Abdulselam
Abdulselam
Abdulselam
October, 2007
1
Contents
Executive Summary...................................................................................................................................3
1. Introduction.......................................................................................................................................4
1.1. Background....................................................................................................................................4
1.2. Profile of the Promoter.................................................................................................................5
1.3. Purpose of the document..............................................................................................................5
1.4. Objectives of the Project...............................................................................................................5
1.5. Description of the Project.............................................................................................................6
1.6. Project Rationale...........................................................................................................................6
1.7. Physical Characteristic of Project Area.........................................................................................9
1.7.1. Location:'................................................................................................................................9
1.7.2. The Economic Base of Burayu................................................................................................9
1.7.4. premisesrequired..............................................................................................................10
1.8. Benefit of the Project:.................................................................................................................11
1.8.1. Source of Employment.........................................................................................................11
1.8.2. Source of Government Revenue..........................................................................................11
1.8.3. Sources of Social Service......................................................................................................11
2. THE MARKET DEMAND POTENTIAL.....................................................................................................12
2.1.1. Demand factors for the construction materials....................................................................12
2.2. Customer Definition.....................................................................................................................15
2.3. Product Type................................................................................................................................16
2.3.1 Type of product per year......................................................................................................16
2.4. Competition.................................................................................................................................17
3. THE PRODUCTION PROCESS AND ENGINEERING................................................................................17
3.1. Manufacturing Process.................................................................................................................17
3.1.1. Batching................................................................................................................................18
3.1.2. Mixing and grinding...............................................................................................................18
3.1.3. Spray drying...........................................................................................................................18
3.1.3. Forming.................................................................................................................................19
3.1.4. Drying....................................................................................................................................20
3.1.5. Glazing...................................................................................................................................20
3.1.6. Firing.....................................................................................................................................21
2
3.2. Quality Control.............................................................................................................................21
3.3. The Production Plan.....................................................................................................................22
3.4. Sales Plan (Sales in Birr)................................................................................................................23
4. ORGANIZATIONAL STRUCTURE...........................................................................................................24
4.1. The General Manager’s Duties and responsibilities.....................................................................25
4.2. General Administration and Finance Department.......................................................................25
4.3. The Marketing Department..........................................................................................................25
4.4. The production Department........................................................................................................26
5. FINANCIAL REQUIREMENT..................................................................................................................26
5.1. Fixed Investment..............................................................................................................................27
5.1.1. Building & Construction........................................................................................................27
5.1.2. Factory Machineries.................................................................................................................27
5.1.3. Office Equipments.....................................................................................................................28
5.2. Expenses.....................................................................................................................................29
5.2.1. Raw Material Purchase Projected......................................................................................29
5.2.2. Salary Expense.....................................................................................................................29
5.2.3. Other Operating Expenses.....................................................................................................30
5.4. Pre-service Expense.....................................................................................................................31
5.5. Summary of financial requirement and source of fund................................................................31
5.6. Financial statement..................................................................................................................34
6. Environmental impact of the project..............................................................................................38
3
Executive Summary
4
1. Introduction
1.1. Background
.
Ethiopia is one of the East African countries with the diversified climatic
conditions, natural scenery and resource bases. Currently the country has
a total population of about 80 million of which more than 3trmillion is
found in Oromia regional state. Oromia is one of the regional states of
Ethiopia with very fertile land, very conducive weather condition both for
crop production and animal husbandry.
The government of the country has been excreting its maximum effort to
expand investment opportunities in the country by designing different
policies and strategies that will facilitate investment through attracting
both domestic and foreign investors. Likewise, the Roomier regional state
government has been working day and night to make poverty history by
making its door open to investors both (domestic and foreign) to come and
invest in the region. Therefore, it is this ample opportunity and cumulative
experience which makes the owner of the project, the promoter envisaged
this integrated construction material manufacturing industries in Bureau
town.
C
onstruction materials so as to bridge the gap of market demand of such
products in the contra. The present which is highly inviting the private
sector to work on import substitution is highly motivating the private sector
to respond to the government invitation, there by contributing their share
to the development process. The project is identified because the highly
growing sectors of the economy are highly in need of this type of
products.
