Table of Contents

List of Tables.............................................................................................................................3
Executive Summary...................................................................................................................4
1. Introduction............................................................................................................................5
1.1. General Background...........................................................................................................5
1.2. Our value:-..........................................................................................................................6
1.3. Objectives of the Project:....................................................................................................7
1.4. Project Rationale.................................................................................................................8
1.5 Significance of the project...........................................................................................8
1.6 Background of the Project Location...................................................................................9
1.7 Proposed Project Location.................................................................................................10
2 Service Descriptions and Application...................................................................................11
2 Market Study and Service Capacity......................................................................................11
2.1 Past Supply and Present Demand......................................................................................11
2.2 Projected Demand..............................................................................................................12
2.3. Pricing...............................................................................................................................12
2.4 Marketing promotion and strategy.....................................................................................12
2.5 Marketing and Sales Strategy............................................................................................13
3. Plant Capacity and Service Delivery Program....................................................................13
3.1. Plant capacity....................................................................................................................13
3.2. Service delivery program..................................................................................................14
4. Inputs...................................................................................................................................14
4.1. Materials and Consumables and Inputs............................................................................14
4.2. Annual Requirement and Cost Utilities............................................................................15
5. Technical Analysis...............................................................................................................15
5.1. Technology.......................................................................................................................15
5.2. Civil Engineering Cost......................................................................................................16
6. Manpower and Training Requirement.................................................................................18
6.1. Manpower Requirement...................................................................................................18
6.2. Training Requirement.......................................................................................................18
7. Financial Analysis................................................................................................................19
7.1. Underlying Assumption....................................................................................................19
7.2. Total Initial Investment Cost............................................................................................19
1
7.3. Operation Cost..................................................................................................................20
8. Financial Evaluation............................................................................................................21
8.1. Profitability.......................................................................................................................21
8.2. Break even Analysis.........................................................................................................21
8.3. Payback Period..................................................................................................................21
8.4. Internal Rate of Return and Net Present Value.................................................................21
9. Economic and Social Benefit and Justification....................................................................21
A Profit Generation..................................................................................................................21
B Tax Revenue........................................................................................................................22
C Employment and Income Generation...................................................................................22
Appendix 1: Projected Sales Revenue.....................................................................................23
Appendix 2: Production cost...................................................................................................24
Appendix 3: Income Statement...............................................................................................25
Appendix 4: Net working Capital............................................................................................26
Appendix 5: Depreciation and Amortization...........................................................................27
Appendix 6: Cash flow Statement...........................................................................................28

2
List of Tables
Table 1: Raw Material Requirement............................................................................................14
Table 2: Utility Requirement........................................................................................................15
Table 3: Machinery Requirements and cost.................................................................................15
Table 4: Equipment & Furniture..................................................................................................15
Table 5: Manpower Requirement and Annual Labor Cost..........................................................18
Table 6: Initial Investment Cost...................................................................................................19
Table 7: Annual Production Cost at Full Capacity ('000Birr)......................................................20

3
Executive Summary
This profile envisages the establishment of recreational center in Adwa town Tigray Regional
State. Demand projection divulges that there is high demand for recreational centers in the
region. Accordingly, the planned plant is set to provide recreational services in zonal capitals.
The proposed Recreation Centre will meet the current and long-term needs of the community
of Adwa town, Mebale kebele Mt Soloda area. The total investment cost of the project
including working capital is estimated at Birr 5 million and creates 50 job opportunity .The
proposed infrastructure will support the Government’s objective to provide conditions and
services. The proposed recreation facility will enhance the tourism experience in many ways
and create opportunities for residents and businesses in Adwa town, Mebale kebele Mt Soloda
area .

The financial result indicates that the project will generate profit beginning from the first year
of operation. Moreover, the project will break even at 29.6% of capacity utilization and it wills
payback fully the initial investment less working capital in 3 years. The result further show
that the calculated IRR of the project is 25.7% and NPV discounted at 18% of Birr
3,871.79 .In addition to this, the proposed project possesses wide range of economic and social
benefits such as increasing the level of investment, tax revenue and employment creation.
Generally’ the project is technically feasible, financially and commercially viable as well as
socially and economically acceptable. Hence the project is worth implementing. To this effect,
the promoter the owner of the envisaged project, planned to establishment of recreational
center in Adwa town and undertaken this project study to check the market, technical and
financial feasibility of this project. The promoter is very ambitious and committed to realize
the project. Hence, they expects to get the necessary support from Adwa , investment and city
administration to make the project to be operational

