Owner name = Almaz Gizachew and their friends Partnership (NAFIRA FARM)

Project Proposal on the Establishment of Animal Feed Production and

Processing Plant

July 8, 2024

Addis Ababa, Ethiopia

1
Table of Contents

A .EXCUTIVESUMMARY.............................................................................................................................3

1. INTRODUCTION.......................................................................................................................................4

1.1INVESTMENT OPPORTUNITIES............................................................................................................6

1.2.CHALLENGES/CONSTRAINTS..............................................................................................................7

1.4 PRODUCT DESCRIPTION AND APPLICATION..................................................................................8

2 .Market study and Plant Capacity..................................................................................................................8

Table1: Projected Demand for Manufacture Animal Feed (Tons)...........................................................................10

2.4. Plant Capacity and Production Program..................................................................................................10

3 Materials and Inputs...................................................................................................................................11

3.3.TECHNOLOGY AND ENGINEERING..................................................................................................13

B. Process Flow Diagram.............................................................................................................................14

4 Economic and Social Benefits.................................................................................................................21

4.1. Environmental Impact..............................................................................................................................21

4.2. HUMANRESOURCEANDTRAININGREQUIREMENTS.............................................................21

4.3. FINANCIAL ANALYSIS..................................................................................................................22

4.9. CONCLUSIONS.....................................................................................................................................28

2
 General Information
Project name Animal feed production and processing plant

1
2 Project owner Almaz Gizachew and their friends Partnership (NAFIRA FARM)
3 Nationality Ethiopian
4 Project location Nifas silk Lafto woreda 11

5 Project Sector Agriculture

6 Premises 500m2
required
area
7 Initial investment A total investment of the project is estimated to be birr
cost
9,138,342 From this 10 %( 913,834) will be covered by their own
and 90 % 8,224,508) will be covered by financial institutions
(loan).
8 Employment At full capacity the farm will hire a total of Workers 15 labor
opportunity force. From the total employee 10 are permanent and 4
temporary or seasonal
9 Technology Molasses processing

10 Market share For Domestic

11 Benefits of the Source of income, employment, value add in agricultural
project sector, foreign currency earning and transformation of
agricultural technology etc

3
A .EXCUTIVESUMMARY

According to CSA 2011/12 the animals feed requirement per annum is 95.83 million tons dry
matter but the available feed is 65.64 million tones dry matter per annum. The difference
between the supply and demand shows 30.2million tones dry matter shortage per annum.

This feasibility study investigates the establishment of a plant for the production of animal feed
with a capacity of 15,000 tons per annum. The plant can produce by 85% capacity in early years.
Animal feed is prepared for consumption by livestock. It contains protein, minerals and other
nutrients which are useful for beef, egg and milk production as well as survival and growth of the
animals.

The principal raw materials required are oil cake, molasses, bone meal, bran of cereals, maize,
salt and limestone which are all available locally and premixes imported from abroad. The total
investment cost of the project is estimated at Birr 9,138,342. From this 8,224,508 birr (90%)
banks loan and 913,834 birr (10%) own equity of the investor. The investor can get lease
financing for machineries and equipment from bank.

The project can create employment for 10 permanents persons. The project will create back ward
linkage with the agriculture and agro processing sectors and forward linkage with the live stock
sector and also generates income for the Government in terms of tax revenue and payroll tax.

Based on the projected profit and loss statement, the project will generate a profit throughout its
operation life continually with promising demand for product. The project financial measurement
(NPV & BCR) shows as the project is accepted & has good return for the investors.

4
 1. INTRODUCTION

Ethiopia has a large livestock population and diverse genetic resources, diverse agro-ecologies
suitable for different kinds of Livestock production. However, the productivity and economic
contribution of Livestock sector much below the potential due to shortage of feed supply in terms
of both quantity and quality. According to CSA 2011/12 the animals feed requirement per annum
is 95.83 million tons dry matter but the available feed is 65.64 million tones dry matter per
annum. The difference between the supply and demand shows 30.2 million tones dry matter
shortage per annum. The main sources of animal feeds are Natural pastures Crop residues
, Conserved forages, Agro industrial by products /wheat bran, Wheat midillings.oil cakes etc/
and Processed compound feeds.