5
1.2. Profile of the Promoter
6
income tax.
To serve as a role model for other investors who wants to invest in
similar business undertakings
To contribute somewhat to the governments Objectives of reducing
the problem of un-employment through crating employment
opportunities to the citizens both on permanent and temporary
basis.
To bridge the demand gap of construction material production in the
country
To contribute in the import substation policy of the government by
locally producing the different construction materials products that
were imported earlier.
7
that all of its activities will be economically fair, socially acceptable and
environmentally sound.
8
. Manufacturing Industry.
Despite the promising business opportunities of the area the trend on such
kinds of investment found to be minimal and none-existing. The mismatch
between the demand for supply and supply of such kind of products is
easily observed in the country.
Nowadays there is high usage of construction materials in the country has
been intensified. In the proposed area Burayu has no single plants that
produce modem Integrated Construction Materials Manufacturing
industries and it is necessary to establish a factory that serves the
potential and existing demand.
Therefore the existing shortage or absence in the supply of these
products, along with its commercial and administrative access, better
location and infrastructure access, escalating
9
Demanded significantly. Thus it is with such proposes and assumed to be more
profitable. Trend of urbanization and business has given the opportunity for the
project to be reason that this project is identified and proposes and assumed to
be more profitable.
10
W
1.7.4. premisesrequired
Description Land
Ns
Requirement(m2)
1 Production hall
1.1 Workshop 300
1.2 Inspection room 100
0
Total production area 4000
0
2 Warehouse
2.2 Raw materials and inputs 100
2.3 Finished products 120
0
Total warehouse area 2200
0
3 Office and worker homes building
3.1 Office Il>
400
.
3.2 Showroom '~Il, 150
~
,0
3.2 Worker 600
Total office and worker homes bulg.
homes 2000
Area
4 Waste accumulation area ' 300
'
5 Green area, garage, parking and ~
~
Expansion' 150 ~
Total 10,000
'~
, 0
11
1.8. Benefit of the Project:
The envisaged project deemed to contribute to the economic development of
the country in the following ways:
12
2. THE MARKET DEMAND POTENTIAL
2.1. MARKET POTENTIAL & DEMAND GAP
Currently our country Ethiopia is among different other countries that has been
registering an impetrative growth in Africa. Hence, different construction
industries, individuals have in need of large quantities of construction products.
Therefore, the existing supply in the market is currently
unable to satisfy the demand. Thus, this will exert it maximum effort to contribute
some to the demand gap currently observed. Although there is clear data on the
production of construction materials, the majority of tiles are imported from
abroad, the envisaged project will domestically produce these tiles.
As sectors Of the economy, the agriculture and construction sector also grows with
double digit with the average annual growth 10.31% and 12% respectively in the
past 8 years. As shown in the table below the growth of sectors directly
related with the economy as parts of the economy.
13
Table major Economic Indicators
This fast growth of these sectors resulted from different bodies like government,
non government and private activities in Ethiopia is growing in the fastest rate.
Moreover, the current five years Ethiopian Growth and transformation plan will
expand the current agriculture, infrastructure, residential (Condominium) and
buildings in paramount level.
In Economics, there exists direct relationship between sectoral development and
complementary equipments and materials. As economic science proved the
demand for complementary goods (goods that will consume together like fuel
and car) have positive relationship. This means when the demand for one good
increase the corresponding complementary good demand also increase
14
automatically with different rate depending on the nature of goods.
The fastest growth of constriction sector created the fast and bulk demand for
construction (building) materials. Since magnesium oxide board, ceramic tiles,
marble tiles, hydra foam and curbstone are among the main complementary
materials for this sector particularly, the corresponding demands for these
products are also increase. Therefore, roof nails and corrugated iron sheet have
the highest demand.