4
1. Introduction

1.1. General Background

Ethiopia is now well-known as among the five1/ fastest growing economies of the world.
According to IMF, the average growth of the economy is about 10.7% for the last 11
consecutive years, up to 2013/14. The development is broad-based and in paradigm
transformation.Itisapparentthatthedevelopmentpolicyandstrategyof the Government created an
enabling environment for the participation of all citizens, who reside both in and outside of the
country, and contributed for the achievement of the stated fruits of development. At this
juncture all the development actors in general and the government in particular is determined to
sustain the pace of on-going growth and transformation of the economy and it is explicitly
indicated in the Second Five Year (2015/16-2019/20) of Growth and Transformation Plan. The
stated economic growth of the country brought a wide range of positive social and economic
outcomes, which includes, among others, the expansion of all rounded business and
investments. The project has multifaceted contributions for the socio-economic development of
a nation. In addition to the inclusive provision of best goods and quality services, it is also
beneficial in terms of job creation, revenue generation for the government, an induced role in
business and investment expansion and facilitation, tourist attraction, etc. It is in this view that
the promoter of establishment of recreational center in Adwa town, Mebale kebele Mt Soloda
area has to first implement a plan to bridge the demand gap of the country. The current fast and
dynamic economic growth of Ethiopia especially in urban area necessitates equivalent growth
of building and construction sector. The sector should expand rapidly to support the overall
economic development sustainable.

Service delivery is the provision of comprehensive and coordinated services to people in need.
Human service delivery is complex in contemporary Western societies, with high community
expectations, competing demands and often delivered under fiscal constraints. Specializations
can mean that individual service providers or agencies develop the expertise to deliver a very
specific service, yet individuals, families and communities often experience multiple needs and
interrelated problems The Government of the Federal Democratic Republic of Ethiopia, after
closely examining youth issues, gave attention to youth problems and established the Ministry

5
The Urban Youth Development Package is a comprehensive development package that is
designed to solve the socio- economic problems of urban youth. In Ethiopia youth Perception
towards youth center service delivery have not as such received significant research attention of
concerned bodies. This has resulted in scarce literature, low practice and intervention on the
area of youth services delivery.

1.2. Our value:-

 Loyalty and Reliability
 Customer focus
 Innovative culture
 Cost effectiveness
 Social responsibility
 Care for the environment
 Compliance with code of conduct

Facilities will be provided: Recreational centers are places where people get
entertainment and enjoyment. The facilities provided include various indoor and outdoor
games, swimming pools, cinema halls and facilities to stage theaters and music shows.
Job opportunity: The project will create employment opportunities for 50 persons

Need and Desirability: The envisaged project deemed to add to the economic development
of the nation in general and zone and town in specific with following ways:

A. Source of Revenue
B. Employment opportunity
C. Sources of social service
D. Income
E. Source Of Fund
F. Hospitality – focus on the customers, promoting an exceptional guest
experience.
G. Efficiency–offer a good service with the adequate resources.
H. Superior Customer Service

Source of Fund: 40 %equity& 60% loan

6
 Social and Economic Benefit: Provide better Building service, employment opportunities,
generation of income and benefits for the local people.

1.3. Objectives of the Project:

The major goal of this project is to contribute towards the growth of the trade sector in Adwa
town. Its specific objectives include the following:

 To provide excellent child play care in a kid-friendly atmosphere while ensuring our customers,
both parent and child, receive excellent service in a playful, educational, and safe environment.

 Establish recreation facilities to meet the needs of the population;

 Provide basic recreation services to the Community.

 The proposed infrastructure upgrade will create both short and long term job opportunity for the
local community and develop the local skills base.

 To create a service-based company this exceeds customers’ expectations.

 Educate the community on what the company has to offer.

 To create employment opportunities for the population in the town and Contribute towards the
beautification of the town through the construction of modern building infrastructure and
facilities.
 To construct and provide excellent child play care in a kid-friendly atmosphere while ensuring
our customers, both parent and child, receive excellent service in a playful,
 Establish recreation facilities and services to meet the needs of the Community.

 create both short and long term job opportunity for the local community and develop the local
skills base. and committed to realize the project. Hence, expects to get the necessary support
from the city administration to make the project to be operational.

