ANRS Investment and Industry Bureau

Revised Project Profile on the

Establishment of Potato Chips &
Wafers Making Plants

Revised 2023
Bahir dar
 Table of Contents

1. Executive Summary..................................................................................1
2. Product Description and Application........................................................1
3. Market Study, Plant Capacity and Production Program...........................2
3.1 Market Study.......................................................................................................2
3.1.1 Present Demand and Supply........................................................................2
3.1.2 Projected Demand........................................................................................2
3.1.3 Pricing and Distribution...............................................................................2
3.2 Plant Capacity......................................................................................................3
3.3 Production Program.............................................................................................3
4. Raw Materials and Utilities......................................................................3
4.1 Availability and Source of Raw Materials...........................................................3
4.2 Annual Requirement and Cost of Raw Materials and Utilities...........................3
5. Location and Site......................................................................................3
6. Technology and Engineering....................................................................4
6.1 Production Process...............................................................................................4
6.2 Machinery and Equipment...................................................................................6
6.3 Civil Engineering Cost........................................................................................6
7. Human Resource and Training Requirement............................................7
7.1 Human Resource..................................................................................................7
7.2 Training Requirement..........................................................................................7
8. Financial Analysis.....................................................................................7
8.1 Underlying Assumption.......................................................................................7
8.2 Investment............................................................................................................9
8.3 Production Costs..................................................................................................9
8.4 Financial Evaluation..........................................................................................10
9. Economic and Social Benefit and Justification......................................11
ANNEXES....................................................................................................13
 1. Executive Summary
This profile envisages the establishment of a plant for the production of 240 tons of potato chips
and wafers at full capacity.

The present countrywide demand is estimated at 1000 tons per annum. The regional demand is
estimated at 250 tons. The annual future countrywide demand is expected to grow from 1,040
tons in the year 2009 to 1,480 tons in the year 2018. During the same period, the annual regional
demand will grow from 260 to 370 tons.

The Total Initial Investment including working capital is estimated at Birr 19.7 million of which
Birr 7.46 million is for plant machinery and equipments.

The plant will create employment opportunities for 61 persons.

The project is financially viable with an internal rate of return (IRR) of 27.3% and a net present
value (NPV) of Birr 15 million at 18 % annual discount rate.

2. Product Description and Application

Potatoes can be converted into chips, wafers, flour starch, alcohol and canned potatoes. Potato
chips are made plain or flavored and they may be sliced, plain or regular as well as wavy or
wafer cut. Potato wafers are chips which are deep fried in vegetable oils. Both potato chips and
wafers are becoming more and more popular in the big urban areas of the country.

Potatoes are one of those perishable agricultural products which are by nature difficult to store
and keep them for months even weeks. After harvest, potatoes either have to be consumed by
the producer or sold for immediate consumption by the buyer. Due to their perishability potatoes
have to be sold immediately after harvesting which results in excess supply over demand
depressing the price of potatoes. This discourages farmers from growing potato which has
relatively higher yield per hectare. One option to solve this problem is to convert fresh potato is
into dry or fried (chips and wafers) potato so that it can be sold during any time of the year with
better prices. This is why this project should be promoted.

1
 3. Market Study, Plant Capacity and Production Program
3.1 Market Study

3.1.1 Present Demand and Supply

Potato chips and wafers are relatively new types of food in Ethiopia whose consumption is
increasing in the big urban centers. With appropriate marketing promotion, the demand of these
food products is likely to increase in the future. The available import and domestic production
data shows that the current countrywide demand for potato chips and wafers is estimated at 1000
tons per annum. The regional demand is estimated at 250 tons. About 80% of the current demand
is satisfied by import.

3.1.2 Projected Demand

The common consumers of products are the urban youth whose number is increasing at about
4% per year. Thus, the demand is projected to increase at the same rate. The projected demand is
shown in Table 1.
Table 1: Projected Demand
Demand (ton)
Year Countrywide ANRS
2019 1833.424 458.356
2020 2271.246 567.8114
2021 2813.619 703.4048
2022 3485.511 871.3778
2023 4317.851 1079.463
2024 5348.954 1337.239
2025 6626.285 1656.571
2026 8208.641 2052.16
2027 10168.87 2542.216
2028 12597.19 3149.298

3.1.3 Pricing and Distribution

The average current price for a ton of potato chips and wafer is about Birr 137,310. Allowing
sufficient profit margin for distributors, the average price of the produce of the envisaged plant is
set at Birr 113,430 per ton.
[
The existing network of supermarkets is appropriate channels of distribution.