The national growth rate coupled with ruiral to urban migration has increased
the housing problem with the construction material in most of the town in
Ethiopia and especially in most of the town in Ethiopia and especially in satellite
towns. Studies conducted pertaining to urban housing problem have emphasized
on
-
the gap between the overcrowding of major towns like the above mentioned and
the fact that the majority of urban population that live in slums manifests the
housing problem with quality of construction materials. However it is important
to note the demand of construction material for a commercial & residential
building.
The rate of growth of the urban population is increasing from year to year. The
latest report of the United Fund for Population Agency revealed that Ethiopia's
population has reached 73 million in July 2005, which puts Ethiopia as the
second most populous country in Africa. According to the Central Statistics
Authority (CSA), current population growth is estimated
to be 2.8% per annum, and the growth rate is expected to remain above 2% for
the next 20 years. Rural population is growing at about 3.0% while the urban
population is growing at about 4.3%. Total population is projected to reach 129
million by 2030. In Ethiopia, of the total population, about 16.0% is estimated to
reside in the urban areas. The trend suggests that the size of urban population is
likely to continue to grow at a high speed in the future.
The share of urban population will rise from 16.0% in 2005 to about 23% by
15
2030. Nearly 30 million of the total 129 million will live in cities and towns by
2030.As a result from big population growth and urbanization demand for
construction materials will be increase.
Considering all the above factors and the growth trend in supply observed from
the historical data (both local and export), future demand for the product is
conservatively projected to grow at a rate of 10%, annually.
Table
PROJECTED DEMAND AND UNSATISFIED DEMAND (M2)
Total
Projected Domestic Unsatisfie
d
Year Demand Supply Demand
2008 232,377 208,695 23,682
2009 255,615 208,695 46,920
2010 281,176 208,695 72,481
2011 309,294 208,695 100,599
2012 340,223 208,695 131,528
2013 374,245 208,695 165,550
16
2014 411,670 208,695 202,975
2015 452,837 208,695 244,142
2016 498,121 208,695 289,426
2017 547,933 208,695 339,238
2018 602,726 208,695 394,031
2019 662,999 208,695 454,304
2020 729,299 208,695 520,604
The project will be to produce magnesium oxide board, ceramic tiles, granite
tiles, marble tiles, hydra form and other different construction materials, hence
the project has objectives of earning income for the promoter, minimizing the
acute shortage and quality of service of construction materials in the mean time
creating additional source of revenue and job opportunity for the area.
The project will produce multiple benefits to the promoter, employees and user
community at large. The promoter will stand to gain the financial income while
the project generates potential employees.
The project will also add up a big value towards the supply of quality
construction materials for the area. The whole functions of the project are
managed by the promoter himself. Selling of the construction material and
collection of fees and other duties related to running the production center will
be handled by the employees of the project.
There are different competitors in the market computing with this envisaged
project tin the market.
1. Those importing from abroad
2. Those producing in the domestic market
3. The potential competitors who deemed do engage in similar production line.
Therefore, there are different forms of competition that may face this project.
These are price and non price based competition. Moreover, the different
competitors may compete with the project under discussion either directly or
indirectly. But the project under discussion has diversified marketing strategies
that could enable it come up with the different competitors in the market. In
addition, it will frequently conduct competitors research which focuses on, the
strength and the weaknesses, the different competitor's strategies, the tenures
they use in rendering the service, their customer handling methods, and others,
then it will devise different strategies like;
1. Diversification of product and product lines
2. Diversified promotional tools
3. Lowering pikes by increasing production which will result in the decrease in
the per unit cost of production.
4. Diversified customer centric marketing strategies,
18
3.1.1. Batching
Once the ingredients are weighed, they are added together into a shell
mixer, ribbon mixer, or intensive mixer. A shell mixer consists of two
cylinders joined into a V, which rotates to tumble and mix the material. A
ribbon mixer uses helical vanes, and an intensive mixer uses rapidly
revolving plows. This step further grinds the ingredients, resulting in a
finer particle size that improves the subsequent forming process.
1.
3.1.3. Spray drying
If wet milling is first used, the excess water is usually removed via spray
drying. This involves pumping the slurry to an atomizer consisting of a
rapidly rotating disk or nozzle. Droplets of the slip are dried as they are
19
heated by a rising hot air column, forming small, free flowing granules that
result in a powder suitable for forming.