To this effect, the promoters of establishment of recreational center in Adwa town committed to
developing in Tigray Region, Adwa town, Mebale kebele Mt Soloda area . Besides, the
government policies and incentives for the private sector investment are very promising that
initiate the promoter to engage in establishment of recreational center in Adwa town, Mebale
kebele Mt Soloda area project
7
1.4. Project Rationale
Man's struggle for self-realization assumes many forms and has many parts. The road to
individual integrity and dignity requires the exercise of our rights and freedoms in responsible
and constructive ways. Important among these is the way each person chooses to exercise the
right to enjoy increasingly longer periods of respite from work and other responsibilities. We
are changing from a work-centered society to one in which people have a better opportunity to
balance their work with meaningful recreation experiences; These leisure experiences should
bring a greater measure of satisfaction and fulfillment into our daily lives. As we balance our
individual lives in this manner, we contribute to the proper balance of society. Whether
individually, or as part of a group such as the family, are find much of the balancing experience
through some form of recreation activity. The nature and quality of the experience, which we
call recreation, determines in large measure the nature and quality of our lives.
The values we experience and demonstrate in our leisure behavior reflect the values we hold as
individuals and as a community of human beings. Recreation is first and foremost a personal

1.5 Significance of the project

The proposed development will have numerous positive impacts to the residents and to the
general area. Some of the benefits include:-

A Source of Revenue

As public policy of any nation, the government collects different forms of taxes from different
business organizations and individuals. Among the different forms of taxes, business income
taxes, payroll income tax and VAT are collected from undertaking business activities.
Therefore, the building will serve as sources of revenue for the town as well as for the region.

B Employment opportunity

One of the problems that our country faced is unemployment. Therefore, the current objective
of the government is working on tackling the problem of unemployment and fostering the
development process either through creating self-employment or employment in other
organization. This will be a significant impact since unemployment is currently quite high in
this area hence, this project will hire 50 individuals

8
 C Sources of social service

In addition to serving as a source of employment and income for the region, Hence, it is also
providing the following services;

 Serve as a source of mental satisfaction for the different users,

 Since, the center encompasses different recreational areas; it will divert the attention of the
users from different evil deeds.

1.6 Background of the Project Location

Adwa is located in Tigray national regional state, central Tigray zone at a distance of 1005 Km
0
Fromm Addis Ababa and 240 Km from Mekele. Its astronomical location is 14 12 north
latitude and 380 56 east longitude. Adwa town has linear shape developed along the road. Its
altitude is 1800-2000m above sea Level. It has mean annual temperature of 20 0c and mean
annual rainfall of 819.6 mm. The Prevailing wind direction is from north west and south east.
The principal natural constraints for The physical expansion of the town are steep slope in the
east and south while manmade Constraints include substation and high tension lines, which
crosses the future expansion area

According to the national population and housing census carried out in 2007,the population of
The town was 49,676. The population of the town is estimated to be 76,237 in 2015 with
medium Variant 5.5% growth rate. The average household size in the town is 4.2.
Regarding infrastructure, the town has asphalt and gravel roads connecting to different Areas.
The distribution of roads as per the type of construction shows that 15 Km is gravel and
cobblestone road, 6.72 Km is Asphalt and 20 Km earth pressed roads. In addition to the inside
roods the town has four major outlets connecting to many strategic and big towns in the
country. These are Adwa - Adwa – Addis Ababa, Adwa – Mereb- Asmara- Adwa- Shire -
Humera and Adwa Abi Adi - Adwa. Moreover, the beneficiaries of the product are located in
and around of the site.
The town has a 24 hours provision of electric power supply, mobile and fixed line telephone,
internet service, and postal service. There is sufficient water supply from the Midmar dam in the
town

9
Adwa town is one of towns in the central zone of the region and its strategic location and
availability of major infrastructures makes it alternative for investment. The coverage of basic
infrastructure facilities are increasing dramatically in recent years following free market policy
of the Federal Democratic Republic of Ethiopia’s (FDRE) in general and Regional Government
of Tigray in particular. As has been the case in the past, Government continues its commitment
to give an opportunity for its national to invest on various feasible projects, with positive
present value when compared to that of without project case. The coverage of basic
infrastructure facilities are increasing dramatically in recent years following free market policy
of the Federal Democratic Republic of Ethiopia’s (FDRE) in general and Regional Government
of Tigray in particular. With this understanding and inspired by current fast development of the
city, the applicant has developed strong desire of investing in the town to construct and operates
recreation center

Ecologically

Adwa town city lies in wet land Ecosystem .It is bounded by wet evergreen mountain forest
land ecosystem. Because of the climatic stability the green coverage is very significant and
estimated to be about 35% including farmlands & vacant places. In the city green areas are
found long streets, in urban parks, in public & private gardens, along stream banks and flood
plains, in stream and downstream, ridges and hills and left over spaces.

1.7 Proposed Project Location

For the proposed development to be feasible, accessibility plays a major role Before choosing
project we conducted feasibility studies and market analysis and identify the location that serve
the market and benefit greatly and decided to settle at Adwa town, Mebale Kebelle Mt Soloda
Area. The proposed project site is approximately 15000 m2.