Feed cost accounts for 60 to 70% of the total cost of Livestock production shortage of feed and
escalating price of Livestock feed is adversely affecting the productivity and profitability of
Commercial livestock operations. The feed milling industry and modern live stock production
both are interdependent. The feed milling industry depends on the growth or success of
commercial live stock production. The market for different compound feeds are concentrated
along the Addis Ababa-Adama corridor, where the feed processing industries and modern
Livestock farms (Poultry, dairy, pig, cattle fattening) are concentrated.

The existing feed industries capacity of the feed mills range widely from 20 quintals to 125
quintals per hour. The standard for feed mills is 2000 hours of operation annually but, feed mills
in Ethiopia generally operating much lower than this standard i.e. below 30 % of their designing
capacity. The sources of compound feed production are purchased grains, agro-industrial-by
products and imported vitamins and Minerals. Hence it is feasible for local and foreign investors
to be engaged in field of animal feed industries in order to enhance feed development and full fill
the shortage of animal feed supply both in quantity and quality in Ethiopia.

5
 Project Goal and Purpose
The overall goal of the project is to contribute towards the economic development of
Ethiopia through using the existing investment opportunities in the Country and taking
advantage of the expressed policy incentives that emphasize on greater commercialization of
agriculture and enhancing private sector development.

The main objective of the said project is to producing and processing forage products for
local markets and to maximize profit so as to sustain the project.
In line with this the following are specific objects of the project.
 To introduce modern Cattle feed production and processing technologies to the
surrounding locality.
 To create job opportunity for skilled and unskilled local citizens.
 To create market linkages with small holder farmers in the town and its surroundings etc

6
 1.1 INVESTMENT OPPORTUNITIES

 High livestock population &Diverse agro-ecologies

 There is an increasing trend of intensification of livestock production especially
the poultry industry. This opens the opportunity for a substantial increase in the
demand of compound feeds
 A welcome trend in the increase of the commercial orientation of animal
production in Ethiopia; the breeds/strains of animals have also started to change in
line with advanced countries.

 The improved breeds are dependent on commercial mixed feeds. This is expected
to continue at a faster rate in the future;
 Rapid expansion of
 Feedlotoperationsmorethan120withaholdingcapacityof70-
2000/operations
 Dairy, poultry and pig farms
 Presence of agro industrial by products(flour mills, oil, sugar factories)
 5 years GTPII plan of the country (2025/26-2029/30) aimed at filling the
identified feed deficient gap
 Price increment of feed from time to time
 Prospects of marked Increased consumer demands for Livestock products
 Prospects for increase in availability of raw materials &equipment i.e. Increase in
the production of especially maize, Soybeans &oilseeds in terms of yield per unit
area and encouraging development in manufacture of small capacity feed milling
and mixing equipment locally
 The industries are importing premixes from abroad revealing existence of
investment opportunities
 Fostering development of agro-industries(Increased availability of ingredients

 Increased consumer demands as a result of fore casted increase in income and

purchasing power of the population;

7
  Potentially high demand in neighboring countries for compound feeds and
livestock products and the comparative advantage of Ethiopia in supplying this
demand.
Incentives
 Duty free feed machineries and necessary equipments
 Land
 Free consultancy training ,investment facilitation and market
promotion service (EMDIDI)

1.2.CHALLENGES/CONSTRAINTS

 Shortage of feed ingredient supply due to Inadequate production& Poor efficiency of

utilization of available feed resources
 Soaring of ingredient/compound feed prices due to shortage of feed ingredient supply;
high transport costs; poor market orientation of feed production.
 Poor quality of ingredients: due to adulteration common practice. ; lack of access to feed
laboratories resulting in no possibilities for checking on quality and deterioration in feed
quality during storage common
 Lack of knowledge and skills for Feed industry personnel in Ration formulation ;Feed
milling technology and Skills on physical tests on feed ingredient &mixed feed quality
1.3 .Strategic options for challenges

 To increase production of quality feed in large-scale commercial operations, government

investment policy needs to make large plots of land and credit available to investors at
reduced rates to encourage them to invest in animal feed production and processing.
 The government needs to promote establishment and use of oil extraction and flour
milling factories so that more by-products are made available for feed processing
industries. Taxes or quotas also need to be levied to discourage imports.
 To promote the production of yellow maize for poultry.

