Contents

EXECTUTVE SUMMARY....................................................................................................................... 3
PROJECT DESCRIPTION AREA APPLICATIONINTRODUCTION...............................................................5
2.1 GENARAL DESCRPTION OF THE PROJECT AREAGENERAL BACKGROUND................................5
GENARAL BACKGROUND................................................................................................................. 6
2.2 HISTORY OF THE PROMOTER...................................................................................................9
VISION.......................................................................................................................................... 9
Mission.........................................................................................................................................9
Keys to Success.......................................................................................................................... 10
Objectives.................................................................................................................................. 10
Key Success and Risk Factors..................................................................................................... 10
Key SuccessFactors.................................................................................................................... 11
CONSTRAINTS OF BAKERY INDUSTRY............................................................................................12
ii.Opportunities.......................................................................................................................... 13
MARKET STUDY................................................................................................................................. 14
Global and regional food consumption patterns and trends.........................................................14
3.1 Introduction......................................................................................................................... 14
Demand analysis............................................................................................................................15
Supply analysis...............................................................................................................................18
DEMAND SUPPLY GAP ANALYSIS...................................................................................................20
Demand projection........................................................................................................................20
Value Proposition........................................................................................................................ 21
Marketing Strategy........................................................................................................................ 22
Promotion Strategy....................................................................................................................... 22
Pricing Strategy..............................................................................................................................23
Sales Strategy................................................................................................................................ 23
................................................................................................................................................... 23
Sales Programs.........................................................................................................................23
TECHNICAL STUDY.............................................................................................................................24
BREAD FORMULATION.................................................................................................................. 24
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 MANUFACTURING PROCESS..........................................................................................................25
4.2 Biscuits.....................................................................................................................................25
Land and Building.......................................................................................................................... 28
Raw Materials................................................................................................................................ 28
ENVIRONMENTAL IMPACT AND SOCIO ECONOMIC CONSIDERATIONS............................................29
5.1 Environmental Impact............................................................................................................. 29
5.2.Socio-Economic Benefits of the Project...................................................................................29
ORGANIZATION, MANAGEMENT AND MANPOWER REQUIREMENT................................................30
Organization and Management plan.............................................................................................30
Organizational Structure................................................................................................................30
Business Experience and Qualifications of the Entrepreneurs......................................................30
A. HUMAN RESOURCE REQUIREMENT...................................................................................30
B. TRAINING REQUIREMENT...................................................................................................... 30
FINANCIAL ANALYSIS......................................................................................................................... 31
INITIAL INVESTMENT OUTLEY........................................................................................................31
Building...................................................................................................................................... 31
PLANT AND MACHINERY............................................................................................................31
EQUIPMENTS............................................................................................................................. 31
RAW MATERIALS REQUIRED...................................................................................................... 33
MAN POWER REQUIREMENT PLANNING...................................................................................34
A . INITIAL INVESTMENT COST...................................................................................................35
B . OPPORATION COST...............................................................................................................36
C.CASH FLOW.............................................................................................................................37
D. ICOME STATEMENT............................................................................................................... 38
E. BALANCE SHEET..................................................................................................................... 39
FINANCIAL EVALUATION................................................................................................................40
APPENDIX................................................................................................................................... 42

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EXECTUTVE SUMMARY

This is a feasibility study for DIGITI Bakery business project which is planned to be
established in JIMMA city administration. The main activity of the project is to establish a
commercial bakery business project in the J I M M A town and supplying different bakery
products mainly bread for the potential customers residing in the town.

In Ethiopia next to Enjera bread is a daily consumed favorite food of the society specially the pattern
of consumption in urban was high followed by rural society. It was the basic food item that
everybodyconsumes every day. In order to fulfill this demand many small bakery are doing
business. However, most of the bakery production in the country is traditional beyond it lack the
capacity to satisfy the demand for bakery its known by waste of products as well as lacks quality,
because it uses wood to flash the bread the mixing the flour was done manpower.Overall it doesn’t
flow the scientific way so a significant concern was given to replace the old system to the society
basic need.

The major objectives ofthis project will to overcoming supplying problem of bakery products by
using technology and up to date knowledge of bakery system and providing quality bakery.

The other rationality to invest in this project is its ideal geographical area of the
project; Manpower requirement is abundantly available in the area, the raw material
is very suitable to bakery production, accessibility of utilities like telephone and
water, proximity to the market. It is planned to be established over 532 sq. meter of
land in the Jimma town owned by Ahmed Nuredin who is the owner and manager of
the project.

The total investment cost of the project is estimated to be Birr 5,000,000. The
source of fund is from owner’s equity.