10
2 Service Descriptions and Application
Recreational centers are places where people get entertainment and enjoyment. The facilities
provided include various indoor and outdoor games, swimming pools, cinema halls and facilities
to stage theaters and music shows. At the same time these facilities also serve for conducting
various ceremonies such as wedding, and other assemblies. The dedicated sports facility is
proposed to be provided by way of a new Community Recreation Centre (including swimming
pool, multi-use recreation hall, change rooms and ancillary rooms and service areas). It is to be
integrated with the adjacent existing community sports oval. The proposed facilities are intended
to balance the commercial and social benefits for all community.to create a welcoming space to
help cultivate a strong sense of community, promote health and wellness in our community and
support for the needs of local residents. There will be indirect benefits from complimentary
development which will occur adjacent to the facility, promoting greater business investment
interest, regional awareness and tourism opportunities. The proposed recreation facility will
enhance the tourism experience in many ways and create opportunities for residents and
businesses in Adwa town.

2 Market Study and Service Capacity

2.1 Past Supply and Present Demand
At present the recreational facilities available in the various are very inadequate in terms of the
type of service and standards. As a matter of fact, with the decentralization of government
structures zonal capitals have become centers of important administrative functions as well as
commerce, industry, education, etc. Accordingly, the population of At the same time in these
and other urban centers of the region the population number is increasing substantially.
Nonetheless, there has not been a corresponding increase in recreational facilities. For example,
no indoor and outdoor games, no swimming pools, no musical shows, and no theaters in most of
the places. For example if we assume that 10% of the population do pay visit to well established
recreational centers once in a week, then the number of individuals in the target group would
amount to 20,956 every month. This can be fairly assumed as the current level of demand and at
the same time suggests the existence of ample demand. Therefore, if well equipped recreation
facilities are established in zonal capitals, they will definitely have enough customers.

11
2.2 Projected Demand
The future demand for recreational Services in the zonal capital Axum, will increases mainly
due to population increase. Moreover, the growth of urbanization will attract additional traders,
social workers and families into the Axum and Adwa towns. Consequently, the number of
individuals that do visit the envisaged type of recreational services will also increase by 3%, the
target population will increases Substantially. According to the forecasted demand presented in
the future is very promising provided that quality and customer centered services are rendered by
the recreational centers.

2.3. Pricing
The envisaged plant as a start up will focus on providing entertainment activities such as video
games, snooker, watching of video films and refreshment drinks. Moreover, the center shall rent
its hall and compound for weeding and meeting purposes. Based on the market research result
and the capacity of the envisaged plant, the following selling price is set.

2.4 Marketing promotion and strategy

Nowadays the sphere of professional commercial activity is being developed rapidly in Ethiopia.
There are several operating modern hotel centers in large cities, the large amount of projects are
in development and are going to entry into the market in the coming years. According to the plan
mentioned above for developing of the consumer market by means of complete meeting clients’
requirements, providing them with safe and high quality goods and services in civilized way,
and also for making-up principally new ways of market wholesale trade providing goods that
arehigh-performance and high-demand on inner and outer market. In order to penetrate and gain
considerable market share, one of the major marketing strategies for the project is consistently
rendering quality service to its tenants. Due emphasis must be placed on improving quality of
service and facilities. The major marketing strategies to promote the project and gainc
considerable market share include:

 Advertising through different means

 focusing on the existing service and facilities

 Promote in association to the key location and nearby business

12
  Working on sustained promotional work.

2.5 Marketing and Sales Strategy

The marketing strategy for this new hotel is going to be driven basically by making available
standard excellent customer service and provision of complimentary services. We will work hard
to build a loyal customer base; customers that will always patronize us over and over again and
as well help us use word of mouth publicity to get their friends and acquaintance to patronize us.
Our marketing strategy is a simple one: satisfied customers are our best marketing tool. When a
customer leaves our business, they know that they got the best price and service money can buy,
our name and service will stand on its own via our cheaper process and very competitive prices.

In view of that, we are going to adopt the following strategies to ensure that we do not only
attract customers but ensure that they become loyal customer. Part of the marketing strategies
that we will adopt is;
 introduce our hotel by sending introductory
 Open our business with a party so as to capture the attention of residence that is our first
targets
 Advertise our hotel on national dailies, local TV stations and local radio station
 Promote online via our official website and all available social media platforms and
Continuous improving the performance of our brands
 Hire the services of experts to make our brands the first choice
 delivering consistent customer experiences to all our clients; making our first impression
count positively

3. Plant Capacity and Service Delivery Program

3.1. Plant capacity
Thus, given the expected demand for the service, and the planned technology, the envisaged
plant is set to attract the following number of visitors.
 50 individuals per day for video game
 50 visitors per day to play snooker
 120 individuals per day to watch video film in two programs
 Accommodate 50 wedding ceremonies in a year
 Accommodate 25 meeting programs and workshops in a year that take on average
13
 3 days per program.
 Cater food and beverage for 100 individuals per day.

