0 0
Fixed Investments 6,723,643 6,723,643 0 0 0 0
Pre-production Expenditures 336,182 336,182 0 0 0 0
5. Increase in Current Assets 0 0 2,171,936 289,591 434,387 0
6. Operating Costs 0 0 4,018,107 4,535,735 5,312,177 5,312,177
7. Corporate Tax Paid 0 0 0 0 2,021,996 2,077,582
8. Interest Paid 0 0 2,483,668 1,111,721 926,434 741,147
9.Loan Repayments 0 0 0 1,544,056 1,544,056 1,544,056
10.Dividends Paid 0 0 0 0 0 0
Surplus (Deficit) 0 1,320,914 3,335,664 4,948,272 4,434,699 4,762,537
Cumulative Cash Balance 0 1,320,914 4,656,578 9,604,850 14,039,549 18,802,087

3
 Annex 2: Cash Flow Statement (in Birr): Continued
PRODUCTION
5 6 7 8 9 10
TOTAL CASH INFLOW 14,437,500 14,437,500 14,437,500 14,437,500 14,437,500 14,437,500
1. Inflow Funds 0 0 0 0 0 0
Total Equity 0 0 0 0 0 0
Total Long Term Loan 0 0 0 0 0 0
Total Short Term Finances 0 0 0 0 0 0
2. Inflow Operation 14,437,500 14,437,500 14,437,500 14,437,500 14,437,500 14,437,500
Sales Revenue 14,437,500 14,437,500 14,437,500 14,437,500 14,437,500 14,437,500
Interest on Securities 0 0 0 0 0 0
3. Other Income 0 0 0 0 0 0
TOTAL CASH OUTFLOW 9,545,262 9,455,903 9,326,202 7,652,445 7,652,445 7,652,445
4. Increase In Fixed Assets 0 0 0 0 0 0
Fixed Investments 0 0 0 0 0 0
Pre-production Expenditures 0 0 0 0 0 0
5. Increase in Current Assets 0 0 0 0 0 0
6. Operating Costs 5,312,177 5,312,177 5,312,177 5,312,177 5,312,177 5,312,177
7. Corporate Tax Paid 2,133,168 2,229,096 2,284,682 2,340,268 2,340,268 2,340,268
8. Interest Paid 555,860 370,574 185,287 0 0 0
9. Loan Repayments 1,544,056 1,544,056 1,544,056 0 0 0
10.Dividends Paid 0 0 0 0 0 0
Surplus (Deficit) 4,892,238 4,981,597 5,111,298 6,785,055 6,785,055 6,785,055
Cumulative Cash Balance 23,694,325 28,675,921 33,787,219 40,572,274 47,357,328 54,142,383

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 Annex 3: DISCOUNTED CASH FLOW-TOTAL CAPITAL INVESTED
CONSTRUCTION PRODUCTION
Year 1 Year 2 1 2 3 4
TOTAL CASH INFLOW 0 0 10,828,125 12,271,875 14,437,500 14,437,500

1. Inflow Operation 0 0 10,828,125 12,271,875 14,437,500 14,437,500

Sales Revenue 0 0 10,828,125 12,271,875 14,437,500 14,437,500

Interest on Securities 0 0 0 0 0 0

2. Other Income 0 0 0 0 0 0

TOTAL CASH OUTFLOW 7,059,825 7,059,825 5,008,793 4,667,827 7,532,310 7,389,759

3. Increase in Fixed Assets 7,059,825 7,059,825 0 0 0 0

Fixed Investments 6,723,643 6,723,643 0 0 0 0

Pre-production Expenditures 336,182 336,182 0 0 0 0

4. Increase in Net Working Capital 0 0 990,686 132,091 198,137 0

5. Operating Costs 0 0 4,018,107 4,535,735 5,312,177 5,312,177

6. Corporate Tax Paid 0 0 0 0 2,021,996 2,077,582

NET CASH FLOW -7,059,825 -7,059,825 5,819,332 7,604,048 6,905,190 7,047,741

CUMULATIVE NET CASH FLOW -7,059,825 -14,119,650 -8,300,317 -696,269 6,208,921 13,256,661

Net Present Value (at 18%) -7,059,825 -5,982,902 4,179,354 4,628,059 3,561,620 3,080,632

Cumulative Net present Value -7,059,825 -13,042,727 -8,863,373 -4,235,315 -673,695 2,406,938

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 Annex 3: DISCOUNTED CASH FLOW-TOTAL CAPITAL INVESTED (Continued)
PRODUCTION
5 6 7 8 9 10
TOTAL CASH INFLOW 14,437,500 14,437,500 14,437,500 14,437,500 14,437,500 14,437,500