8
  The Government needs to ensure that seasonal fluctuations in ingredients and compound
feed prices are minimized and ensure sustainable feed production by advising feed
processors to develop storage capacity for processed feeds and the ingredients required to
produce these feeds.

1.4 PRODUCT DESCRIPTION AND APPLICATION

Animal feed is a kind of feed prepared for oxen, cows, sheep, goat, poultry etc. reared for their
milk, meat and egg. It contains protein, minerals and other nutrients which are useful for milk
egg and beef production as well as survival and growth of the animals. Animal feed can be
prepared from oil cakes, agro - residues, flour mill by- products, cereals, molasses, minerals and
vitamins etc. The major animal feed consumers are large and small scale cattle rising and
fattening farms.

2 .Market study and Plant Capacity

2.1. Market study
Ethiopia has a significant number of cattle. However, the production of cattle feed is not
sufficient to support the development of this activity. Livestock feed includes natural pastures,
crop residues, cultivated forages and agro-industrial by-products. But, the importance of natural
pasture is gradually declining because of the expansion of crop production into grazing lands,
redistribution of communal lands to the landless and land degradation. Commercial fattening and
animal breeding enterprises have also grown significantly since recently. The establishment of
these kind enterprises would increase the demand for cattle feed. Moreover, many animal feeds
have alternative uses either for human consumption or for industrial use. There is also direct
competition between human and livestock for cereal grains. The country faces severe feed
shortage due to either the seasonality in the availability and the poorly developed animal feed
conservation method for use during lean years. The current national animal feed demand is
estimated at 95.83 million tons of DM, whereas the supply thereof amounts only to 65.6 million
tons of DM (CSA 2011/12)—leaving an unsatisfied huge gap

9
To estimate the present demand for cattle feed the cattle population, the recommended average
feed consumption and constraints such as awareness and income of potential users as well as
products adaptability are considered. Accordingly, the total cattle population for the country is
estimated to be about 53.6 million (LSA report, 2014) and the recommended rate is 2 kg/head a
day. If the total population was to be feed with improved feed, 37.5million tons would be
needed. However, considering the constraints mentioned earlier, conservatively only 10% of the
population are assumed to be relevant. Hence, the national present effective demand is estimated
at 3.7 million tons which show that there is large scope to increase production of industrially
processed feed. Furthermore, the enterprises in Addis Ababa are assumed to capture 10% of the
market (considering Addis Ababa’s advantage; central location, availability of better
infrastructure and other facilities). Accordingly, the present effective demand is 370,000 tons.
2.2 .Demand Projection

The demand for industrially processed animal feed will ultimately depend on the awareness of
farmers on the importance of the product, size of animal population and development of modern
animal farms. The government’s livestock policy objectives in the GTP are to increase livestock
productivity through increases in improved breed’s provision, animal health and increase forage
production. Naturally, there are things that can be done to improve natural feed sources.
However, there will be limitations due to factors enumerated above. Moreover, for age
production alone is unlikely to satisfy the existing demand. One of the possible ways of
overcoming these limitations is through increased production and supply of industrially
processed feed. By considering the extension program being implemented by the Ministry of
Livestock resource Development and Fish as well as other NGOs which is likely to impact
demand for manufactured feeds positively (through awareness creation) and declining
importance of natural pasture and the competing demands, as well as development of market
oriented livestock production, an annual growth rate of 5% is applied in projecting the demand
for the product.

Moreover, during the projection period the enterprise to be established in Addis Ababa is
assumed to capture 10% of the market (considering Addis Ababa’s advantage i.e. central
location, availability of better infrastructure and other facilities).

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 Table1: Projected Demand for Manufacture Animal Feed (Tons)

Year Projected Existing Demand Addis

Demand Production Supply Ababa’s
Capacity Gap Market
Share

2025 4,958,354 19,392 4,938,962 493,896

2026 5,206,272 19,392 5,186,880 518,688
2027 5,466,585 19,392 5,447,193 544,719
2028 5,739,914 19,392 5,720,522 572,052
2029 6,026,910 19,392 6,007,518 600,752

2.3. Pricing and Distribution

Prices of animal feed depend upon the composition of the mix and the nutrients. The Current
average price is Birr 660/quintal. This has been taken as ex-factory price for the envisaged
project.