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The total project investment cost includes all the fixed investment and the working capital
cost of the project will be 5,000,000.The project fixed asset is estimated to be
birr3,150,000 and the working capital is Br.1,850,000.00

The project expected to generate revenue amounting Birr.3,500,000 400,000 4,150,000in

the first year, 2nd and 3rd years of operation.

There are three financial statements which indicate the profitability, liquidity and net
worth of a given project .These are the income statement, the cash flow projection, and the
balance sheet. The projected profit and/or loss statement indicates that the project is going
to be a profitable venture through its life. The project’s net profit at first year and at the end
of the project year is Birr.745,885at the first and Birr904,085. This shows that the business
is highly income generating and profitable venture.

The projected cash flow indicates the liquidity position of the project over its estimated
lifespan.Hence,the project under caption expected to generate net cash flow
Birr1,158,385at the first year andBr.1,316,585attenthyear of the project operation.

The project has alsomany benefits for the development of the country by
creating employment opportunity, generating tax for government, transfer
advanced knowledge to the local people and contribution in food security. The
project is found to be viable with all aspects of viability indicators. It is financially
profitable, economically and socially desirable there fore, it is wise decision for
financial institution to finance its cost partially.

PROJECT DESCRIPTION AREA APPLICATION INTRODUCTION

Bakery is a traditional activity and occupies an important place in food processing industry.
Despite the advent of fully automatic and semi-automatic bread as well as biscuit making plants,

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a sizeable number of people still prefer fresh bread and other products from bakery. With
growing population and preference for fresh and ready-to-eat convenient food items, demand for
bakery products is steadily increasing. There are many bakery products like bread and its
different variants, biscuits, cakes &pastries, cookies, puffs etc. having ready market round the
year.Each product enjoys a very wide range in terms of size or weight, flavors, end-use and so
on. There is a tremendous scope to introduce new varieties every year. However, this note deals
only with bread and biscuits. This project can be started anywhere in the country and there is no
preferred location as such. A bakery can be set up in urban as well as rural areas. Depending
upon its location, a suitable product mix can be worked out. This profile primarily considers
semi-urban location from where nearby rural centers can also be catered to. In view of this
consideration, thesuggested products are bread. These products are very well accepted in the
market and have gained consumer acceptance.

2.1 GENARAL DESCRPTION OF THE PROJECT AREAGENERAL BACKGROUND

The role small-scale industries play in the process of industrial development has attracted a large
number of studies for the past three decades. No wonder this is the case in view of the fact that
the importance of small-scale industries in less developed countries (LDCs) is gaining
momentum at the present time.

The reasons are obvious. Since, for LDCs, industrial development is considered to be a means
for economic development, substantial effort has gone to promote industrialization. There is no
country that has not given priority to industrial development in its development plans. In terms of
success story, however, few have done well in achieving the desired goal of industrialization.

For the large majority of LDCs, industrialization has remained a far cry. Industrial development
pursued along the path of large-scale industries has not been able to generate the expected
economic impact and sustained development. In fact, it is not uncommon to see idle
capacities due to both supply side constraints and lack of absorptive markets. In view of the huge
amount of resources and long gestation period required by large-scale industrial projects, such
low performance has an unbearable cost to the economy.

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 GENARAL BACKGROUND

The Project is located in Oromia Regional state, Jimma city administration and it is 350 km far
away from the center Addis. The owner has investing in the food industrial sector with the
register capital of birr 5,000,000. The project has a full access of road from Addis Ababato
Jimma. The project is categorized as partnershipform of business.

2.2 HISTORY OF THE PROMOTER

Ahimed Nuradin and Hayat Isihak special bakery business which is going to establish in Jimma
city administration. The owner has masters degree in business with a relevant work. Besides the
owner has an ambitious to diversified business which is related the earlier one into
technologically advanced of forms of bread manufacturing. The project will be established and
registered according

VISION

Our Motto: “providing quality bakery products for the society"

The timing is right for this venture. Patiently searching for the last few years for a similar highly
recognized existing business in a prime location was unsuccessful. We therefore decided to build
one from the ground up

Mission
To provide a comforting, fresh, delicious in which customers will be able to satisfies their
physiological desire with quality products, through a wide range of products and services..

Keys to Success

The keys to success in our business are:

1. Location: Providing an easily accessible location for clients.

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 2. Environment: Providing an environment conducive to giving relaxing and professional
service.
3. Convenience: Offering clients a wide range of services in one setting, and extended
business hours.
4. Reputation: Reputation of the owner and staff as providing superior personal service.
5. Effective advertising: Advertising in the corporate environment.