Tile bodies can also be prepared by dry grinding followed by granulation.
Granulation uses a machine in which the mixture of previously dry-ground
material is mixed with water in order to form the particles into granules, which
again form a powder ready for forming.
3.1.3. Forming
Most tiles are formed by dry pressing. In this method, the free flowing
powder- containing organic binder or a low percentage of moisture-flows from
a hopper into the forming die. The material is compressed in a steel cavity by
steel plungers and is then ejected by the bottom plunger. Automated presses
are used with operating pressures as high as 2,500 tons.
Several other methods are also used where the tile body is in a wetter, more
moldable form. Extrusion plus punching is used to produce irregularly shaped
tile and thinner tile faster and more economically. This involves compacting a
plastic mass in a high-pressure cylinder and forcing the material to flow out of
the cylinder into short slugs. These slugs are then punched into one or more
tiles using hydraulic or pneumatic punching presses.
Ram pressing is often used for heavily profiled tiles. With this method,
extruded slugs of the tile body are pressed between two halves of a hard or
porous mold mounted in a hydraulic press. The formed part is removed by first
applying vacuum to the top half of the mold to free the part from the bottom
half, followed by forcing air through the top half to free the top part, Excess
material must be removed from the part and additional finishing may be needed.
Another process, called pressure glazing has recently been developed. This
process combines glazing and shaping simultaneously by pressing the glaze ( in
spray- dried powder form) directly in the die filled with the tile body powder.
Advantages include the elimination.
20
of glazing lines, as well as the glazing waste material (called sludge) that is
produced with the conventional method.
3.1.4. Drying
Ceramic tile usually must be dried (at high relative humidity) after forming,
especially if a wet method is used. Drying, which can take several days,
removes the water at a slow enough rate to prevent shrinkage cracks.
Continuous or tunnel driers are used that are
heated using gas or oil, infrared lamps, or microwave energy. Infrared
drying is better suited for thin tile, whereas microwave drying works better
for thicker tile. Another method, impulse drying, uses pulses of hot air
flowing in the transverse direction instead of continuously in the material
flow direction.
3.1.5. Glazing
To prepare the glaze, similar methods are used as for the tile body. After a
batch formulation is calculated, the raw materials are weighed, mixed and
dry or wet milled. The milled glazes are then applied using one of the many
methods available. In centrifugal glazing or discing, the glaze is fed through a
rotating disc that flings or throws the glaze onto the tile. In the bell/waterfall
method, a stream of glaze falls onto the tile as
it passes on a conveyor underneath. Sometimes, the glaze is simply sprayed
on. For multiple glaze applications, screen printing on, under, or between tile
that have been wet glazed is used. In this process, glaze is forced through a
screen by a rubber squeegee or other device.
Dry glazing is also being used. This involves the application of powders, crushed
frits (glass materials), and granulated glazes onto a wet-glazed tile surface. After
firing, the glaze articles melt into each other to produce a surface like granite.
3.1.6. Firing
After glazing the tile must be heated intensely to strengthen it and give it the
desired porosity. Two types of ovens, of kilns, are use for firing tile, wall tile,
or tile that is prepared by dry grinding instead of wet milling usually requires
a two- step process. In this process, the goes through a low- temperature
21
firing called bisque firing before glazing . This step removes the volatiles from
the material and most or all of the shrinkage. The body and glaze are then
fired together in a process called gloss firing.
Both firing processes take place in a tunnel or continuous kiln, which consists
of a chamber through which the ware is slowly moved on a conveyor on
refractory batts- shelves built of materials that are resistant to high
temperatures-or in containers called saggers. Firing in a tunnel kiln can take
two to three days, with firing temperatures around 2,372 degrees Fahrenheit
(1,300 degrees Celsius).