Current practice of feed product distribution involves sales at factory gate and to supply to major
towns by opening sales store. The project can use both distribution mechanisms to expand its
market outlets.

2.4. Plant Capacity and Production Program

A. Plant Capacity
Based on the projected demand for animal feed shown in the market study and considering the
minimum economic scale of production, the envisaged plant is planned to have a capacity of
15,000 tons of animals feed per annum. This capacity is proposed on the basis of a single shift
of 8 hours per day and 250 working days per annum.
B. Production Program
The envisaged plant will start operation at 85% of its rated capacity which will grow to 95% in
the second year. Full capacity production will be attained in the third year and onwards. Details
of annual production program are shown in Table 2

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Table2: Annual Production Program at Full Capacity Operation

Item Description Unit of Production Year

No. Measure 1st
2nd 3rd&
Onwards
1 Animal feed Ton 12,750 14,250 15,000
2 Capacity utilization rate % 85 95 100

3 Materials and Inputs

3.1 Raw Materials
The basic raw materials required for the production of animal feed include oil cake, molasses,
and bone meal, bran of cereals, maize, salt and limestone. All of the raw materials can be
available locally. The annual requirement for raw materials at full capacity production and the
estimated costs are given in Table 3.
SN Description Measurement Qty Unit cost in Total cost in
Birr Birr.
1 Tank and silo for raw and auxiliary 1 56,000
56000
materials Set
2 1 500,000
Metal screen and shaker 500,000
Set
3 1 150,000
Hammer mill(crusher) 150.000
Set
4 2 200,000.
Weighing scale (5 tons) 100,000
Set
5 2 400,000
Bagging machine 200,000
Set
6 2 400,000
Dust collector 200,000
Set
7 1 200,000
Product tank 200,000
Set
8 2 200,000.00
Boiler 100,000
Set
9 Generator 2 300,,000
150,000
Set
10 (Security Equipment) Unit 1 40000 40,000
Total 2,303,750

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The only auxiliary materials required for the operation of the envisaged plant are 50 kg plastic
sacks and twine rope that are also available locally. The annual requirement for auxiliary
materials at full capacity production of the plant and the estimated costs are given in Table 4.

13
 Table4: Annual Auxiliary Materials Requirement at Full Capacity and Costs

Item Description Unit of Required Unit Cost,('birr)

No. Measure Qty Price F.C. L.C. Total
(Birr)
1 sack,50kg Pc 72,000 7.00 - 500,500 500,500
2 Twin Europe Kg 2,000 1.50 - 3.00 3.0
Total - 500503 500503

3.2 .Utilities
The utilities required for the envisaged plant comprise electric power, water and fuel oil. Electric
power is required to run the production machinery and to provide lighting for the plant. Water is
required for general purpose and for the boiler which generates hot water to be supplied to the
molasses tank. Fuel oil is required for the boiler. The annual requirement for utilities at full
capacity production and the estimated costs are shown in Table 5.

Table5: Annual Utilities Requirement and Estimated Costs

Item Description Unit of Required Unit Cost Birr)

No. Measure Qty Price
(Birr)
F.C. L.C. Total
1 Electric power kWh 250,000 0.6 150,000 150,000
2 Water m3 5,000 10.00 50.00 50.00
Total 200,000 200,000

3.3.TECHNOLOGY AND ENGINEERING

A. Production
Process

The major operations involved in the production of animal feed are: raw materials preparation,
primary crushing, assorting and measuring, molasses mixing, and fine crushing and packing.

Raw and auxiliary materials are first charged into silos and tanks where they are made ready for
further processing. They are then processed by primary crusher. Crushed materials are further
separated by means of a lifter, and then stored in the assorting tanks according to the kind of raw
materials.

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 In assorting and measuring operations, small amounts of additives are charged into the bins
containing different assortments of raw materials. The raw materials stored in the assorting tanks
are measured in accordance with the desired proportion.

