Investment Office ANRS

Project Profile on the Establishment

of Animal Feed Producing Plant

Development Studies
Associates (DSA)

October 2008
Addis Ababa
 Table of Contents

1. Executive Summary................................................................................1
2. Product Description and Application....................................................1
3. Market Study, Plant Capacity and Production Program...................1
3.1 Market Study.......................................................................................................1
3.1.1 Present Demand and Supply........................................................................1
3.1.2 Projected Demand........................................................................................4
3.1.3 Pricing and Distribution...............................................................................5
3.2 Plant Capacity......................................................................................................5
3.3 Production Program.............................................................................................5
4. Raw Materials and Utilities....................................................................6
4.1 Availability and Source of Raw Materials...........................................................6
4.2 Annual Requirement and Cost of Raw Materials and Utilities...........................6
5. Location and Site.....................................................................................7
6. Technology and Engineering.................................................................7
6.1 Production Process...............................................................................................7
6.2 Machinery and Equipment...................................................................................8
6.3 Civil Engineering Cost........................................................................................9
6.4 Alternative Technology.......................................................................................9
7. Human Resource and Training Requirement......................................9
7.1 Human Resource..................................................................................................9
7.2 Training Requirement........................................................................................10
8. Financial Analysis.................................................................................11
8.1 Underlying Assumption.....................................................................................11
8.2 Investment..........................................................................................................12
8.3 Production Costs................................................................................................13
8.4 Financial Evaluation..........................................................................................13
9. Economic and Social Benefit and Justification..................................14
ANNEXES....................................................................................................16
 1. Executive Summary
The project envisages production of 5000 tons or 50,000 quintals of assorted animal feed per
annum. The total investment requirement of the project is estimated at about Birr 3.4 million; of
which Birr 1.2 million is the cost of working capital and another Birr 1.2 million is planned to
finance the cost comprising building and civil-works while Birr 830 thousand is for machinery
and equipment. Based on the cash flow statement, the calculated internal rate of return (IRR) and
simple rate of return of the project are 25.9 % and 21.8, respectively. And the net present value
(NPV) at 18 % discounting rate is Birr 818 millions. The plant is expected to create employment
opportunities for about 31 persons.

2. Product Description and Application

Assorted animal feed is used for feeding domestic animals like cattle, sheep and goats, poultry
and hogs. The feed is prepared by modern industrial production method and the main
ingredients are maise, milo, wheat, barley, mash, molasses, soybean oil lees, other vegetable oil
lees, crushed bones, oil and fat, and some other additives. Depending on the availability of
inputs, some of the above inputs could be substituted to each other without affecting the quality
of the animal feed.

3. Market Study, Plant Capacity and Production Program

3.1 Market Study

3.1.1 Present Demand and Supply

With a livestock and poultry population of 31.9 million, the ANRS has the second largest
livestock resources of the country. But, due decreasing size of grazing land caused by the
expansion of farmlands and lack of modern animal feeding system, the livestock population of
the region is increasing at a very low rate; and in some areas, there is an actual decline of the
livestock population. Besides, because of poor and inadequate feeding, the quality of the meat,
hides and skins of the livestock resources of the region has been declining during the past 25
years.

1
The estimated and reported animal feed deficit for the ANRS in 1984 is 28-40 percent. The data
is outdated by nearly two decades, but it is doubtful whether development activities implemented
have had a say in changing the figure. The traditional feeding of livestock by letting cattle and
other domestic animals to wander in an ever decreasing grazing land is no longer practical;
simply there is no enough grazing land for the animals.

If the ANRS has to maintain and further develop its livestock resources for domestic use and for
export, the system of feeding the animals should be modernized and at the same time
economical. One option for providing feed for the animals is the establishment of a number of
small to medium scale animal feed making factories in the major urban centers; and if
infrastructures allow, in the major cattle growing areas of the region. The animal feed from the
factories may not be the only source of feed for the animals; it can be used as supplementary but
important feed for livestock productivity.

Traditionally, Ethiopian dairy farmers as well as cattle fatteners prepared their own concentrated
feed from different ingredients such as milling and oil factory by-products. In other words, agro-
industrial by-products are important rations in ruminant livestock feed. They are generally feeds
of high energy. If such products are mixed with cereals and some sorts of vitamins and minerals,
they are very useful for animal growth and health. However, despite the availability of various
agro-industrial by-products, most of them are under-utilized; mainly because of lack of
appropriate technologies for processing.

In connection to this, however, many inputs used to produce animal feeds have alternative uses,
either for human consumption or for industrial use. These competing demands are determined by
price and availability of the commodity. In country like Ethiopia, where there is shortfall in food
grains production, the availability of raw materials for animal feed plants could be the major
problem. In other words, there is a direct competition between human and livestock for cereal
grains.