For tile that only requires a single firing-usually tile that is prepared by wet
milling-roller kilns are generally used. These kilns move the wares on a roller
conveyor and do not require kiln furniture such as butts or staggers. Firing times
in roller kilns can be as low as 60 minutes, with firing temperatures around
2,102 degrees Fahrenheit (1,150 degrees Celsius) or
more.
• After firing and testing, the tile is ready to be packaged and shipped.
Most tile manufacturers now use statistical process control (SPC) for each step
of the manufacturing process. Many also work closely with their raw material
suppliers to ensure that specifications are met before the material is used.
Statistical process control consists of charts that are used to monitor various
processing parameters, such as particle size, milling
time, drying temperature and time, compaction pressure, dimensions after
pressing, density, firing temperature and time, and the like. These charts
identify problems with equipment, out of spec conditions, and help to improve
yields before the final product is finished.
The Final product must meet certain specifications regarding physical and
chemical properties, These properties are determined by standard tests
22
established by the American society of Testing and Materials (ASTM).
Properties measured include mechanical strength, abrasion resistance, chemical
resistance, water absorption dimensional stability, frost resistance, and linear
coefficient of thermal expansion. Mere recently, the sip resistance, which can be
determined by measuring the confident other factors has become a concern.
However, no standard has yet been established because other factors ( such as
proper floor design and care) can make results meaningless.
The company will operate for 16 working hour per day for 26 days per month
and by further assuming also that the machine sets are using 20% capacity in
the first year, 40% in 2nd year, 60% in 3rd year, 80 in the 4th year and 100% or
full capacity over the rest year. Moreover,
the project year is assumed to be 10 years. After 10 years the owner of the
project will diversify its project to different another businesses as different
competitors are coming to the market and saturating the marker. Therefore, by
taking in to account the above information, the company will produce and sale
the different product types which are aggregated together
on the average basis as follows.
Production plan for the project life (lOyears)
The envisaged company will produces Mg Oxide, Granite tiles, Hydra foam,
marble tiles and other floors tiles.
23
5 562,000
6-10 562,000
The sales revenue for this company will be generated from the production of the
products like Mg Oxide Board, Granite tiles, Hydra foam, marble, tiles and others
different type of tiles and the sales price is taken of average all products in M 2
43113600
2 239,520 180 431136
10678000
4 190 8325040
438,160 0
106780000
5 562,000 190 106780000
24
4. ORGANIZATIONAL STRUCTURE
The organizational structure of the project is designed by including all the
necessary personnel under the right division. At the top of the organizational
structure, there will be a general manager with the responsibility of
supervising the overall activity of the plant. Depending up on the nature of
the center and the amount of work to be performed; there will
be auxiliary units under the general manager. Employees under each unit
will be supervised by the unit head that is accountable for the general
manager.
CEO
Production General
Marketing
Department Administration
Department
Department
25
Hench are following section deals with the duties and responsibilities of
each division,
He will plan, organize, direct and control the human and non-human
resources of the hotel so as to achieve the short and long run objectives
ofthe organization.
4.3.
The Marketing Department
~ Will handle the overall marketing activities of the organization which
center's development.
26
Conduct both foreign and domestic market research for expanding the
5. FINANCIAL REQUIREMENT
The financial resource is a prime resource for undertaking any activities.
Hence for implementing this project a total of 60,337,260 Eth birr is
required. From this 70% or 42,236,082 birr will be coveted by bank loan and 30%
or 18,101,178 birr will be contributed by the promoter of the project.
Therefore the said amount of finance is needed for undertaking the
following:
27
5.1. Fixed Investment
5.1.1. Building & Construction
installation 50,000
14 Land lease Initial Fee 165000
Total 17860000
28
Vehicles
No. Commodity Description Qty Unit Cost Total Cost
1 Truck, 18-20m3 1 2,000,000 1,000,000
2 Truck with Crane Fixed, 10Ton 1 800,000 800,000
3 Pick up car 1 600,000 600,000
4 Workers 'Service Car, Minibus 1 1,000,000 1,000,000
Total 2,400,000
FOB 400,000
SHIPING 150,000
INSURANCE 220,000
TRANSPORT FROM PORT TO SITE 140,000
Grand Total 6,710,000
Total 175,000
29
5.2. Expenses
5.2.1. Raw Material Purchase Projected
The envisaged project will use different raw materials for production of
Mg Oxide board. granite tile, marble tiles ceramic tiles and slabs. The
raw materials used to form tile consist of clay minerals mined forty the
earth's crust, natural minerals such as feldspar that are used to
lower the firing temperature, and chemical additives required for the
shaping process. The raw material cost is the general estimation of all
ingredients for all products on annual basis. The salary of 460 workers is
included in this because they are directly working here on
loading and unloading.