The raw materials are then mixed by means of a mixer. In this process, fatty ingredients are
added to the materials in order to raise the nutritional value of the feed. The feed obtained from
the mixer is blended with molasses. Finally, the product is weighed and packed in plastic or jute
bag.
B. Process Flow Diagram
Feed Feed Analysis in Acceptance of Separators and Crushing by
ingredients laboratory feed ingredients conveyors hammer mill
(Trucks)

Storage or Exit Conditioning (Molasses, Dosage bin

Minerals) Mixer (separate)f
Packing Hoppers
or each
feed)

C. Machinery and equipment

Plant machinery and equipment required for the envisaged project comprise raw materials tanks,
screen shakers, hammer mill, blender, bagging machine, pellet making machine, boiler, etc. The
total cost of machinery and equipment is estimated at Birr 12.25 million, out of which Birr 9.8
million is required in foreign currency. List of plant machinery and equipment and the estimated
costs are shown in Table 6.

15
Cattle feed processing Machine

16
Poultry food processing machine

17
Material mix machine

18
Table6: Machinery and Equipment Requirement and Estimated Costs

Item Cost,(Birr)
Description Unit of Required
No. Measure Qty
F.C. L.C. Total
Tank and silo for raw 300000
1 and auxiliary materials Set 2 200,000100,000

2 Set 1 150,000 50,000 200000

Metal screen and shaker
3 Mixer Set 2 400,000 100,000 500,000

4 Hammer mill(crusher) Set 2 500,0000 100,000 600,000

5 Weighing scale (5tons) Set 1 200,000 100,000 300,000.00

6 Bagging machine Set 2 400,000 200,000 600,000.00

7 Dust collector Set 1 150,000 50,000 2,000,000.00

8 Product tank Set 1 150,00050,000 200,000

9 Boiler Set 2 400,000 200,000 600000

10 Other accessories Set 1 200,00 50000 250000

0
Total 1,855,00 700,000 3,705,000
0
D. Land, Buildings and Civil Works
2,
The total land area required for the plant is 500 m 2
Out of which 300m Is built–up area. The
2
Construction cost of buildings and civil works at the rate of Birr 4,500 per misestimated at Birr
700,000.

According to the Federal Legislation on the Lease Holding of Urban Land (Proclamation No
721/2004) in principle, urban land permit by lease is on auction or negotiation basis, however,
the time and condition of applying the proclamation shall be determined by the concerned
regional or city government depending on the level of development.
19
The legislation has also set the maximum on lease period and the payment of lease prices. The
lease period ranges from 99 years for education, cultural research health, sport, NGO , religious
and residential area to 80 years for industry and 70 years for trade while the lease payment period
ranges from 10 years to 60 years based on the towns grade and type of investment.

20
Moreover, advance payment of lease based on the type of investment ranges from 5% to 10%.The lease
price is payable after the grace period annually. For those that pay the entire amount of the lease will
receive 0.5% discount from the total lease value and those that pay in installments will be charged interest
based on the prevailing interest rate of banks. Moreover, based on the type of investment, two to seven
years grace period shall also be provided.

However, the Federal Legislation on the Lease Holding of Urban Land apart from setting the
maximum has conferred on regional and city governments the power to issue regulations on the
exact terms based on the development level of each region.

On the other hand, some of the investment incentives arranged by the Addis Ababa City
Administration on lease payment for industrial projects are granting longer grace period and
extending the lease payment period. The criterions are creation of job opportunity, foreign
exchange saving, investment capital and land utilization tendency etc. Accordingly, Table 7
shows incentives for lease payment.

21
 4 Economic and Social Benefits
The project will create backward linkage with the agriculture and agro processing sectors and
forward linkage with the livestock sector and also generates income for the government in terms
of payroll tax. The project can create employment for 32 persons

4.1. Environmental Impact

The envisaged plant does not have any adverse impact on the environment, rather it have an
advantage to minimize the methane mitigation by feeding the animals the compound feed.
Thus, the project is environment friendly.

4.2. HUMANRESOURCEANDTRAININGREQUIREMENTS
A. Human Resource Requirement
The total human resource required for the envisaged plant 32 persons. The human resource
required and the estimated annual labor cost including the fringe benefits is shown inTable8.