To compute the demand for concentrated animal feed in ANRS, it is reasonable to start with the
utilization of agro-industrial by-products as animal feed in the region. Utilization of agro-

2
industrial by products (millers’ by products, oil cakes, brewer’s spent grain, etc…) is a bit higher
in moisture deficit areas (4.1 percent for Dega, 7.0 percent for Woina-Dega and 4.5 percent for
Kola) as compared to sufficient rainfall areas (2.5, 4.3 and 2.3). Transport problem and higher
price prevent by-products from being utilized effectively.

Utilization of concentrated or improved animal feed in the ANRS is only 0.2 %. And, it is from
other regions that the feed is come. Like that of agro-industrial by-products, transport problem
and higher price prevent the use of industrially processed animal feed in the ANRS. Feed
resources for livestock in rural and urban holdings in ANRS are given in Table 3.1.

Table 3.1
FEED RESOURCES FOR LIVESTOCK IN RURAL AND URBAN HOLDINGS IN ANRS

Number of % Rural Urban

households
Green fodder/.grazing 2,670,653 46,58 51.36 35.08
Crop residues 2,545,602 35.31 32.99 17.05
Improved feed (alfalfa) 22,475 0.18 0.16 0.38
Hay (grass, clover, etc) 1,433,118 13.08 11.43 16.05
By – products/others 277,131 1.31 1.02 8.96
By – products: rapeseed cake,
Noug cake, safflower cake,
brewing residue and bran. 617,411 3.54 3.04. 22.47
Source: CSA, 2002 G.C

Supply of industrially processed animal feed in Ethiopia is also very minimal. The production of
animal feed in the country from 1989 E.C to 1999 E.C. is given in Table 3.2 below.
TABLE 3.2
PRODUCTION OF ANIMAL FEED IN ETHIOPIA (IN TONS)

Quantity 1989
(in
Ton)19921
993199419
951996199

3
719981999
Animal
Feed54534
991557670
498399476
265675800
105011321
816000Item

3.1.2
Pr

The
following
assumption
s are made
to project
the future
demand
for
industriall
y processed
animal
feed:

 In
the
year
200
0
E.C.
, the

4
cattl
e
pop
ulat
ion
in
AN
RS
is
esti
mat
ed
to
be
11,0
26,5
49
and
esti
mat
ed
to
gro
w at
1.2
%
per
ann
um
in
the

5
 com
ing
year
s.
 Of
the
tota
l
cattl
e
pop
ulat
ion,
it is
cons
erva
tive
to
say
at
leas
t 0.5
%
( wh
ich
is
two
time
s
the
curr

6
ent
use)
can
be
fed
fro
m
ind
ustr
ially
pro
cess
ed
ani
mal
feed
in
the
shor
t-
run
whil
e, as
awa
rene
ss
incr
ease
s, it
can
gro

7
 w at
10
%
per
ann
um
in
the
com
ing
year
s, if
the
sup
ply
is
avai
labl
e at
a
reas
ona
ble
pric
e.
 The
aver
age
cons
um
ptio

8
 n
per
hea
d
per
day
is
assu
med
to
be
2.7
K.G
,
whi
ch is
take
n
fro
m
the
Stat
e
Dai
ry
Far
ms
past
reco
rd.


9
 Bas
ed
on
the
abo
ve
fact
s
and
assu
mpt
ions
, the
AN
RS’
s
dem
and
for
ind
ustr
ially
pro
cess
ed
ani
mal
feed
can
be
proj

10
ecte
d as
give
n in
Tab
le
3.3
belo
w.
By
the
year
200
0
E.C,
the
proj
ecte
d
dem
and
equ
als
54,3
33
tons
; the
figu
re is
proj
ecte

11
 d to
reac
h
62,6
88
tons
and
66,5
40
tons
by
the
year
200
4
E.C.
and
200
9
E.C.
 TA
BL
E
3.3

 PR
OC
ESS
ED
ANI
MA
L
FE
ED

12
 DE
MA
ND
PR
OJ
ED
TIO
NS
IN
AN
RS

 Yea
r
(E.
C.)
200019901 54,333
991
2001 60,484
2002 61,210
2003 61,944
2004 62,688
2005 63,440
2006 64,201
2007 64,971
2008 65,751
2009 66,540

3.1.3 Pricing and Distribution

Market prices of industrially processed animal feed depends upon the availability and value of
raw materials, number of processing units, number of processing firms and their production
efficiency, prevailing demand and etc. As discussed earlier, the demand for industrially
processed or concentrated animal feeds for ANRS’s alone surpasses the existing animal feed
supply in the country. The current producer’s prices of the product range between Birr 160 and
Birr 180 per quintal at industry gate. In this project profile, it is proposed to sell the product at
Birr 150 per quintal at the factory gate.