Objectives

The objectives for digiti bakery business are outlined below:

1. To create a product-based company whose goal is to exceed customer's expectations

2. Sales increase substantially by end of Year 2 and nearly double year one revenue by the
end of Year 3.
3. To increase the number of clients services by at least 20% per year through superior
performance and word-of mouth referrals.
4. Have a clientele return rate of 90% by end of Year 1.Become an established community
destination by end of Year

Key Success and Risk Factors

 Expenditures would be allocated to highly processed or prepared foods consumed

away from home. In low income countries bakery prices are highly elastic.A1 percent
change in income leads to 0.93 percent change in demand for bakery products in lower
income countries and 0.35percent in higher income countries.

 Qualityandotherfoodattributes:Per capita consumption of bakery products in

developed countries has been driven by quality and other food attributes (preference,
consumer attitude and etc.)rather than affordability and availability.

 Populationgrowth: the high rate of population increase is reckoned to

Affect b a k e r y industry development. The demand for bakery

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 products directly related with the annual population growth.

Key SuccessFactors

The key factors form the foundation of any successful and sustainable bakery
industry. The key factors for bakery industry or market are:

 Responding quickly to changing economic forces, changing policies Non-

agricultural as well as agricultural and shifts in baker supply and demand factors.
 Continuous in novationby adopting new technology and adapting to changing
consumer demands.
 Consumer base with sufficient disposable income to create and drive the market for
bread and bakery products–or alternatively–accessible export markets.
 The availability of the human, animal, natural and material resources to
secure the production of bakery
 The existence of the requisite infrastructure for an efficiently operating
processing facility.
 Giving bakery products a brand identity .Brand strength can determine who the
industry winners will be. Branded value-added products are the key to success – no matter
what industry the firms are in.
 Presence of institutional support including research and training institute to be supplied
by up-to-date information, training and technical assistant.
 Efficient and effective Product distribution strategy.

CONSTRAINTS OF BAKERY INDUSTRY

Bakery products not only serve as ready to eat convenient food, but also help in increasing
the utilization of surplus wheat produced in the country. Promotion of bakery industry will
also create more employment potential. The growth of bakery industry could be much
greater if some ofthe problems faced by them are solved and the major problems are:
 Non-availability of quality raw materials
 Lack of knowledge of raw materials for specific product applications

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  Poor understanding of process equipment and process technology
 Ignorance about testing protocols to enhance and maintain the quality of the
finished products.
 Unpredictability ofmarket access because of stringent health requirement
 High and quality product insome exporting countries
 Poor environmental and quality reputation
 Inefficient and in effective distribution strategy.
 No concern for profession and planning.
  Lack of awareness regarding financial control and market development/less research
on the area

ii.Opportunities

 Increasing population and demand. Growing population and high birth rates will have a
direct andunquestionableimpact on demand.
 Strong tradition of bakery product consumption habit.
 Huge supplies of raw material in the country
 Large train able labor force and relatively low wage than other competing countries
 Conducive business environment with facilitated institutional support
 Strong government policy that support agro-processing industries.

iii.Threat

 The constraints such as unavailability of quality flour

 Low productivity levels leading to uncompetitive pricing.
 entrance of newly competitor

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MARKET STUDY

Global and regional food consumption patterns and trends

3.1 Introduction
Promoting healthy diets and lifestyles to reduce the global burden of non-communicable diseases
requires a multisectoral approach involving the various relevant sectors in societies. The
agriculture and food sector figures prominently in this enterprise and must be given due
importance in any consideration of the promotion of healthy diets for individuals and population
groups. Food strategies must not merely be directed at ensuring food security for all, but must
also achieve the consumption ofadequate quantities of safe and good quality foods that together
make upa healthy diet. Any recommendation to that effect will have implications for all
components in the food chain. It is therefore useful at this junctureto examine trends in
consumption patterns worldwide and deliberate onthe potential of the food and agriculture sector
to meet the demands andchallenges posed by this report. Economic development is normally
accompanied by improvements in acountry’s food supply and the gradual elimination of dietary
deficiencies, thus improving the overall nutritional status of the country’s population.

Furthermore, it also brings about qualitative changes in the production, processing, distribution
and marketing of food. Increasing urbanizationwill also have consequences for the dietary
patterns and lifestyles of individuals, not all of which are positive. Changes in diets, patterns of
work and leisure --- often referred to as the ‘‘nutrition transition’’ --- are already contributing to
the causal factors underlying non communicable diseases even in the poorest countries.
Moreover, the pace of these changes seems to be accelerating, especially in the low-income and
middle-income countries.