3.2. Service delivery program

The program is scheduled based on the consideration that the envisaged plant will work 300
days from 8 A.M till 8 P.M where the remaining days will be for maintenance. During the first
year of operation the plant will operate at 70 percent capacity and then it grows to 85 percent in
the 2ndyear. The capacity will grow to 100 percent starting from the 3rdyear. This consideration
is developed based on the assumption that market and logistics barriers would be eliminated
gradually within the first two years of operation.

4. Inputs
4.1. Materials and Consumables and Inputs
The raw materials used in providing the services stated earlier are mainly beverages and various
ingredients used to prepare food. The annual raw material requirement and the associated cost
for the envisaged plant is listed in table 1 here under.

Table 1: Raw Material Requirement

S/N Description Unit of Qty. Unit Total Cost (In
Measure Cost Birr)
1 Various Ingredients for Food Lump sum 1,000,000
2 Roasted Coffee Kg 1,000 500 500,000
3 Milk Liters 4,000 100 400,000
4 Tea Kg 300 200 60,000
5 Soft Drinks Bottle 50000 25 90,620
Total 2,050,620

According to the above table the annual cost of material and utility at full capacity of operation
is estimated to be Birr 2,050,620.

4.2. Annual Requirement and Cost Utilities

14
The annual utility requirement and the associated cost for the envisaged plant is listed in table 2
here under.

Table 2: Utility Requirement

Unit of Required Total Annual
Unit Price
S/N Description meas. Qty/year Cost(Birr)
1 Electricity, kWh 30,000 0.9 27000
2 Water, m3 10,000 5 50000
3 Fuel and Lubricants Liters 200 150 30000
Total 82602 107,000

According to the above table the annual cost of raw material at full capacity of operation is
estimated to be Birr 107,000.

5. Technical Analysis
5.1. Technology
The machineries and equipment required for providing the various services stated earlier is
detailed in table 3 below

Table 3: Machinery Requirements and cost

S/N Description Qty. No
1 Video Game Equipment 3
2 Refrigerator 6
3 Coffee Machine 1
4 Snooker Table 2
5 Various Tools As required

The, total cost of machinery is estimated to be about Birr 2,000,000.

Table 4: Equipment & Furniture

S/N Description unit Qty unit Total price
price
1 Managerial chair, high back pcs 2 10000 20,000
2 Open book shelf pcs 1 15000 15,000
3 Wooden filling cabinet, four drawers pcs 1 16000 16,000
4 Coat hunger pcs 5 2400 12,000
5 Executive sec. Desk and chair set 1 30000 30,000

15
 6 Office desk pcs 2 10000 20,000
7 Arc joint table pcs 1 2300 2,300
8 Computer table pcs 1 4500 4,500
9 Desktop computer with network set 2 35000 70,000
access
10 Mobile drawer pcs 1 4700 4,700
11 Swivel chair pcs 3 6500 19,500
13 Guest chair with arm seat pcs 6 3500 21,000
Total 235,000

5.2. Civil Engineering Cost

The total site area for the envisaged plant is estimated to be 2500m2 is allocated to the building
for the various game playing area, hall, café and related activities. The remaining space is left
open compound. The following outlines the functional components of the proposed multiple use

Recreation Centre:

Lobby/Foyer; Reception, Staff administration offices; Kitchen/Kiosk;

Public

toilets/change rooms; staff toilets; Creche/Child minding facilities, a multi-purpose sports hall to
cater for net ball, volley ball, basketball, equipment stores, hall viewing and seating, multi-
purpose activity room, Gymnasium, First aid, 25mpool, External paving/Hard stand for
pedestrians, Car parking and drop of facilities, General power and site lighting, Sewage
collection from toilet facilities, Storm water and run off collection, treatment and disposal and
screen fencing

Gymnasium

The envisaged gymnasium will composed of one machine room (200sq.mt), one Aerobics studio
(100 sq. mt) Laundry Center

The laundry center provides in-house cleaning service to bed room, and sauna/stem bathrooms
by providing clean towels, linens, covers and uniform of the employees with the required time
and quantity. The main processes of laundry center are sewing (if any), washing, and squeezing
drying, folding and pressing. The laundry center will have a daily capacity of providing 200
16
clean sets of towels, 300 sets of linen and cover 100 sets of uniforms and other miscellaneous
items.

Children’s Playground

The facilities included in the children’s playground are swings, sliding stands, tunnels, merry go
round, sand filled pits, and coin operated toy vehicles and different kinds of arcade video games.
The whole area of the playground shall be free from any obstruction that could result in accident
and the recreational tools are installed in such a way that they will not cause any accident. The
arcade coin operated video game room having an area of about 100 m2will be constructed from
prefabricated material with ventilation and lighting, and it will be carpeted. It should also be free
from any visible electrical connections and free from an accident or hazard. The provision of
such service doesn't have any adverse impact on environment.