13
 3.2 Plant Capacity

According to market study, the present demand supply gap of animal feed is very large. In this
study, a plant with a capacity of 5000 tons per annum is envisaged; which is a small fraction of
the projected demand of the region. The plant will operate 275 days a year. Sundays and national
holidays, amounting to 65 days a year, are registered holidays for the plant. For maintenance and
repair work as well as for contingence of unexpected work interruption additional 25 days are
assigned.

3.3 Production Program

The plant can start operation at 75 % of its capacity in the first year. It will then build up its
production capacity to 85 % and 100 % in the second and third year, respectively. As the plant is
new and is equipped with new machinery, production build-up is made to start at reduced
capacity and gradually rise to full capacity. The low production level at the initial stage is also to
develop substantial market outlets for the product. Machinery operators will also get enough time
to develop the required skills and experience.

14
 4. Raw Materials and Utilities
4.1 Availability and Source of Raw Materials

The main ingredients for the production of industrially processed animal feed are Milo, maize,
wheat bran, mash, molasses, soybean grounds, fish grounds (meal) and some vitamins.
Depending on the availability of other inputs, the above inputs could be substituted without
affecting the quality of the animal feed. All the raw materials, except molasses, can be obtained
within the region. Molasses can be brought from the existing sugar factories or from the region
if these factories are established.

4.2 Annual Requirement and Cost of Raw Materials and Utilities

The quantities and costs of raw materials required for the production of 5000 tons of
concentrated animal feed are indicated in Table 4.1.Utilities required by the plant consist of
electricity, water and fuel oil. The annual requirement and costs of these utilities is shown in
Table 4.2.
TABLE 4.1

RAW AND AUXILIARY MATERIALS REQUIREMENT

No Description Qty Cost ('000 Birr)

(tons) F.C L.C Total
1 Oil Cake 1150 - 555 555
2 Frushka (Bran of Cereals) 1235 - 573.6 573.6
3 Molasses 250 - 120.8 120.8
4 Low Quality Maize 2000 - 1200 1200
5 Salt 7 - 5 5
6 Limestone (ground) 8 - 4.3 4.3
7 Meal (bone or flesh or blood) 200 - 36 36
8 Sacks (150 kg capacity) 100,000 pcs - 600 600
9 Twine Rope lump sum - 8.4 8.4
10 Other grains (low quality 150 - 216 216
wheat, barely and etc)
Total Cost - - 3,319.1 3,319.1

15
 TABLE 4.2

UTILITIES REQUIREMENT AT FULL CAPACITY

No Item Annual Cost ('000 Birr)

Requirement
1 Electricity 45,000 KWH 24.5
2 Water 4800 m3 12.7
3 Fuel Oil 374,000 liter 2618
Total 2655.2

5. Location and Site

For its convenience for distribution, Bahir-Dar is an appropriate choice for the establishment
animal feed production plant in the region.

6. Technology and Engineering

6.1 Production Process

The major operations involved in the production of animal feed are:- raw materials preparation;
primary crushing; assorting and measuring; mixing; molasses mixing; fine crushing; pellet
making; packaging.

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

In assorting and measuring operation, small amounts of additives are charged into the bins
containing different assortments of raw materials. The raw materials stored in the assorting tanks
are measured in accordance with their use (cattle feed, hog feed, etc).

16
The raw materials are then mixed by means of a mixer. In this process, fatty ingredients are
added to the materials in order to raise the nutrient value of the feed. The feed obtained from the
mixer is added with molasses. The product is next accommodated in the product tanks, then
weighed and packaged.

6.2 Machinery and Equipment

Machinery and equipment required by the plant together with auxiliary equipment and their costs
are given in Table 6.1.