The dietary changes that characterize the ‘‘nutrition transition’’ include both quantitative and
qualitative changes in the diet. The adverse dietary changes include shifts in the structure of the
diet towards a higher energy density diet with a greater role for fat and added sugars in foods,
greater saturated fat intake (mostly from animal sources), reduced intakes of complex

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carbohydrates and dietary fiber, and reduced fruit and vegetable intakes (1). These dietary
changes are compounded by lifestyle changes that reflect reduced physical activity at work and
during leisure time (2). Atthe same time, however, poor countries continue to face food shortages
and nutrient inadequacies.

Diets evolve over time, being influenced by many factors and complex interactions. Income,
prices, individual preferences and beliefs, cultural traditions, as well as geographical,
environmental, social and economicfactors all interact in a complex manner to shape dietary
consumptionpatterns. Data on the national availability of the main food commodities provide a
valuable insight into diets and their evolution over time. FAO produces annual Food Balance
Sheets which provide national data on food availability (for almost all commodities and for
nearly all countries). Food Balance Sheets give a complete picture of supply (including
production, imports, stock changes and exports) andutilization (including final demand in the
form of food use and industrial non-food use, intermediate demand such as animal feed and seed
use, and waste) by commodity. From these data, the average per capita supply of macronutrients
(i.e. energy, protein, fats) can be derived for all food commodities. Although such average per
capita supplies are derived from national data, they may not correspond to actual per capita
availability, which is determined by many other factors such as inequality in access to food.
Likewise, these data refer to ‘‘average food available for bconsumption’’, which, for a number of
reasons (for example, waste at thehousehold level), is not equal to average food intake or average
food consumption. In the remainder of this chapter,therefore, the terms ‘‘food consumption’’ or
‘‘food intake’’ should be read as ‘‘food available for consumption’’.

Demand analysis

Wheat and barley were two of the earliest plants to be cultivated, and primitive people living as
early as 5000 B.C. are known to have eaten these grains. Eventually it was discovered that
adding water to the grain made it more palatable, and people experimented with cooking the
grain and water mixture on stones that had been heated in a fire. In this manner, porridge and flat
breads were developed.

The ancient Egyptians were known to grow barley and wheat. Excavations of their cities
revealed that they enjoyed flat breads with nearly every meal. It is likely that leavened, or raised,

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bread was discovered accidentally when a wheat and water mixture was left in a warm place,
causing the naturally occurring yeast to produce puffed-up dough. It is also possible that a piece
of leftover dough was mixed into a new batch, producing the same results

The present study is an investigation of the demand for bread and the arrangements for its
distribution in tropical Africa's largest country. Beyond its immediate interest as an analysis of
bread consumption for some 40 million Africans, the study gives an indication of the nature and
strength of forces shaping consumer demand for the larger group of temperate foodstuffs which
are exotic to the tropics. Moreover, among new food products bread has made perhaps the
greatest inroads into the markets for indigenous staples in developing tropical economies despite
its typically higher relative costs: thismonograph helps to identify factors responsible for this
universal popularity.

And finally, owing to its perish ability, the bread case is relevant to the introduction of new
consumer industries where local supply, rather than the gradual buildup of imports, creates the
market; elements in this product innovation include sociological carriers, economic constraints,
and a time sequence.

In Ethiopia next to Enjera bread is a daily consumed favorite food of the society specially the
pattern of consumption in urban was high followed by rural society. It was the basic food item
that every I body consume every day. in order to fulfill this demand many small bakery are doing
business, however most of the bakery production in the country is traditional beyond it lack the
capacity to satisfy the demand for bakery its known by waste of products as well as lacks quality,
because it uses wood to flashes the bread the mixing the flour was done manpower overall it
doesn’t flow the scientific way so a significant concern was given to replace the old system to
the society basic need

The major objectives of this project overcoming supplying problem bakery by using technology
and up to date knowledge of bakery system and providing quality bakery.

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THE PAST DEMAND FOR BREAD AND BAKERY PRODUCTS IN TONES

YEAR E.C DEMAND IN TONES

2014 234986
2015 256389
2016 376912

Source: 1. CSA, Report of survey of the Manufacturing & Electricity Industries, annual issues.

2. Customs Authority, External Trade Statistics, Annual Issues.

According the above statistics In Ethiopia in the year 2005 the existing demand for the bread
was115,968tones this trend until the past year 2015 it was 256,389 tones this was estimated
annual percent of 25

The yearly average level of demand which was 112.6 tons during the years 2005--2009
has increased to 208 tons during the period 2009--2012. Similarly, the yearly average
quantity needed during the period 2013--2015 has increased to 272 tons. A substantial
growth of demand is recorded during the recent two years of 2012--2015, which stood at annual
average of 574 tons. Compared to the previous three years annual average it is higher by more
than two fold. Generally, demandof the product in the past eleven years has shown an annual
average growth of about 25%. By looking to the above trend analysis , the average quantity of
the recent three years i.e. 2009--2011, which is 489 tons, is taken as the effective demand
for the year 2011. By applying a growth rate of 20%, less than the observed trend in the past,
the current (year 2015) demand is estimated at 586 tons.