17
6. Manpower and Training Requirement
6.1. Manpower Requirement
The envisaged project requires 50 labor forces. The list of manpower and the annual cost of
labor is indicated in Table below.

Table 5: Manpower Requirement and Annual Labor Cost

Salary (Birr)
Required Monthly salary Annual Salary
S/N Description No per individual in ETB
1 General Manager 1 8000 96,000
2 Secretary 1 3000 36,000
3 Finance and Supplies 1 6000 72,000
Manager
4 Technical Manager 1 6000 72,000
5 Chef 4 6000 288,000
6 Accountant 1 5000 60,000
7 Cashier 2 4000 96,000
8 Purchaser 1 5000 60,000
9 Marketing 1 5000 60,000
10 Store keeper 1 4000 48,000
11 HR officer 1 5000 60,000
12 Plumber 2 4500 108,000
13 Electrician 2 4500 108,000
14 Guard 6 3000 216,000
15 Cleaner 10 3000 360,000
16 Waiter 15 3000 540,000
Total 50 1,596,000

6.2. Training Requirement

All the staffs, in the catering and recreation sections, including physiotherapists, and supervisors
should be given at least two weeks on- the-job- training by the equipment supplier’s expert
during commissioning. The management members should also be given a two weeks training in
local training centers.

7. Financial Analysis

18
The financial analysis of the international standard hotel project is based on the data presented in
the previous chapters and the following assumptions:-

7.1. Underlying Assumption

The financial analysis of milk powder producing plant is based on the data provided in the
preceding chapters and the following assumptions.
 Construction period :- 1 year
 Source of finance :- 100 % equity
 Tax holidays:- 3 years
 Discounted cash flow:- 15 %
 Annual Raw material inflation rate:- 3%
 Annual Production revenue increase:- 3%

7.2. Total Initial Investment Cost

The total investment cost of the project including working capital is estimated at Birr 5.07
million. The major breakdown of the total initial investment cost is shown in Table 6.

Table 6: Initial Investment Cost

S/N Cost items Cost In Birr Share from total

amount In %

1 Land 0.0
2 Building and civil works 2,300,000.00 45.3
3 Plant machineries 2,000,000.00 39.4
4 Equipment, vehicle and furniture 235,000.00 4.6

5 Pre Production expenditure 200,000.00 3.9

6 Working capital 339,166.67 6.7
Total Investment cost 5,074,166.67 100
N.B Pre-production expenditure includes interest during construction, training (Birr 100
thousand) and Birr 100000 costs of registration, licensing and formation of the company
including legal fees, commissioning expenses.

7.3. Operation Cost

19
The annual production cost at full operation capacity is estimated at Birr 7,237,260.The major
components of the production cost depreciation, Labor direct material and input which account
for 26.82%, 22.63% and 18.72%, respectively. The remaining 31.82% is the share of direct
labor, utility, repair and maintenance, labor overhead and other administration cost.

Table 7: Annual Production Cost at Full Capacity ('000Birr)

S/N Item Cost Share of the cost

from the total
amount In %
1 Raw material and Inputs 2,050,620 28.3
2 Utilities 107,000 1.5
3 Maintenance and repair 100,000 1.4
4 Labor direct 1,117,200 15.4
5 Labor overheads 296,640 4.1
6 Administration 478,800 0.0
7 Cost of Marketing 1,000,000 0.0
Total Operating Costs 5,150,260 71.2
8 Depreciation 1,947,000 26.9
9 cost of finance 140,000 1.9
Total Production Cost 7,237,260 100

8. Financial Evaluation

20
8.1. Profitability
According to the projected income statement attached in the annex part 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 10%, 14% and 22% in the first
year and are gradually rising. Furthermore, the income statement and other profitability
indicators show that the project is viable.

8.2. Break even Analysis

The breakeven point of the project is estimated by using income statement projection.
Accordingly, the project will break even at 29.6% of capacity utilization.

8.3. 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 3 years.

8.4. Internal Rate of Return and Net Present Value

Based on cash flow statement the calculated IRR of the project is 25.7% and the net present
value at 18 % discount.

9. Economic and Social Benefit and Justification

The envisaged project possesses wide range of benefits that promotes the socio-economic goals
and objectives stated in the strategic plan of the Adwa town Mebale Kebele, Mt Soloda area,
Tigray regional state. It also plays a role in diversifying the economic activity of the region.
These other benefits are listed as follows

A Profit Generation

The project is found to be financially viable and earns profit of Birr 2.48 million within the
project life.