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 3.2 Plant Capacity

The minimum economic capacity of a unit manufacturing potato chips is 240 tons per annum
based on a two shift operation of 275 working days in a year.

3.3 Production Program

Since the products are relatively new which requires vigorous marketing, it is suggested to start
at half of the plant’s capacity and then increase the capacity by 10% each year. It will attain full
capacity at the sixth year of operation.

The plant can increase its capacity at any time if demand warrants.

4. Raw Materials and Utilities

4.1 Availability and Source of Raw Materials

All raw materials, except salt and packaging, are agricultural product; all are available in the
domestic market.

4.2 Annual Requirement and Cost of Raw Materials and Utilities

Table 2: Raw Material Requirements at Full Capacity

Cost (Birr)
No. Material Unit Qty Local Foreign Total
1 Fresh Potatoes (ton) ton 1092
13,038,480.00 - 13,038,480.00
2 Edible Oil ” 85
7,611.75 - 7,611.75
3
Food Additives, spices & flavours 119,400.00 - 119,400.00
4 Packing Material
179,100.00 - 179,100.00
Total 13,344591.75 13,344591.75

5. Location and Site

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Urban centers located in or near potato growing Dega and upper Woina Dega areas of the Region
as preferred locations for this plant. Therefore, either of Debre Tabor, Debre Berhan, Debre
Markos, Koso Ber can be options.

6. Technology and Engineering

6.1 Production Process

The process of fresh potatoes to manufacture potato chips and wafers involves the following
operations in sequence.

1. Selection of Raw Material

The selected potatoes must be large and soft free from diseases of potato eyes.
2. Washing
The potatoes should be thoroughly washed to remove adhering dirt prior to processing.
Washing must be accompanied by passing the potatoes first under water sprays and
through a tank of brine in which they float while any stones, which may have been mixed
with them during digging sink to the bottom.
3. Peeling and Trimming
There are several systems in use for peeling and trimming potatoes. Some of these are
described below:

3.1. Abrasive Peeling: In his method th potatoes are rotated against rough surfaces such as
carborandum, which rub of the soft peel. Losses in this system range between 15-
30%.
3.2. Lye Peeing: The lye peeing operation involves a preliminary dusting and water wash,
followed by rigorous water rinse and tumbling and tumbling in washer to remove all
skins and chemicals and an acid to neutralizing bath, after which hand trimming and
cutting is done to give perfectly finished potatoes.
3.3. Flame Retardent Heat Peeling: Peeling by this process is a recent development. In
this process the potatoes are brought either in direct contact with live flame or
subjected to high radiant heat temperature.

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3.4. Steam Peeling: In this process the potatoes are exposed to steam at 90 psig pressure
for about 20 seconds. After exposure the potatoes are passed under high pressure jets
of water in a rotary washer which removes the loosened peel.

5
4. Slicing and Cutting
In this operation, the potatoes are fed to the hopper of a universal slicing and shredding
machine in which the thickness of the product can be adjusted by fixing suitable slicing
disc in the machine. This is to ensure that ships are uniform in thickness; otherwise,
variation in thickness may lead to differences in moisture content of the finished product
thereby affecting the quality of the product.
5. Washing, Sorting, Dewatering
The sliced material is washed with a water spray to remove the starch and is made to flow
on a moving belt conveyer from which sorting of any foreign material or damaged
product can be done manually. Removal of surface moisture (or dewatering of sliced
materials from the washed vegetables) is done on centrifuges. This process helps in
reducing the frying time as well as saving frying oil.
6. Frying and Cooling
The potato slices are fried by in being carried on a moving conveyer through a trough of
oil which is maintained at a predetermined temperature of 150-180 oC, depending upon
the residence time of frying. The heat generator particle extractor, oil filter and oil
extractor are incorporated in the frying post to avoid wastage of frying oil. The process
ends with cooling and salting, which is carried out manually while feeding the fried chips
to hopper through a moving belt conveyer.
7. Packaging
In case of higher chips production capacities the packaging of the finished product is
performed automatically in an automatic packaging machine.

Using full automation is an expensive alternative to Ethiopia.