Supply analysis
Actual food availability may vary by region, socioeconomic level andseason. Certain difficulties
are encountered when estimating trade, production and stock changes on an annual scale. Hence
three-year averages are calculated in order to reduce errors. The FAO statistical database
(FAOSTAT), being based on national data, does not provide information on the distribution of
food within countries, or within communities and households.

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The total numbers of bakery unitsare not exactly known, however, it has been reported that there
are 5 large-scale units producing either bread or biscuits. Among these, 1unitproduces only bread
while the remaining produces biscuits.

However, there are over 5000 small and medium scale units in factory sectors producing both
bread and biscuits. There are over 1 million units in family scale small units producing various
bakery products like bread, biscuits, cookies and pastries. The number of bakery units is
maximum in (34.2%)

THE SUPPLIES BREAD AND BAKERY RESULT IN TONES

YEAR TOTAL SUPPLIES

2014 164490.2
2015 179472.3
2016 198628.6

SOURCE: MINISTRY OF TRADE

CSA: CENTRAL STASITICS AGENCY

DEMAND SUPPLY GAP ANALYSIS

year demand Supply gap
2014 234986 164490.2 70495.8
2015 256389 179472.3 70495.8
2016 376912 198628.6 178283.4

The above table shows the existing demand supply gap that in the year 2014 70495.8 tones this
gap during the year 2015 70495.8 this indicate the double increment in the gap.

Demand projection

Demand for bakery depends on the growth of the targeted consumers and their disposable
incomes. Moreover, new entrants to use the product will also have an effect on the demand for
the product. At present, the product has been used by bakeries and urban dwellers.

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The past ten years delivery (2014-2016) showed an average annual increase of 25%.
Nevertheless, this figure thought to be very high for future estimation. Therefore, the
annual GDP increase, which is 11%, has been taken in projecting the future demand.
Based on the above assumption, the projected future demand is shown in Table 3.2

Year E.C Projected demand

2017
795264
2018 974889.
2019 1154514.
2020 1334139.
2021 1513764.
2022 1693389.

The demand for bakery will increase from 615,639 tons in the year 1,513,764tons and 1,693,389
tons by the year 2021 and year 2022, respectively

Strategy and Implementation Summary

1. Emphasize quality, originality, and "World Class product". We will differentiate

ourselves from our competitors by trained in understanding the dynamicsof customer
service so as to maximize the connection to their clients and more easily meet their clients’
expectations.
2. Build a community/corporate relationship-oriented business. We will focus on
strengthening the trust of our customer base, and providing not only services, but
information that will aid everyone in the progression of obtaining a balanced and healthy
lifestyle.

Value Proposition

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Our value proposition is that we will bring a unique mode of bakery production to satisfy the
customer.

Marketing Strategy

Our marketing strategy is the key to our success:

1. Emphasize our name and unique products and environment through advertising.
2. Focus on the convenience of our location.
3. Build community relationships and corporate relationships through unique and quality
products, a friendly caring atmosphere, and delivering world class service.

Promotion Strategy

Our promotional strategy will be two-fold: first phase promotion will advertising before, during,
and six months following our opening; the second phase advertising will deal with long-term
advertising.

1. First Phase Promotions

o Advertising
 We will utilize local newspaper, local social magazines, local radio, mail-
outs to all households within the immediate 10-mile radius, and mail-outs
to all local business within a five-mile radius.
o Internet
 We will have a comprehensive website.
2. Second Phase Promotions
o Advertising

We will continue to place advertise in the local social magazines year around. Mail-outs will be
done again within a 10-mile radius one year after takeoff, then again only every three to five
years. Radio and television advertise will be done only when we have sale promotions during the
most stressful time of the year - the holiday season; television advertise are not certain, we will
evaluate their effectiveness before further implementation.

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Internet: We will continue to have a comprehensive website. After the first six months, and
certainly after the first year, we will evaluate the viability of having target clients advertise on
our site, and conversely, we will evaluate viability of advertising on our target client website (if
applicable).

Pricing Strategy

Our pricing strategy will be similar to that of our competitors. We will not charge over,
substantially under, standard prices for our products. We will be paying our employees a straight
percentage of their total individual client sales plus a bonus–that's more than our competitors.
This will allow us to hire the best employees, and have a built-in motivational factor that will
keep them empowered to enhance their opportunity.