1. Inflow Operation 14,437,500 14,437,500 14,437,500 14,437,500 14,437,500 14,437,500

Sales Revenue 14,437,500 14,437,500 14,437,500 14,437,500 14,437,500 14,437,500

Interest on Securities 0 0 0 0 0 0

2. Other Income 0 0 0 0 0 0

TOTAL CASH OUTFLOW 7,445,345 7,541,273 7,596,859 7,652,445 7,652,445 7,652,445

3. Increase in Fixed Assets 0 0 0 0 0 0

Fixed Investments 0 0 0 0 0 0

Pre-production Expenditures 0 0 0 0 0 0

4. Increase in Net Working Capital 0 0 0 0 0 0

5. Operating Costs 5,312,177 5,312,177 5,312,177 5,312,177 5,312,177 5,312,177

6. Corporate Tax Paid 2,133,168 2,229,096 2,284,682 2,340,268 2,340,268 2,340,268

NET CASH FLOW 6,992,155 6,896,227 6,840,641 6,785,055 6,785,055 6,785,055

CUMULATIVE NET CASH FLOW 20,248,816 27,145,043 33,985,683 40,770,738 47,555,793 54,340,848

Net Present Value (at 18%) 2,590,115 2,164,898 1,819,871 1,529,732 1,296,383 1,098,630

Cumulative Net present Value 4,997,052 7,161,950 8,981,822 10,511,554 11,807,937 12,906,566

Net Present Value (at 18%) 12,906,566.14

Internal Rate of Return 38.5%

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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 10,828,125 12,271,875 14,437,500 14,437,500 14,437,500

Sales Revenue 10,828,125 12,271,875 14,437,500 14,437,500 14,437,500
Other Income 0 0 0 0 0
2. Less Variable Cost 3,573,977 4,050,508 4,765,303 4,765,303 4,765,303
VARIABLE MARGIN 7,254,148 8,221,367 9,672,197 9,672,197 9,672,197
(In % of Total Income) 66.99 66.99 66.99 66.99 66.99
3. Less Fixed Costs 1,903,031 1,944,129 2,005,775 2,005,775 2,005,775
OPERATIONAL MARGIN 5,351,116 6,277,239 7,666,422 7,666,422 7,666,422
(In % of Total Income) 49.42 51.15 53.10 53.10 53.10
4. Less Cost of Finance 2,483,667.95 1,111,720.59 926,433.82 741,147.06 555,860.29
5. GROSS PROFIT 2,867,448.49 5,165,517.94 6,739,987.84 6,925,274.61 7,110,561.37
6. Income (Corporate) Tax 0.00 0.00 2,021,996.35 2,077,582.38 2,133,168.41
7. NET PROFIT 2,867,448.49 5,165,517.94 4,717,991.49 4,847,692.22 4,977,392.96
RATIOS (%)
Gross Profit/Sales 26.48% 42.09% 46.68% 47.97% 49.25%
Net Profit After Tax/Sales 26.48% 42.09% 32.68% 33.58% 34.48%
Return on Investment 35.41% 41.18% 36.56% 36.20% 35.84%
Return on Equity 46.43% 83.64% 76.39% 78.49% 80.59%

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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 14,437,500 14,437,500 14,437,500 14,437,500 14,437,500

Sales Revenue 14,437,500 14,437,500 14,437,500 14,437,500 14,437,500
Other Income 0 0 0 0 0
2. Less Variable Cost 4,765,303 4,765,303 4,765,303 4,765,303 4,765,303
VARIABLE MARGIN 9,672,197 9,672,197 9,672,197 9,672,197 9,672,197
(In % of Total Income) 66.99 66.99 66.99 66.99 66.99
3. Less Fixed Costs 1,871,302 1,871,302 1,871,302 1,871,302 1,871,302
OPERATIONAL MARGIN 7,800,895 7,800,895 7,800,895 7,800,895 7,800,895
(In % of Total Income) 54.03 54.03 54.03 54.03 54.03
4. Less Cost of Finance 370,574 185,287 0 0 0
5. GROSS PROFIT 7,430,321 7,615,608 7,800,895 7,800,895 7,800,895
6. Income (Corporate) Tax 2,229,096 2,284,682 2,340,268 2,340,268 2,340,268
7. NET PROFIT 5,201,225 5,330,925 5,460,626 5,460,626 5,460,626
RATIOS (%)
Gross Profit/Sales 51.47% 52.75% 54.03% 54.03% 54.03%
Net Profit After Tax/Sales 36.03% 36.92% 37.82% 37.82% 37.82%
Return on Investment 36.09% 35.73% 35.37% 35.37% 35.37%
Return on Equity 84.21% 86.31% 88.41% 88.41% 88.41%