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 6.2 Machinery and Equipment
Table 3: Required Machineries & Equipments
Ite Description Qt
m y
1 Inclined elevator with rubber belt conveyer, 1
buffer hopper belt, variable speed dive and accessories
2 Destoner elevator 1
3 Continuous abrasive peeler with accessories (SS*) 1
4 Trimming belt with accessories) 1
5 Vertical elevator with accessories (SS) 1
6 Slice with accessories (SS) 1
7 Slice washer with accessories (SS) 1
8 Blancher (multi turbo blancher) (SS) 1
9 Shaler with accessories (SS) 1
10 Multi flow frying System comprising of continuous 1
fryer, heat exchanger, circulating pump unit,
cleaning in place system, rotating continuous filter,
continuous level control, transport pump unit day tank
11 Salt dozer with accessories (SS) 1
12 Salting belt with accessories (SS) 1
13 inspection belt with accessories (SS) 1
14 Spice feeder with accessories (SS) 1
15 Spice drum with accessories (SS) 1
16 Piping (steam and thermic), electrical, platforms and railing, control panels, packing 1
elevator,
Packaging conveyor and packaging machine
*. SS – Small Scale

The total cost of the above listed machineries and equipments is estimated at Birr 7,462,500.00
Supplier Address
Company Name: Foshan KEDI Engineering Control Equipment Co., Ltd
Country: China

Address: Overpass Westward Crossing Bridge 280 Meters, Lunjiao Shunde Town, Foshan City,
Guangdong Province, China
Website: http://www.gdkedi.com
Tel: (86) 757-27731323
Fax: (86) 757-27731133

6.3 Civil Engineering Cost

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The plant requires 1000m2 land of which 500m2 is for building. The total land lease cost is
estimated at Birr 3,582,000.00 and that of building and civil works Birr 5,970,000.

7. Human Resource and Training Requirement

7.1 Human Resource

The human resource requirement is shown in Table 3.

Table 4: Human Resource Requirements

Salary/Wage (Birr)

Job Title No. Monthly Annual

1 General Manager 1 17,910.00 214,920.00

2 Personnel Head 1 8,955.00 107,460.00

3 Secretary 1 4,776.00 57,312.00

4 Accountant 1 5,970.00 71,640.00

5 Casher 1 4,776.00 57,312.00

6 Sales Person 1 7,164.00 85,968.00

7 Foremen 2 7,164.00 171,936.00

8 Operators 20 4,776.00 1,146,240.00

9 Labourers 20 2,985.00 716,400.00

10 Clerks 2 3,582.00 85,968.00

11 Driver 1 2,985.00 35,820.00

12 Security 4 2,089.50 100,296.00

13 Genitor 6 2,089.50 150,444.00

Total 61 - 3,001,716.00

Employment Benefits 20% of Annual Salary - 600,343.20

- 3,602,059.20

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 7.2 Training Requirement

Birr 358,200.00 is included in working capital for training the workers before and after
commencement.

8. Financial Analysis
8.1 Underlying Assumption

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

A. Construction and Finance

Box 1: Construction and Finance

Construction period 2 year

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

B. Depreciation

Box 2: Depreciation

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

C. Working Capital (Minimum Days of Coverage

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 Box 3: Working Capital (in days)

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

8.2 Investment
The Total Initial Investment including working capital is estimated at Birr 19.7 million of which
Birr 7.46 million is for plant machinery and equipments. The detail is shown in Table 4.
Table 5: Total Initial Investment & Working Capital

Total Initial Investment

Item Cost
Land 17,910.00
Building and civil works 5,970,000.00
Office equipment 447,750.00
Vehicles 1,492,500.00
Plant machinery & equipment 7,462,500.00
Total Fixed Investment 15,390,660.00
Pre production capital expenditure 769,533.00
Total Initial Investment 16,160,193.00
Working capital at full capacity 3,514,893.38
Total 19,675,086.38
*Pre-production capital expenditure includes - all expenses for pre-investment
studies, consultancy fee during construction and expenses for company‘s
establishment, project administration expenses, commission expenses, preproduction
marketing and interest expenses during construction.

8.3 Production Costs

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The total production cost at full capacity is estimated at Birr 22.27 million. The details are shown
at Table 5.