B Tax Revenue

21
In the project life under consideration, the region will collect about Birr about 1million from
corporate tax payment alone (i.e. excluding income tax and).Such result create additional fund
for the regional government that will be used in expanding social and other basic services in the
region

C Employment and Income Generation

The proposed project is expected to create employment opportunity to several citizens of the
region. That is, it will provide permanent employment to 50 professionals as well as support
stuffs.

22
Appendix 1: Projected Sales Revenue

S/N Product Type Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10

1 Foods 6,000,000 6,600,000 7,260,000 7,986,000 8,784,600 9,663,060 10,629,366 11,692,303 12,861,533 14,147,686

2 Soft drinks 4,000,000 4,400,000 4,840,000 5,324,000 5,856,400 6,442,040 7,086,244 7,794,868 8,574,355 9,431,791

3 Hot drinks 2,500,000 2,750,000 3,025,000 3,327,500 3,660,250 4,026,275 4,428,903 4,871,793 5,358,972 5,894,869

3 Other Services 2,500,000 2,750,000 3,025,000 3,327,500 3,660,250 4,026,275 4,428,903 4,871,793 5,358,972 5,894,869

15,000,000 16,500,000 18,150,000 19,965,000 21,961,500 24,157,650 26,573,415 29,230,757 32,153,832 35,369,215
Total
Appendix 2: Production cost
Raw material and 2,050,620 2,255,682 2,481,250 2,729,37 3,002,313 3,302,544 3,632,798 3,996,078 4,395,686 4,835,255
Inputs 5
Utilities 107,000 117,700 129,470 142,417 156,659 172,325 189,557 208,513 229,364 252,300
Maintenance and 100,000 110,000 121,000 133,100 146,410 161,051 177,156 194,872 214,359 235,795
repair
1,117,200 1,228,920 1,351,812 1,486,99 1,635,693 1,799,262 1,979,188 2,177,107 2,394,817 2,634,299
Labor direct 3
Labor overheads 296,640 326,304 358,934 394,828 434,311 477,742 525,516 578,067 635,874 699,462
Administration 478,800 526,680 579,348 637,283 701,011 771,112 848,223 933,046 1,026,350 1,128,985
Cost of marketing and 1,000,000 1,100,000 1,210,000 1,331,00 1,464,100 1,610,510 1,771,561 1,948,717 2,143,589 2,357,948
distribution 0
TOTAL
OPERATING 6,854,99
COST 5,150,260 5,665,286 6,231,815 6 7,540,496 8,294,545 9,124,000 10,036,400 11,040,040 12,144,044
1,947,000 1,947,00
Depreciation 1,947,000 1,947,000
0
1,947,000 1,947,000 1,947,000 1,947,000 1,947,000 1,947,000
cost of finance 140,000 140,000 140,000 140,000 140,000 140,000 140,000 140,000 140,000 140,000
TOTAL
PRODUCTION 8,941,99
COST 7,237,260 7,752,286 8,318,815 6 9,627,496 10,381,545 11,211,000 12,123,400 13,127,040 14,231,044
Appendix 3: Income Statement
Items Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10
21,961,50
15,000,000 16,500,000 18,150,000 19,965,000 24,157,650 26,573,415 29,230,757 32,153,832 35,369,215
Sales revenue 0
10,596,07
7,237,260 7,960,986 8,757,085 9,632,793 11,655,680 12,821,248 14,103,372 15,513,710 17,065,081
Less variable costs 2
in % of sales revenue 48.2 48.2 48.2 48.2 48.2 48.2 48.2 48.2 48.2 48.2
Less fixed costs 5,150,260 5,665,286 6,231,815 6,854,996 7,540,496 8,294,545 9,124,000 10,036,400 11,040,040 12,144,044
18,136,56
12,387,520 13,626,272 14,988,899 16,487,789 19,950,225 21,945,247 24,139,772 26,553,749 29,209,124
OPERATIONAL COSTS 8
in % of sales revenue 82.6 82.6 82.6 82.6 82.6 82.6 82.6 82.6 82.6 82.6
140,000.0
Financial costs 140,000.00 140,000.00 140,000.00 140,000.00 0 140,000.00 140,000.00 140,000.00 140,000.00 140,000.00
GROSS PROFIT 2,472,480 2,733,728 3,021,101 3,337,211 3,684,932 4,067,425 4,488,168 4,950,984 5,460,083 6,020,091
in % of sales revenue 16.5 16.6 16.6 16.7 16.8 16.8 16.9 16.9 17.0 17.0
1,122,041.
0.0 0.0 0.0 333,721.1 736,986.4 1,016,856.3 1,237,746.1 1,365,020.7 1,505,022.8
Business tax 9
NET PROFIT 2,472,480 2,733,728 3,021,101 3,003,490 2,947,946 3,050,569 3,366,126 3,713,238 5,460,083 6,020,091
in % of sales revenue 10.55 18.06 18 6.83 7.03 8.32 8.55 8.77 8.99 8.99
Appendix 4: Net working Capital