Sales Strategy

Our umbrella sales strategy is to sell bakery products to the society as a uniquely desirable
destination that will enhance their lives.

We will sell our bakery products through each qualities, courtesy, and fresh bread, creating a
trusting impression on all clients, and establishing loyalty and return visits.

Sales Programs

1. Our comprehensive brochure will explain the nature of our products, and how this
benefits our clients.
2. Our website will be comprehensively informative of our products, environment and their
benefits.

TECHNICAL STUDY

BREAD FORMULATION
Many different types of bread formulations have been developed so far. These formulations are
developed in different regions based on thetraditional food habits of the people. The main bread
types can be classified as under.

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1. Pan bread: This type of bread is popular in the economically developed countries including
USA, Canada, and United Kingdom and European nations.

2. Hearth bread or sour bread: This category of bread is produced with or without lactic acid
fermentation. Hearth breads are baked in an open hearth. These breads are becoming popular in
France.

3. Flat bread or ratio /chapatti: This category of bread is popular in Asian countries. The
product is unfermented and flat. This baked on a flat hot pan.

4. Rolls and other small fermented breads: These products generally have higher levels of sugar
and fat in the formulation and thus typically have sweeter taste and softer bite characteristics.
The basic recipes for bread making include wheat flour, yeast, salt and water. If any one of these
basic ingredients is missing, the acceptable product cannot be prepared. Other ingredients are
known as optional, for example, fat, sugar, milk and milk product, malt and malt product,
oxidants (such as ascorbic acid and potassium bromate), surfactants and anti-microbial agents.
Each of these ingredients has specific role to play in bread making. The wheat flour is the main
ingredient in bread production. It isprimarily responsible for bread structure and bite
characteristics. Water transforms flour into viscoelastic dough that retains gas produced during
fermentation and water also provides medium of all chemical reaction to occur. Yeast ferment
sugars and produces carbon dioxide gas and ethanol. It, thus, gives us porous and leavened
bread. Sugar is the source of fermentable carbohydrate for yeast and it also provides sweet taste.

MANUFACTURING PROCESS
4.1 Bread

Sifting of flour

Preparation of suspension

Preparation of dough by kneading all the ingredients

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Fermentation of dough

Baking

Cooling and packing

The Process Flow is as under

Flour Sifting

Dough Preparation

Fermentation

Baking

Cooling and Packing

It is recommended to install bread making capacity of 12,000 quintals per year considering
300working days. Each bread would be of 400gms and 600 breads could bemade every day.

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Picture of the major machines

Raw Materials
The major raw material required is flour. Ideally, the unit can enter into a long term
supplyarrangement with an established flour mill to ensure adequate and timely supply.
Otheritems like yeast, sugar, ghee, milk powder, salt, edible color and flavors shall be
availablefrom nearby trading centers. Since their requirement will not be substantial, supplies
can beeasily tied up.

ENVIRONMENTAL IMPACT AND SOCIO ECONOMIC CONSIDERATIONS

5.1 Environmental Impact

The envisaged plant does not have any adverse impact on the environment. Thus, the project is
environment friendly. The process does not have any adverse impact on the environment.
TheScrapes from the process are fully recyclable in foundry make it neutral. The machine also

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perform by using electric power so there is no gas which released air. And also it doesn’t release
heavy noise to the environmental so that no sounds pollution. In order to mitigate the clearance
of fauna some local trees will be planted around the fence.

5.2.Socio-Economic Benefits of the Project

The establishment of this backer project would have so many socio-economic benefits.
The benefits of economic development are often more immediate ,important, and
obvious to the societies and the project owner.

Employment Creation: the project creates job opportunity for many skilled and
unskilled workers in line to reduce unemployment which hinders the stability of
macro economic variables of the country.
Technology transfer: it enables the local manufactures and community
to share technology in bakery system farm.
GDP Contribution: the supposed project will contribute to the GDP of
the country, increases the income of the workers employed in and the
owners too.
Food security: the project would contribute in increasing the supply of
food which is most important issue for the country now.

FINANCIAL ANALYSIS

INITIAL INVESTMENT OUTLEY

Building
Built up area of around 90 sq.mtrs. Can comfortably accommodate bakery as well as retail

Outlet for which a provision of birr650,000 is adequate

PLANT AND MACHINERY

Plant and machinery required and their parts for this project are totally imported from abroad.
Cost used is calculated CIF(freight on board) plus home country transportation cost and
insurance.