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 Table 6: Production Cost at Full Capacity

Total Production Cost at Full Capacity

Items Cost
1. Raw materials
13,344,591.75
2. Utilities
232,531.50
3. Wages and Salaries
3,602,059.20
4. Spares and Maintenance
461,719.80
Factory costs
17,640,902.25
5. Depreciation
1,541,931.60
6. Financial costs
3,113,740.01
Total Production Cost 22,296,573.86

8.4 Financial Evaluation

I. Profitability
The income statement (Annex 4) shows that the proposed project generates profit starting from
the first year of operation. Profits starts at Birr 108,009 in first year and reach at about 5.97
million in the eight year of the project life. Gross Profit to Sales starts at 0.79% and reach at
31.59% at eight year. Return on Equity start at 1.37% and reaches 76.49%. The total profit to be
earned during the whole ten years of operation amounts Birr 43,492,739.52 . These indicators
prove that the project is profitable.

II. Breakeven Analysis

The breakeven analysis shows that the Total Revenue equals the Total Cost at 23.3% of capacity
which is achieved at the first year of operation.
III. Payback Period

The project pays back its initial investment at about the first quarter of the fourth year (See
Annex 8: Summary 3).

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 IV. Simple Rate of Return
The simple interest rate is 26.6% .

V. Internal Rate of Return and Net Present Value

The Internal Rate of Return is 27.3% and the Net Present Value at 18% discount rate per annum
is Birr 14,989,789.45

VI. Sensitivity Analysis

A 10% decrease in sales revenue will decrease the total revenue to Birr 4,421,536, while a 10%
increase in cots of inputs will decrease the total profit to Birr 5,609,478.

9. Economic and Social Benefit and Justification

Based on the foregoing presentation and analysis, we can learn that the proposed project
possesses wide range of benefits that complement the financial feasibility obtained earlier. In
general the envisaged project promotes the socio-economic goals and objectives stated in the
strategic plan of the Amhara National Regional State. These benefits are listed as follows .

A. Profit Generation

The project is found to be financially viable and earns a total profit of Birr 7.28 million within
the project life. Such a result is attractive for a business undertaking whose initial investment is
only Birr 3.3 million.

B. Tax Revenue

In the project life under consideration, the government will collect about Birr 2.9 million from
corporate tax payment alone (i.e. excluding income tax, sales tax and VAT)

C. Import Substitution and Foreign Exchange Saving

The project has strong import substitution effect.

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 D. Employment and Income Generation

The proposed project is expected to create employment for 61 citizens of the country; generating
Birr 603,360 household income to the workers per year.

E. Diversification and Inter-Sectoral linkage

The proposed plant will to modernize Ethiopian agriculture; help farmers to shift to the
production of potato which yield relatively high yield compared to other cereals.

F. Modernization of Diet Culture

The most common usage of potato in contemporary rural Ethiopia is to cook and eat it without
any sort of processing. This culture has discouraged farmers from producing it larger quantities
because it has never been a cash crop. This project helps to change this situation and makes
potato a cash generating yield.

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ANNEXES

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 Annex 1: Total Net Working Capital Requirements (in Birr)
CONSTRUCTION PRODUCTION YEARS
Year 1 Year 2 1 2 3 4
Capacity Utilization (%) 0 0 50% 60% 70% 80%
1. Total Inventory 0 0 381,269 457,522 533,776 610,030
Raw Materials in Stock- Total 0 0 121,924 146,309 170,694 195,079
Raw Material-Local 0 0 121,924 146,309 170,694 195,079
Raw Material-Foreign 0 0 0 0 0 0
Factory Supplies in Stock 0 0 1,753 2,103 2,454 2,804
Spare Parts in Stock and Maintenance 0 0 4,219 5,062 5,906 6,750
Work in Progress 0 0 43,816 52,580 61,343 70,106
Finished Products 0 0 87,633 105,159 122,686 140,213
2. Accounts Receivables 0 0 223,855 268,625 313,396 358,167
3. Cash in Hand 0 0 35,035 42,042 49,049 56,056
CURRENT ASSETS 0 0 518,234 621,881 725,528 829,175
4. Current Liabilities 0 0 223,855 268,625 313,396 358,167
Accounts Payable 0 0 223,855 268,625 313,396 358,167
TOTAL NET WORKING CAPITAL REQUIREMENTS 0 0 294,380 353,256 412,132 471,007
INCREASE IN NET WORKING CAPITAL 0 0 294,380 58,876 58,876 58875.936