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 Table8: Human Resource Requirement and Estimated Cost

Item Required Salary, Birr

No. Job Title No. of persons
Salary/month Total Salary/Year
(birr) salary/mo (Birr)
nth (birr)
1 Plant manager 1 7,500 7500 90,000
2 Secretary 1 2008 2008 24096
3 Accountant–clerk 2 1,600 3200 38400
4 Personnel 1 2008 2008 24096
5 Salesperson 1 1200 1200 14400
6 Cashier 1 1200 1200 14400
7 Storekeeper 1 1000 1000 12000
8 Production supervisor 1 2500 2500 30,000
9 Quality controller 1 2500 2500 30000
10 Mechanic 1 2500 2500 30000
11 Electrician 1 2500 2500 30000
12 Operator 2 2,500 5000 60000
13 Laborer 10 1200 12000 144000
14Cleaner 3 1000 3000 36000
15Driver 2 1500 3000 36000
16Guard 3 1,200 3600 43200
Sub–total 32 35216 54716 656,592

B. Training Requirement

Two weeks on the job training should be given for production supervisor, 6 operators, quality
controller, a mechanic and an electrician by the advanced technician of the machinery supplier
on operation, quality control and maintenance of machinery and equipment. The cost of training
is estimated at Birr 50,000.

4.3. FINANCIAL ANALYSIS

The financial analysis of the animal feed project is based on the data presented in the previous
chapters and the following assumptions:-
Construction period 3 Month
Source of finance 10% own equity and 90%Bank loan in lease financing.
Tax holidays 3 years
Bank interest 12%
Discount cash flow 12%

23
Accounts receivable 30 days
Raw material local 30 days
Work in progress 1 day
Finished products 30 days
Cash in hand 5 days
Accounts payable 30 days
Repair and maintenance 5%ofmachinerycost
Total processed feed production 127,500qt
Current average selling price of animal feeds 690birr/qt

4.4 .Total Initial Investment Cost

The total investment cost of the project including working capital is estimated as indicated
bellow (See Table 9).

Table9: Initial Investment Cost (Birr)

Sr. Local Foreign Total

No. Cost Items Cost Cost Cost
1 Fixed investment
1.2 Building and civil work
700,000 700,000
1.3 Machinery and equipment
911,000 1,644,000 3,705,000
Subtotal 4,405,000
2 Other costs
2.1 Raw material cost(Ingredients) 1,113,800 309,950 2,303,750
2.2 Salary 656,592 656,592
2.3 Auxiliaries 503,000 503,000
2.4 Utilities 200,000 200,000
Subtotal 1,903,392 109,950 3,663,342
3 Pre operating cost 150,000 150,000
4 Reserved Budget for row material 1,070,000 1,070,000
coast variation
Grand Total 9,138,342

24
*The above table shows that the total needed initial cost the animal feed processing plant. Hence
6,000,000 birr is required to start and implement the project. The source finance is from banks
5,400,000Birr (90%) and Own equity 600,000 birr (10%).

25
4.5 .Total Revenue
Based on the projected profit and loss statement, the project will generate a profit throughout its
operation life. Annual net profit after tax increases from Birr 4,200,000 at the beginning of the project
to Birr 9,000,000 during the fifth year of operation year. The detail is
Presented in the table15below
Table1 5 Purchase and Sales Estimation Feed Purchase and Sales
Purchase of feeding Processed feed sales
year Purchase of feedinqt unit coast Total coast Processed feed sales unit sell Total sell
1 5,000.00 300 1,500,000.00 5,000.00 690 3450000
2 7,000.00 320 2,240,000.00 7,000.00 700 4900000
3 8,000.00 350 2,800,000.00 8,000.00 700 5600000
4 10,000.00 350 3,500,000.00 10,000.00 720 7200000
5 12,000.00 350 4,200,000.00 12,000.00 750 9000000

4.6. Project Income Statement

Based on the projected profit and loss statement, the project will generate a profit throughout its
operation life. Annual net profit after tax increases from Birr 1,666,687.91at the beginning of the
project to Birr 5,333,726during the fifth year of operation year. The detail is presented in the
table 16 below.
Table16IncomeStatement