Items Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10
Total Inventory 2,000,000 2,000,000 2,000,000 2,000,000 2,000,000 2,000,000 2,000,000 2,000,000 2,000,000 2,000,000
16,500,00 21,961,50 32,153,83
Accounts receivable 15,000,000 0 18,150,000 19,965,000 0 24,157,650 26,573,415 29,230,757 2 35,369,215
Cash in hand 2,472,480 2,733,728 3,021,101 3,003,490 2,947,946 3,050,569 3,366,126 3,713,238 5,460,083 6,020,091
21,233,72 26,909,44 39,613,91
CURRENT ASSETS 19,472,480 8 23,171,101 24,968,490 6 29,208,219 31,939,541 34,943,995 5 43,389,307
Accounts payable 2,050,620 2,255,682 2,481,250 2,729,375 3,002,313 3,302,544 3,632,798 3,996,078 4,395,686 4,835,255

CURRENT LIBAILITIES 9,143,800 9,143,800 9,143,800 9,143,800 9,143,800 9,143,800 9,143,800 9,143,800 9,143,800 9,143,800
12,089,92 17,765,64 30,470,11
TOTAL WORKING CAPITAL 10,328,680 8 14,027,301 15,824,690 6 20,064,419 22,795,741 25,800,195 5 34,245,507
 Appendix 5: Depreciation and Amortization

Depreciation Original value Depreciation

Year-5 &
S/No Description unit Year-1 Year-2 Year-3 Year-4
above
1 Building birr 2,300,000
Depreciation 5% birr 460,000 460,000 460,000 460,000 460,000
machinery/packing and
2 birr 2,000,000
processing
Depreciation 10% birr 400,000 400,000 400,000 400,000 400,000
3 Equipment birr 235,000
Depreciation 10% birr 47,000 47,000 47,000 47,000 47,000
4 vehicle birr 5,000,000
1,000,00
Depreciation 10% birr 1,000,000 1,000,000 1,000,000 1,000,000
0
Pre-production capital
200,000
expenditure
Depreciation 25% 40,000 40,000 40,000 40,000 40,000
1,947,00
Total 9,735,000 1,947,000 1,947,000 1,947,000 1,947,000
0
 Appendix 6: Cash flow Statement

Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10
A. CASH IN
FLOW
Equity 2,029,666.6
Contribution 7
3,044,500.0
Bank Loan
0
Net Sales 15,000,000.00 30,951,813.00 36,413,897.00 36,413,897.00 36,413,897.00 36,413,897.00 36,413,897.00 36,413,897.00 36,413,897.00 36,413,897.00
Net Working
Capital
Salvage Value
5,074,166.6
Total Cash Inflow 15,000,000.00 30,951,813.00 36,413,897.00 36,413,897.00 36,413,897.00 36,413,897.00 36,413,897.00 36,413,897.00 36,413,897.00 36,413,897.00
7

B. CASH out
FLOW
4,535,000.0
Fixed Capital
0
Working Capital 339,166.67
Operating Cost 5,150,260.00 5,665,286.00 6,231,814.60 6,854,996.06 7,540,495.67 8,294,545.23 9,123,999.76 10,036,399.73 11,040,039.70 12,144,043.68
Repayment 30,445.00 30,445.00 30,445.00 30,445.00 30,445.00 30,445.00 30,445.00 30,445.00 30,445.00 30,445.00
Interest 304,450.00 304,450.00 304,450.00 304,450.00 304,450.00 304,450.00 304,450.00 304,450.00 304,450.00 304,450.00
Profit Tax 0.00 0.00 0.00 333,721.09 736,986.39 1,016,856.29 1,122,041.92 1,237,746.11 1,365,020.72 1,505,022.80
Total Cash Out 4,874,166.6
5,485,155.00 0.00 28,281,771.00 30,696,861.00 30,634,143.00 30,539,400.00 30,433,288.00 30,314,442.00 30,181,334.00 29,951,980.00
Flow 7
Net Cash Inflow 0.00 9,514,845.00 8,132,126.00 5,717,036.00 5,779,754.00 5,874,497.00 5,980,609.00 6,099,455.00 6,232,563.00 6,461,917.00
Cumulative Cash
9,514,845.00 11,672,422.00 19,804,548.00 25,521,584.00 31,301,338.00 37,175,835.00 43,156,445.00 49,255,900.00 55,488,463.00 71,538,295.00
Flow