1
 Annex 1: Continued
PRODUCTION YEARS
5 6 7 8 9 10
Capacity Utilization (%) 90% 100% 100% 100% 100% 100%
1. Total Inventory 686,284 762,537 762,537 762,537 762,537 762,537
Raw Materials in Stock-Total 219,463 243,848 243,848 243,848 243,848 243,848
Raw Material-Local 219,463 243,848 243,848 243,848 243,848 243,848
Raw Material-Foreign 0 0 0 0 0 0
Factory Supplies in Stock 3,155 3,505 3,505 3,505 3,505 3,505
Spare Parts in Stock and Maintenance 7,593 8,437 8,437 8,437 8,437 8,437
Work in Progress 78,870 87,633 87,633 87,633 87,633 87,633
Finished Products 157,739 175,266 175,266 175,266 175,266 175,266
2. Accounts Receivables 402,938 402,938 402,938 402,938 402,938 402,938
3. Cash in Hand 63,063 70,070 70,070 70,070 70,070 70,070
CURRENT ASSETS 932,822 991,698 991,698 991,698 991,698 991,698
4. Current Liabilities 402,938 402,938 402,938 402,938 402,938 402,938
Accounts Payable 402,938 402,938 402,938 402,938 402,938 402,938
TOTAL NET WORKING CAPITAL REQUIREMENTS 529,883 588,759 588,759 588,759 588,759 588,759
INCREASE IN NET WORKING CAPITAL 58875.936 58875.936 0 0 0 0

2
 Annex 2: Cash Flow Statement (in Birr)
CONSTRUCTION PRODUCTION YEARS
Year 1 Year 2 1 2 3 4
TOTAL CASH INFLOW 1,353,450 1,942,209 2,503,855 2,780,771 3,236,771 3,692,771
1. Inflow Funds 1,353,450 1,942,209 223,855 44,771 44,771 44770.9091
Total Equity 541,380 776,884 0 0 0 0
Total Long Term Loan 812,070 1,165,326 0 0 0 0
Total Short Term Finances 0 0 223,855 44,771 44,771 44770.9091
2. Inflow Operation 0 0 2,280,000 2,736,000 3,192,000 3,648,000
Sales Revenue 0 0 2,280,000 2,736,000 3,192,000 3,648,000
Interest on Securities 0 0 0 0 0 0
3. Other Income 0 0 0 0 0 0
TOTAL CASH OUTFLOW 1,353,450 1,353,450 2,521,862 2,443,535 2,694,959 3,209,348
4. Increase In Fixed Assets 1,353,450 1,353,450 0 0 0 0
Fixed Investments 1,289,000 1,289,000 0 0 0 0
Pre-production Expenditures 64,450 64,450 0 0 0 0
5. Increase in Current Assets 0 0 518,234 103,647 103,647 103646.845
6. Operating Costs 0 0 1,482,064 1,773,035 2,064,007 2,354,979
7. Corporate Tax Paid 0 0 0 0 0 262,965
8. Interest Paid 0 0 521,564 237,287 197,740 158,192
9.Loan Repayments 0 0 0 329,566 329,566 329,566
10.Dividends Paid 0 0 0 0 0 0
Surplus Deficit) 0 588,759 -18,008 337,235 541,812 483,423
Cumulative Cash Balance 0 588,759 570,752 907,987 1,449,799 1,933,222