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 Annex 5: Projected Balance Sheet (in Birr)
CONSTRUCTION PRODUCTION
Year 1 Year 2 1 2 3 4
TOTAL ASSETS 7,059,825 15,440,564 19,489,262 23,268,224 26,678,409 29,982,045
1. Total Current Assets 0 1,320,914 6,828,514 12,066,377 16,935,464 21,698,001
Inventory on Materials and Supplies 0 0 462,134 523,752 616,179 616,179
Work in Progress 0 0 142,546 161,552 190,061 190,061
Finished Products in Stock 0 0 285,092 323,104 380,122 380,122
Accounts Receivable 0 0 1,181,250 1,338,750 1,575,000 1,575,000
Cash in Hand 0 0 100,914 114,369 134,552 134,552
Cash Surplus, Finance Available 0 1,320,914 4,656,578 9,604,850 14,039,549 18,802,087
Securities 0 0 0 0 0 0
2. Total Fixed Assets, Net of Depreciation 7,059,825 14,119,650 12,660,748 11,201,847 9,742,945 8,284,044
Fixed Investment 0 6,723,643 13,447,285 13,447,285 13,447,285 13,447,285
Construction in Progress 6,723,643 6,723,643 0 0 0 0
Pre-Production Expenditure 336,182 672,364 672,364 672,364 672,364 672,364
Less Accumulated Depreciation 0 0 1,458,901 2,917,803 4,376,704 5,835,606
3. Accumulated Losses Brought Forward 0 0 0 0 0 0
4. Loss in Current Year 0 0 0 0 0 0
TOTAL LIABILITIES 7,059,825 15,440,564 19,489,262 23,268,224 26,678,409 29,982,045
5. Total Current Liabilities 0 0 1,181,250 1,338,750 1,575,000 1,575,000
Accounts Payable 0 0 1,181,250 1,338,750 1,575,000 1,575,000
Bank Overdraft 0 0 0 0 0 0
6. Total Long-term Debt 4,235,895 9,264,338 9,264,338 7,720,282 6,176,225 4,632,169
Loan A 4,235,895 9,264,338 9,264,338 7,720,282 6,176,225 4,632,169
Loan B 0 0 0 0 0 0
7. Total Equity Capital 2,823,930 6,176,225 6,176,225 6,176,225 6,176,225 6,176,225
Ordinary Capital 2,823,930 6,176,225 6,176,225 6,176,225 6,176,225 6,176,225
Preference Capital 0 0 0 0 0 0
Subsidies 0 0 0 0 0 0
8. Reserves, Retained Profits Brought Forward 0 0 0 2,867,448 8,032,966 12,750,958
9.Net Profit After Tax 0 0 2,867,448 5,165,518 4,717,991 4,847,692
Dividends Payable 0 0 0 0 0 0
Retained Profits 0 0 2,867,448 5,165,518 4,717,991 4,847,692

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 Annex 5: Projected Balance Sheet (in Birr): Continued
PRODUCTION
5 6 7 8 9 10
TOTAL ASSETS 33,415,381 37,072,550 40,859,419 46,320,045 51,780,671 57,241,297
1. Total Current Assets 26,590,239 31,571,836 36,683,133 43,468,188 50,253,243 57,038,297
Inventory on Materials and Supplies 616,179 616,179 616,179 616,179 616,179 616,179
Work in Progress 190,061 190,061 190,061 190,061 190,061 190,061
Finished Products in Stock 380,122 380,122 380,122 380,122 380,122 380,122
Accounts Receivable 1,575,000 1,575,000 1,575,000 1,575,000 1,575,000 1,575,000
Cash in Hand 134,552 134,552 134,552 134,552 134,552 134,552
Cash Surplus, Finance Available 23,694,325 28,675,921 33,787,219 40,572,274 47,357,328 54,142,383
Securities 0 0 0 0 0 0
2. Total Fixed Assets, Net of Depreciation 6,825,143 5,500,714 4,176,286 2,851,857 1,527,429 203,000
Fixed Investment 13,447,285 13,447,285 13,447,285 13,447,285 13,447,285 13,447,285
Construction in Progress 0 0 0 0 0 0
Pre-Production Expenditure 672,364 672,364 672,364 672,364 672,364 672,364
Less Accumulated Depreciation 7,294,507 8,618,935 9,943,364 11,267,792 12,592,221 13,916,650
3. Accumulated Losses Brought Forward 0 0 0 0 0 0
4. Loss in Current Year 0 0 0 0 0 0
TOTAL LIABILITIES 33,415,381 37,072,550 40,859,419 46,320,045 51,780,671 57,241,297
5. Total Current Liabilities 1,575,000 1,575,000 1,575,000 1,575,000 1,575,000 1,575,000
Accounts Payable 1,575,000 1,575,000 1,575,000 1,575,000 1,575,000 1,575,000
Bank Overdraft 0 0 0 0 0 0
6. Total Long-term Debt 3,088,113 1,544,056 0 0 0 0
Loan A 3,088,113 1,544,056 0 0 0 0
Loan B 0 0 0 0 0 0
7. Total Equity Capital 6,176,225 6,176,225 6,176,225 6,176,225 6,176,225 6,176,225
Ordinary Capital 6,176,225 6,176,225 6,176,225 6,176,225 6,176,225 6,176,225
Preference Capital 0 0 0 0 0 0
Subsidies 0 0 0 0 0 0
8. Reserves, Retained Profits Brought Forward 17,598,650 22,576,043 27,777,268 33,108,193 38,568,819 44,029,446
9. Net Profit After Tax 4,977,393 5,201,225 5,330,925 5,460,626 5,460,626 5,460,626
Dividends Payable 0 0 0 0 0 0
Retained Profits 4,977,393 5,201,225 5,330,925 5,460,626 5,460,626 5,460,626

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