Table 7.1 MACHINERY AND PARTS REQUIRED FOR PROJECT

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 no Plant and machinery Quantity Unit cost Total cost
description
1 DOUGH KNEADER 2 150,000 300,000
2 FLUOR SIFETER(MIXER) 2 210,000 420,000
3 HAND DIVEDERES 4 95,000 380,000

4 OVEN 2 450,000 900,000

5 MOULEDS AND DIES 1 190,000 190,000

Total 2,190,000

EQUIPMENTS
Equipment that are required was char, table and the like were listed it account about 80,000 birr

Table 7.2 equipment required for the project

NO ASSETS QUANTITY UNIT COST TOTAL COST

1 COMPUTER 1 22,000 22,000

2 SALES 1 14,000 14,000

REGISTRATION
MACHINES
3 SHELF 4 20,000 80,000

4 2 9,000 18,000
SHOW ROOF

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 5 8 2,900 23,200
CHAIR
TOTAL 157,200

Preliminary & Pre-operative Expenses

Some expenses that are incurred during the feasibility study of the project as well as for different
licensing and consultancy are totally estimated to 65,000 birr.

A. INITIAL INVESTMENT COST

The initial investment cost was the investing cost of the fixed asset of the project

TABLE 7.5 INITIAL INVESTMENT OUTLAY FOR FIXED ASSETS

NO INVESTMENT ITEM TOTAL COST

1 BUILDING 450,000.00

4 Generator 50kv 520,000.00

5 950,000.00
MINIBUS

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 1,920,000.00
TOTAL INVESTING COST

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1. Profitability

Based on the projected profit and loss statement, the project will generate a profit through out its
operation life. Annual net profit after tax will grow from Birr 1,211,920.00 Million to Birr
3,564,525.65 million during the life of the project. Moreover, at the end of the project life the
accumulated net cash flow amounts to Birr 1,704,525.65. For profit and loss statement and cash
flow projection

2. Ratios

In financial analysis financial ratios and efficiency ratios are used as an index or yardstick for
evaluating the financial position of a firm. It is also an indicator for the strength and weakness of
the firm or a project. Using the year-end balance sheet figures and other relevant data, the most
important ratios such as return on sales which is computed by dividing net income by
revenue,return on assets (operating income divided by assets), return on equity (net profit
divided by equity) and return on total investment (net profit plus interest divided by total
investment) has been carried out over the period of the project life and all the results are found to
be satisfactory.

3. Break-even Analysis

The break-even analysis establishes a relationship between operation costs and revenues.

PLANT CAPACITY AND PRODUCTION PROGRAMME

1. Plant Capacity

Based on the outcome of market study and considering the minimum economic scale of
production, the production capacity of the envisaged plant is produces 12,000quintals per annum.
This capacity will be attained by working a single shift of 8 hours per day and 300 working days
per year.

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 1. Production Program

The annual production program is formulated on the basis of the market forecast and selected
plant capacity. It is assumed that the plant will achieve 80% and 90% capacity utilization rate in
the first and second year, respectively. Full capacity will be reached in the third year and
onwards. The production program is shown in Table below.
ANNUAL PRODUCTION PROGRAM
s/n Production Year
Description Units of measurement 1st 2nd 3rd& onwards

1 Production quintals 9,600 10,800 12,000

2 Capacity utilization rate percent 80 90 100

1. Machinery and Equipment

The total cost of machinery and equipment is estimated at Birr 3,817,200.00. Detailed list of
machinery and equipment and their cost estimates are listed so far.

2. Land, Buildings and Civil Works

The total land area required for the Bakery is determined after the arrangement of all buildings
facilities providing enough space between them, space for circulation / vehicular and human,
spaces for landscaping gardening, space for loading and unloading, disposal etc. Accordingly
land required for the processing machineries is 532m2. Out of this approximately 90m2 is built-up
area for operation. The construction cost of buildings and civil works at a rate of 90 per square
meter is estimated Birr 450,000.

3. Location/site

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The Digiti Bakery is selected based on the two options: - one is the identifying potential project
location and site, other criteria is based on the expansion . The project location is determining
factors for the studying of supply of raw materials and labor, infrastructures, etc. So, the selected
plant site is appropriate for the business.

VI. MANPOWER AND TRAINING REQUIREMENT

MANPOWER REQUIREMENT

The organizational structure of the envisaged plant will create job opportunities for 17
employees.
Employees estimated costs 480,000 per annum.
The proposed manpower requirement and the estimated annual labor cost including Fringe
benefits is given in Table below Table
MANPOWER REQUIREMENT AND ANNUAL LABOUR COST

S/N Description Req. Monthly Annual

No. Salary (Birr) Salary (Birr)
1 General Manager 1 6,000 72,000
2 Secretary 1 3,000 36,000
3 Baker 3 3,000 108,000
4 Accountant 1 3,000 36,000
5 Cashier 1 4,000 48,000
6 Sales Clerk 3 3,000 108,000
13 Machine Operator 2 4000 96,000
15 Store Keeper 2 2500 60,000
16 Driver 1 5,000 60,000
29 Guard 2 3,000 72,000
TOTAL 17 696,000

TRAINING REQUIREMENT

The workers should be given on-the-job training for duration of one month by experts of the
supplier of the machinery and equipment. The machine operator should also obtain 15 days on –
the – job training on how to operate the equipment and handle the inputs. The estimated training
cost is Birr 65,000.