3
 Annex 2: Continued
PRODUCTION YEARS
5 6 7 8 9 10
TOTAL CASH INFLOW 4,148,771 4,560,000 4,560,000 4,560,000 4,560,000 4,560,000
1. Inflow Funds 44770.9091 0 0 0 0 0
Total Equity 0 0 0 0 0 0
Total Long Term Loan 0 0 0 0 0 0
Total Short Term Finances 44770.9091 0 0 0 0 0
2. Inflow Operation 4,104,000 4,560,000 4,560,000 4,560,000 4,560,000 4,560,000
Sales Revenue 4,104,000 4,560,000 4,560,000 4,560,000 4,560,000 4,560,000
Interest on Securities 0 0 0 0 0 0
3. Other Income 0 0 0 0 0 0
TOTAL CASH OUTFLOW 3,522,145 3,812,904 3,726,345 3,369,095 3,369,095 3,369,095
4. Increase In Fixed Assets 0 0 0 0 0 0
Fixed Investments 0 0 0 0 0 0
Pre-production Expenditures 0 0 0 0 0 0
5. Increase in Current Assets 103646.845 58875.936 0 0 0 0
6. Operating Costs 2,645,950 2,936,922 2,936,922 2,936,922 2,936,922 2,936,922
7. Corporate Tax Paid 324,338 408,445 420,309 432,173 432,173 432,173
8. Interest Paid 118,644 79,096 39,548 0 0 0
9. Loan Repayments 329,566 329,566 329,566 0 0 0
10. Dividends Paid 0 0 0 0 0 0
Surplus Deficit) 626,626 747,096 833,655 1,190,905 1,190,905 1,190,905
Cumulative Cash Balance 2,559,848 3,306,944 4,140,599 5,331,503 6,522,408 7,713,312
Annex 3: Discounted Cash Flow-Total Capital Invested (Birr)
CONSTRUCTION PRODUCTION YEARS

4
 Year 1 Year 2 1 2 3 4
TOTAL CASH INFLOW 0 0 2,280,000 2,736,000 3,192,000 3,648,000
1. Inflow Operation 0 0 2,280,000 2,736,000 3,192,000 3,648,000
Sales Revenue 0 0 2,280,000 2,736,000 3,192,000 3,648,000
Interest on Securities 0 0 0 0 0 0
2. Other Income 0 0 0 0 0 0
TOTAL CASH OUTFLOW 1,353,450 1,353,450 1,776,443 1,831,911 2,122,883 2,676,819
3. Increase in Fixed Assets 1,353,450 1,353,450 0 0 0 0
Fixed Investments 1,289,000 1,289,000 0 0 0 0
Pre-production Expenditures 64,450 64,450 0 0 0 0
4. Increase in Net Working Capital 0 0 294,380 58,876 58,876 58875.936
5. Operating Costs 0 0 1,482,064 1,773,035 2,064,007 2,354,979
6. Corporate Tax Paid 0 0 0 0 0 262,965
NET CASH FLOW -1,353,450 -1,353,450 503,557 904,089 1,069,117 971,181
CUMULATIVE NET CASH FLOW -1,353,450 -2,706,900 -2,203,343 -1,299,254 -230,137 741,043
Net Present Value (at 18%) -1,353,450 -1,146,992 361,647 550,256 551,439 424,512
Cumulative Net present Value -1,353,450 -2,500,442 -2,138,795 -1,588,538 -1,037,100 -612,588

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 Annex 3: Continued
PRODUCTION YEARS
5 6 7 8 9 10
TOTAL CASH INFLOW 4,104,000 4,560,000 4,560,000 4,560,000 4,560,000 4,560,000
1. Inflow Operation 4,104,000 4,560,000 4,560,000 4,560,000 4,560,000 4,560,000
Sales Revenue 4,104,000 4,560,000 4,560,000 4,560,000 4,560,000 4,560,000
Interest on Securities 0 0 0 0 0 0
2. Other Income 0 0 0 0 0 0
TOTAL CASH OUTFLOW 3,029,164 3,404,243 3,357,231 3,369,095 3,369,095 3,369,095
3. Increase in Fixed Assets 0 0 0 0 0 0
Fixed Investments 0 0 0 0 0 0
Pre-production Expenditures 0 0 0 0 0 0
4. Increase in Net Working Capital 58875.936 58875.936 0 0 0 0
5. Operating Costs 2,645,950 2,936,922 2,936,922 2,936,922 2,936,922 2,936,922
6. Corporate Tax Paid 324,338 408,445 420,309 432,173 432,173 432,173
NET CASH FLOW 1,074,836 1,155,757 1,202,769 1,190,905 1,190,905 1,190,905
CUMULATIVE NET CASH FLOW 1,815,879 2,971,637 4,174,406 5,365,310 6,556,215 7,747,119
Net Present Value (at 18%) 398,153 362,821 319,982 268,497 227,540 192,830