Revenue Year1 Year2 Year3 year4 and after year5

Feed sell 3,450,000.00 4,900,000.00 5,600,000.00 7,200,000.00 9000000

Expenses
Salary Expense 452,390.40 452,390.40 452,390.40 452,390.40 452,390.4
Operating Expenses 161,009.00 161,009.00 161,009.00 161,009.00 161,009.0
Deprecation Bld. 0.00 0.00 492,700.00 492,700.00 492,700.0
Machineries ,&vehicle

InterestExpense3 453,317.88 407,986.09 362,654.30 317,322.51 271,990.7

Total Expense 1,069,017.28 1,023,685.49 1,471,053.70 1,425,721.91 1,380,390
Profit be fore Tax 2,380,982.72 3,876,314.51 4,128,946.30 5,774,278.09 7,619,609
Tax (30%) 714,294.82 1,162,894.35 1,238,683.89 1732283.426 2285882.9
Net profit 1,666,687.91 2,713,420.16 2,890,262.41 4,041,994.66 5,333,726

26
4.7. Cash Inflow
The projected cash flow of the envisaged project shows that the project would generate positive
net cash flows throughout the operation years. Cumulative cash flow generated by the project
towards the end of the first operation year will amount to Birr 2,805,202.50Attheend of the
project life, this amount will rise to Birr 18,939,006.65 in the fifth year. The detail is presented in
table 17 below.

Table1 7 Balance sheet

Year Year0 Year1 Year2 Year3 year4 Year5
Equity 600,000
Capital
Loan
Principal 5,400,000
Net sale 0 3,450,000 4,900,000 5,600,000 7,200,000 9,000,000

Total 6,000,000 3,450,000 4,900,000 5,600,000 7,200,000 9,000,000

Cash in
Flow
Cash
Payment
Salary 0 452,390 452,390 452,390.40 452,390 452,390
Expense
Investment 0 0 0 0 1
T 5,427,000
Pre 20,000 0 0 0 0 0
operating
Expense
Operating 0 161,009 161,009 161,009 161,009 161,009
Cost
Loan 0 986,633 941,301 895,969 850,637
repayment 805305
Lease 0 2,300 2,300.00 2,300.00 2,300.00 2,300
Payment
Tax 0 714,294 1,162,894 1,238,683 1,732,283 2,285,882
Payment
Total 5,447,000 1,864,236 2,267,504 2,297,962 2,746,230 3,254,498
Payment
Net Cash 1,219,439 1,585,763 2,632,495 3,302,037 4,453,769 5,745,501
Flow 4 6 1 6 1 7

27
 Beginning 1,219,439 2,805,202 5,437,697 8,739,735 13,193,505
cash balance
Ending
Cash 13,193,505 18,939,006
Balance 2,805,202.50 5,437,697.91 8,739,735.57

4.8. Measure of project worthiness

I. Internal Rate of Return

The internal rate of return (IRR) is an indicator of the efficiency or quality of an investment. A
project is a good investment proposition if its IRR is greater than the rate of return that could be
earned by alternate investments or putting the money in a bank account. Accordingly, the IRR of
the project after tax is computed to be 161 % indicating the viability of the project.

II. Net present value

Net present value (NPV) is defined as the total present (discounted) value of a time series of cash flows.
NP Aggregates cash flows that occur during different periods of time during the life of a project in to a
common measuring unit i.e. .present value. It is a standard method for using the time value of money to
asses’ long-term projects. NPV I s an indicator of how much value an investment or project adds to the
capital invested. In principle a project is accepted if the NP Vinson-negative. Accordingly, the net

present value of the project at 10% discount rate is found to be Birr 11,598,347.75 which is acceptable.

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4.9. CONCLUSIONS
As it is known Ethiopia has huge investment potentials for feed processing industry
subsector, and the climatic condition is favorable for growing different vegetation and crops
which are an excellent source of processed fodder preparation.
The financial analysis of this feed processing investment pre-feasibility study shows that the
project is worth profitable and acceptable as the discounted measures of the project worth
shows positive trend if investors are engaged in the area.

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