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 A. TOTAL INITIAL INVESTMENT COST

The total initial investment cost of the project including working capital is estimated at Birr 5
million. The major breakdown of the total initial investment cost is shown in Table below.
INITIAL INVESTMENT COST ('000 BIRR)
S/ Cost Items Price
N
2 Building and Civil Work 450,000
3 Plant & Machinery 1,650,000
4 Office Furniture and Equipment 500,000
5 Vehicles 950,000
Total Investment cost 3,150,000

7 Working capital 1,850,000

TOATAL

B. PRODUCTION COST

The annual production cost at full operation capacity is estimated at Birr 1,824,200(see Table
below). Repair and maintenance take 2 per cent of the fixed assets.

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 Annual production cost at full capacity (three years).
Items year
1 2 3
Raw Material and Inputs 1,200,000 1,400,000 1,600,000
Direct Labor cost 100,000 110,000 120,000
Utilities 6,200 6,200 6,200
Administration cost 94,000 96,000 98,000
Total Production Cost 1,400,200 1,612,200 1,824,200

C. FINANCIAL EVALUATION

Operating cost estimate.

The costs to be included operating cost are listed below. The costs estimated
to be incurred in the first, second and third years birr 1,400,200and
1,612,200and 1,824,200respectively. Insurance is 2.5 percent of assets.

production Maintenance Property

year Salary Total
costs expenses insurance
1. 1,400,200 480,000 63,000 78,750 2,021,950
2. 1,612,200 480,000 63,000 78,750 2,233,950
3. 1,824,200 480,000 63,000 78,750 2,445,950

Computation of Depreciation for the proposed Projects

S/N Type of Fixed Asset Total Cost Rate Applied

1 Plant & Machinery 1,650,000 10% 165,000

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2 Building & Civil Work 350,000 5% 17,500

3 Equipment & Furniture 500,000 20% 100,000

5 motor vehicles 650,000 20% 130,000

Total Depreciation 3,150,000 412,500

PROJECTED INCOME STATEMENT

Proposed Total Deduction Costs Total costs Profit before Net income
Income
revenue tax
tax
Operating Depreciation

costs

3,500,000 2,021,950 412,500 2,425,450 1,065,550 319,665 745,885

4,000,000 2,233,950 412,500 2,646,450 1,353,550 406,065 947,485

4,150,000 2,445,950 412,500 2,858,450 1,291,550 387,465 904,085

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 Discounted cash flow

Item Year o Year 1 Year 2 Year 3

Initial investment (3,150,000) - - -
Working capital (1,850,000)
Total cash inflow - 3,500,000 4,000,000 4,150,000
Costs of operation - 2,021,950 2,233,950 2,445,950
cash inflow before tax - 1,478,050 1,766,050 1,704,050
Depreciation expense - 412,500 412,500 412,500
Taxable Income - 1,065,550 1,353,550 1,291,550
Income (corporate ) tax 30% - 319,665 406,065 387,465
Net cash inflow - 745,885 947,485 904,085
Total annual cash flow (5,000,000) 1,158,385 1,359,985 1,316,585
NPV=2,981,894.48

1. Profitability

According to the projected income statement, the project will start generating profit in the first
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 life-time of the project. The income statement and the other
indicators of profitability show that the project is viable.
2. Break-even Analysis (Bea)
The break even analysis establishes a relationship between operation costs and revenues.
Itindicates the level at which costs and revenue and is in equilibrium.
3. Pay-back Period
The investment cost and income statement projection are used to project the pay-back period.
The project's initial investment will be fully recovered within 5 years.

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4. Internal Rate of Return and Net Present Value

Based on the cash flow statement, the calculated IRR of the project is greater than cost of capital
and the net present value at 10% discount rate is Birr 2,981,894.48million. Since IRR is greater
than cost of capital, 10% and NPV is positive the project is profitable.

5. ECONOMIC BENEFITS
The project will create employment for more than 17 employees from three machine operation.
In addition to supply of the domestic needs, the project will generate income in terms of tax
revenue. Moreover, the Regional Government can collect employment, income tax and sales tax
revenue.

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