Cumulative Net present Value -214,435 148,386 468,369 736,866 964,405 1,157,235

Net Present Value (at 18%) 2510685.253

Internal Rate of Return 27%

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 Annex 4: NET INCOME STATEMENT (in Birr)
PRODUCTION YEARS
1 2 3 4 5
Capacity Utilization (%) 50% 60% 70% 80% 90%
1. Total Income 2,280,000 2,736,000 3,192,000 3,648,000 4,104,000
Sales Revenue 2,280,000 2,736,000 3,192,000 3,648,000 4,104,000
Other Income 0 0 0 0 0
2. Less Variable Cost 1,334,187 1,601,024 1,867,861 2,134,698 2,401,536
VARIABLE MARGIN 945,813 1,134,976 1,324,139 1,513,302 1,702,464
(In % of Total Income) 41.5 41.5 41.5 41.5 41.5
3. Less Fixed Costs 406,157 430,291 454,426 478,560 502,695
OPERATIONAL MARGIN 539,656 704,685 869,713 1,034,741 1,199,770
(In % of Total Income) 23.7 25.8 27.2 28.4 29.2
4. Less Cost of Finance 521,564 237,287 197,740 158,192 118,644
5. GROSS PROFIT 18,092 467,397 671,974 876,550 1,081,126
6. Income (Corporate) Tax 0 0 201592.051 262,965 324,338
7. NET PROFIT 18,092 467,397 470,381 613,585 756,788
RATIOS (%)
Gross Profit/Sales 0.79% 17.08% 21.05% 24.03% 26.34%
Net Profit After Tax/Sales 0.79% 17.08% 14.74% 16.82% 18.44%
Return on Investment 17.98% 23.03% 21.42% 24.29% 27.05%
Return on Equity 1.37% 35.46% 35.68% 46.54% 57.41%

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 Annex 4: Continued
PRODUCTION YEARS
6 7 8 9 10
Capacity Utilization (%) 100% 100% 100% 100% 100%

1. Total Income 4,560,000 4,560,000 4,560,000 4,560,000 4,560,000

Sales Revenue 4,560,000 4,560,000 4,560,000 4,560,000 4,560,000
Other Income 0 0 0 0 0
2. Less Variable Cost 2,668,373 2,668,373 2,668,373 2,668,373 2,668,373
VARIABLE MARGIN 1,891,627 1,891,627 1,891,627 1,891,627 1,891,627
(In % of Total Income) 41.5 41.5 41.5 41.5 41.5
3. Less Fixed Costs 451,049 451,049 451,049 451,049 451,049
OPERATIONAL MARGIN 1,440,578 1,440,578 1,440,578 1,440,578 1,440,578
(In % of Total Income) 31.6 31.6 31.6 31.6 31.6
4. Less Cost of Finance 79,096 39,548 0 0 0
5. GROSS PROFIT 1,361,482 1,401,030 1,440,578 1,440,578 1,440,578
6. Income (Corporate) Tax 408,445 420,309 432,173 432,173 432,173
7. NET PROFIT 953,037 980,721 1,008,405 1,008,405 1,008,405
RATIOS (%)
Gross Profit/Sales 29.86% 30.72% 31.59% 31.59% 31.59%
Net Profit After Tax/Sales 20.90% 21.51% 22.11% 22.11% 22.11%
Return on Investment 31.32% 30.96% 30.60% 30.60% 30.60%
Return on Equity 72.29% 74.39% 76.49% 76.49% 76.49%
Annex 5