30
13 Drivers 4 8th grade 2000 96,000
14 Semi skilled labors 105 8th grade 1000 720,000
Total 180 1,510,800
15 Temporal employer 460
Empolyee Benefit (20%) 302,160
Total 1812960
The salary Expense is only for permanent employees of the company and
does not include the daily laborers wages which already included within the
production cost as the direct labor
Cost. Total permanent workers are 180 and temporary 460 workers
totally 640 workers. From
180 , 75 are skilled, 105 are unskilled, and from 460, 60 are skilled
and 400 are unskilled.
No List of Items Qty Unit of Unit cost Total cost Per annum
Measure
1 Computer paper 10 Pack 45 1450
2 Staples 10 " 7 270
3 Pens, pencils, and others 20 Pack 75 1,500
4 Detergents 1000 Pcs 30 30,000
5 Uniforms 20 Pes 200 44,000
6 Water - - - 8,000
7 Electricity - - - 178000
8 Transportation cost
- - - 100,000
9 Telephone - - - 12,000
10 Fuel
- - - 340,000
11 Miscellaneous Costs - - - 50000
Total 765220
31
5.4. Pre-service Expense
Unit Cost in Total Cost
No. Cost Items Unit Qty Br. in Br.
1 Business Plan Set 1 4865 4865
14577.
2 Feasibility Study Set 1 14577.5
5
3 Environmental Impact Assessment Set 1 14577. 14577.5
5
4 Market Study and processing with suppliers Set 2 48,615 97230
5 Import processing 2 24,308 48615
6 License and other processing 2 24,308 48615
7 Billboards 2 1452.5 14525
32
The contingent costs will used for covering all other costs which are not
stated in the financial summary in addition to price fluctuation. For example,
the salaries of the contractual workers, promotional costs and any other
costs which are not visible in the project.
Sources of Fund: source of fund to finance the project is planned to be
from two sources. These are promoter's equity and bank loan. The loan is
expected to be obtained from one of the local lending institutions. Since the
project is expected to take some times take .to times to be repay all its
debts, the bank loan is assumed to obtain on long term credit basis. Taking
the financial position of the promoter into account, equity contribution and
bank loan to finance the total investment outlays of the project are assumed
to be 30% and 70% respectively. Accordingly the total financial requirement
from the sources will be
No Description 0/0 Amount
share
1 Owners Share 30% 18851178
2 Bank Loan 70% 43986082
Total 100% 62,837,260
33
34
5.6. Financial statement
Revenue 1 2 3 4 5 6-10
Sales 21556800 43113600 63475200 83250400 106780000 106780000
Purchase of Raw 12160000 24320000 36480000 48640000 60,800,000 60,800,000
Material
Gross profit 9396800 18793600 26995200 34610400 45980000 45980000
Expenses
Salary Expense 1812960 1812960 1994256 1994256 1994256 1994256
Operating Expenses 765,220 765,220 841742 841742 841742 841742
Pre-operating 291,602 0 0 0 0 0
Expense
Deprecation Building 893000 893000 893000 893000 893000 893000
Deprecation Vehic1es 1942000 1942000 1942000 1942000 1942000 1942000
Deprecation office 35,000 35,000 35,000 35,000 35,000 35,000
Equip
Deprecation Machine 1435000 1435000 1435000 1435000 1435000 1435000
35
Year Year 0 1 2 3 4 5 6-10
Equity Capital ca 18851178
Loan principal pit 43986082
Net sale 0 21556800 43113600 63475200 83250400 10678000 106780000
Total cash in flow 62,837,260 21556800 43113600 63475200 83250400 106780000 106780000
Cash payment 0
PPurchase 0 12160000 24320000 36480000 48640000 60,800,00 60,800,000
S
uSalary expense 0 1812960 1812960 1994256 1994256 19942560 1994256
IInvestment 42,095,000 0 0 0 0 0 0
a
O
nOperating cost 0 765,220 765,220 841742 841742 841742 841742
Loan repayment 08797216.4 8357355.5 7917494. 7477633.94 7037773.1 5718190.66
p
Tax payment X 0 - 2336001.98 4851094.