8
Annex 5: Projected Balance Sheet (in Birr)

9
 CONSTRUCTION PRODUCTION YEARS
Year 1 Year 2 1 2 3 4
TOTAL ASSETS 1,353,450 3,295,659 3,537,606 3,720,208 4,107,387 4,436,176
1. Total Current Assets 0 588,759 1,088,986 1,529,868 2,175,327 2,762,396
Inventory on Materials and Supplies 0 0 127,895 153,474 179,053 204,632
Work in Progress 0 0 43,816 52,580 61,343 70,106
Finished Products in Stock 0 0 87,633 105,159 122,686 140,213
Accounts Receivables 0 0 223,855 268,625 313,396 358,167
Cash in Hand 0 0 35,035 42,042 49,049 56,056
Cash Surplus, Finance Available 0 588,759 570,752 907,987 1,449,799 1,933,222
Securities 0 0 0 0 0 0
2. Total Fixed Assets, Net of Depreciation 1,353,450 2,706,900 2,448,620 2,190,340 1,932,060 1,673,780
Fixed Investment 0 1,289,000 2,578,000 2,578,000 2,578,000 2,578,000
Construction in Progress 1,289,000 1,289,000 0 0 0 0
Pre-Production Expenditure 64,450 128,900 128,900 128,900 128,900 128,900
Less Accumulated Depreciation 0 0 258,280 516,560 774,840 1,033,120
3. Accumulated Losses Brought Forward 0 0 0 0 0 0
4. Loss in Current Year 0 0 0 0 0 0
TOTAL LIABILITIES 1,353,450 3,295,659 3,537,606 3,720,208 3,905,795 4,234,584
5. Total Current Liabilities 0 0 223,855 268,625 313,396 358,167
Accounts Payable 0 0 223,855 268,625 313,396 358,167
Bank Overdraft 0 0 0 0 0 0
6. Total Long-term Debt 812,070 1,977,396 1,977,396 1,647,830 1,318,264 988,698
Loan A 812,070 1,977,396 1,977,396 1,647,830 1,318,264 988,698
Loan B 0 0 0 0 0 0
7. Total Equity Capital 541,380 1,318,264 1,318,264 1,318,264 1,318,264 1,318,264
Ordinary Capital 541,380 1,318,264 1,318,264 1,318,264 1,318,264 1,318,264
Preference Capital 0 0 0 0 0 0
Subsidies 0 0 0 0 0 0
8. Reserves, Retained Profits Brought Forward 0 0 0 18,092 485,489 955,871
9.Net Profit After Tax 0 0 18,092 467,397 470,381 613,585
Dividends Payable 0 0 0 0 0 0
Retained Profits 0 0 18,092 467,397 470,381 613,585
Balance Sheet (in Birr)Annex 5: Continued
PRODUCTION YEARS
5 6 7 8 9 10

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 TOTAL ASSETS 4,908,170 5,531,641 6,182,796 7,191,201 8,199,605 9,208,010
1. Total Current Assets 3,492,670 4,298,641 5,132,296 6,323,201 7,514,105 8,705,010
Inventory on Materials and Supplies 230,212 255,791 255,791 255,791 255,791 255,791
Work in Progress 78,870 87,633 87,633 87,633 87,633 87,633
Finished Products in Stock 157,739 175,266 175,266 175,266 175,266 175,266
Accounts Receivables 402,938 402,938 402,938 402,938 402,938 402,938
Cash in Hand 63,063 70,070 70,070 70,070 70,070 70,070
Cash Surplus, Finance Available 2,559,848 3,306,944 4,140,599 5,331,503 6,522,408 7,713,312
Securities 0 0 0 0 0 0
2. Total Fixed Assets, Net of Depreciation 1,415,500 1,233,000 1,050,500 868,000 685,500 503,000
Fixed Investment 2,578,000 2,578,000 2,578,000 2,578,000 2,578,000 2,578,000
Construction in Progress 0 0 0 0 0 0
Pre-Production Expenditure 128,900 128,900 128,900 128,900 128,900 128,900
Less Accumulated Depreciation 1,291,400 1,473,900 1,656,400 1,838,900 2,021,400 2,203,900
3. Accumulated Losses Brought Forward 0 0 0 0 0 0
4. Loss in Current Year 0 0 0 0 0 0
TOTAL LIABILITIES 4706577.5 5330049 5981204.1 6989608.7 7998013.2 9006417.8
5. Total Current Liabilities 402938.18 402938.18 402938.18 402938.18 402938.18 402938.18
Accounts Payable 402938.18 402938.18 402938.18 402938.18 402938.18 402938.18
Bank Overdraft 0 0 0 0 0 0
6. Total Long-term Debt 659,132 329,566 0 0 0 0
Loan A 659,132 329,566 0 0 0 0
Loan B 0 0 0 0 0 0
7. Total Equity Capital 1,318,264 1,318,264 1,318,264 1,318,264 1,318,264 1,318,264
Ordinary Capital 1,318,264 1,318,264 1,318,264 1,318,264 1,318,264 1,318,264
Preference Capital 0 0 0 0 0 0
Subsidies 0 0 0 0 0 0
8. Reserves, Retained Profits Brought Forward 1,569,456 2,326,244 3,279,281 4,260,002 5,268,407 6,276,811
9. Net Profit After Tax 756,788 953,037 980,721 1,008,405 1,008,405 1,008,405
Dividends Payable 0 0 0 0 0 0
Retained Profits 756,788 953,037 980,721 1,008,405 1,008,405 1,008,405

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