76 7267612.8 9490868.72 9886743.3
23535396. 37591537. 520845875 66221244.7 80,164,64
Total payment ~ 79,240,932
42095000 4 48 .26 4 0
Cash surplus/Deficit 20742260 -1978596.4 5522062.5 11390612 17029155.2 26615360 27539068
Cumulative balance 1891082 -87514.4 2 16825160 6 60469676 88008744
Year Year 0 1 2 3 .86 4 5 6-10
Equity Capital ca 18851178
Loan principal pit 43986082
Net sale 0 21556800 43113600 63475200 83250400 10678000 106780000
Total cash in flow 62,837,260 21556800 43113600 63475200 83250400 106780000 106780000
Cash payment 0
PPurchase 0 12160000 24320000 36480000 48640000 60,800,00 60,800,000
S
uSalary expense 0 1812960 1812960 1994256 1994256 19942560 1994256
IInvestment 42,095,000 0 0 0 0 0 0
a
O
nOperating cost 0 765,220 765,220 841742 841742 841742 841742
Loan repayment 08797216.4 8357355.5 7917494. 7477633.94 7037773.1 5718190.66
p
Tax payment X 0 - 2336001.98 4851094.
76 7267612.8 9490868.72 9886743.3
23535396. 37591537. 520845875 66221244.7 80,164,64
Total payment ~ 79,240,932
36 42095000 4 48 .26 4 0
Cash surplus/Deficit 20742260 -1978596.4 5522062.5 11390612 17029155.2 26615360 27539068
Cumulative balance 1891082 -87514.4 2 16825160 6 60469676 88008744
37
As clearly indicated in the project income statement part the project will
return its initial cost soon
Assumptions
Salary expense increased by 10% after 3rd onwards, operating expenses
increased by 10% from 3rd onwards. """,,--
Depreciation expense is assumed on straight line method
For office equipment life time assumed to be 5 years and
rate of dep.20%
For Building with the life time of25 years with dep. rate 5%
For Vehicles life 5 years dep. Rate of20%
From the income statement, the promoter of the project has sufficient
amount of money that enables him pays the bank loan with in short period of
time and invests in other business of his interest.
In general, the financial statement of the project shows that the project
under discussion will cover its entire investment costs with in short period of
time.
Profitability
According to the projected income statement, the recreation resort will start
generating profit in the 2nd year of operation. Important ratios such as profit
to total sales, net profit to equity (Return on equity) and net profit plus
interest on total investment (return on total investment) show an increasing
trend during the lifetime of the project.
The income statement and the other indicators of profitability show that the
project is viable.
Pay-BackPeriod
The investment cost and income statement projection are used to project the
pay –back period. The projects. initial investment will be fully recovered
within This shows that this project is a long term business.
Future development& exit strategies
Every business undertakings be it large or small should have to have future
development Plan. It is a plain fact that business activities are undertook in a
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dynamic and turbulent environment. Hence, to overcome or minimize the
risks of uncertain future businesses should devise effective strategies that
enable them to be successful in their operation. Likewise, the envisaged
project has devised strategies to overcome the future risk of operation. The
first strategy is diversification of its activities to different other business
forms. The second future development plan of the project is expanding its
branches in many other parts of the region. The third strategy of the center
is making a joint venture with other similar business undertakings either in
the domestic country or from abroad. The final strategy of the center is
selling to other organization or individuals.
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