TABLE 6.1

MACHINERY AND EQUIPMENT REQUIRED BY CATTLE FEED

PRODUCING PLANT

No Description Cost(In Birr)

1 Tanks And Silos for Raw and Auxiliary Materials
2 Metal Screen & Shaker
3 Mixer
4 Hammer Mill (Crusher)
5 Blender FOB price for items
1-13: Birr 680,000
6 Weighing Scale (5 Tons)
7 Bagging Equipment
8 Dust Collector
9 Product Tank
10 Tanks for Oil Cakes and Molasses
11 Boiler
12 Other Accessories
Sub-Total 680,000
Freight, Insurance, Banks, Charges, Inland Transport, etc. 150,000
Total Cost of Machinery and Equipment 830,000

Machinery Suppliers Address:

Shanghai Zenith Company
Zip: 200122
No. 416 Jane Road, South Jinqiao Area, Padongo New area,
Shanghai, China

17
 6.3 Civil Engineering Cost

The building area required by the plant is estimated to be 600 m 2, and it costs Birr 1,200,000.
This would include cost of land preparation and associated civil works. The total land area of the
plant including the open space is 1000 m2. The cost of the land lease is Birr 60,000 which is as
per ANRS land lease rate for Bahir-Dar (which is equal to Birr 60 per sq meter for industrial
purpose). Of the total cost of the lease 5 % is paid in the beginning while the rest will be paid in
40 years.

6.4 Alternative Technology

Alternatively, assorted animal feed can be produced using a capital intensive technology that
involves fine crushing and pellet making. In this case, after the feed is mixed with molasses, it is
further crushed by means of the second chamber, and the assorted animal feed that is crushed in
to fine particles is further formed in to pellets. The pellets, which are cylindrical type and come
in sizes measuring 6mm in diameter and 2 cm in length, are then dried.

7. Human Resource and Training Requirement

7.1 Human Resource

The manpower requirement of the plant will be 33 out of which 18 will be engaged in production
activities and the remaining 15 will be involved in administrative activities. In terms of annual
expenditure a total of Birr 241,200 will be expended for salary and wages. Table 7.1 shows the
details of manpower requirement of the plant.

18
 TABLE 7.1

MANPOWER REQUIREMENT OF ANIMAL FEED PRODUCING PLANT

No Description Qt Monthly Annual

(no) Salary/Wages Expenditure
A. Administration

1 Plant Manager 1 2500 30000

2 Secretary 1 500 6000
3 Accountant 1 800 9600
4 Personnel Officer 1 800 9600
5 Salesman 1 800 9600
6 Cashier 1 600 7200
7 Clerks 2 250 6000
8 General Services 5 300 18000

B. Production

1 Production Supervisor 1 1200 14400

2 Electrical/Mechanical Eng. 1 1500 18000
3 Skilled Workers 10 600 72000
4 Unskilled Workers 6 400 28800

Sub-total 31 - 229200
Training Cost - - 12000
Benefits 48,240
Total cost 31 - 241,200

7.2 Training Requirement

Training is required for key production personnel. For this purpose, one expert from the
technology suppliers can be sent.

19
 8. Financial Analysis
8.1 Underlying Assumption

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

A. Construction and Finance

Construction period 2 years

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

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

C. Working Capital (Minimum Days of Coverage)

Raw Material-Local 30 days

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

20
 8.2 Investment
The total investment cost of the project including working capital is estimated at Birr 3.4 million
as shown in Table 8.1 below. The Owner shall contribute 40 % of the finance in the form of
equity while the remaining 60 % is to be financed by bank loan.

Table 8.1
TOTAL INITIAL INVESTMENT

Items L.C F.C Total

Land
3,000 3,000
Building and Civil Works
1,200,000 1,200,000
Office Equipment
50,000 50,000
Vehicles
0 0
Plant Machinery & Equipment
0 830,000 830,000
Total Fixed Investment Cost
1,253,000 830,000 2,083,000
Pre production capital
expenditure* 62,650 104,150
Total Initial Investment
1,315,650 830,000 2,187,150
Working Capital at Full Capacity
1,219,372 0 1,219,372
Total 2,535,022 830,000 3,406,522
*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.

The major components of the investment are building and civil works, plant and machinery
expenses and working capital which are accounting for 35.2 %, 24.4 % and 35.8 %, respectively.
The foreign component of the project accounts for 24.4 % of the total investment cost.

21
 8.3 Production Costs
The total production cost at full capacity operation is estimated at Birr 6.7 million (See Table
8.2). Raw materials and utilities amounts Birr 89.8 % of the total production cost.

TABLE 8.2

PRODUCTION COST AT FULL CAPACITY

Raw Material
Requirement Cost
1.Local Raw Materials 3,319,100
2.Foreign Raw Materials 0

Total Production Cost at full Capacity

Items Cost
1. Raw Materials 3,319,100
2. Utilities 2,655,200
3. Wages and Salaries 241,200
4. Spares and Maintenance 62,490
Factory costs 6,277,990
5. Depreciation 168,830
6. Financial Costs
204,391
Total Production Cost 6,651,211

8.4 Financial Evaluation

I. Profitability

According to the projected income statement (See Annex 4) the project will generate profit
beginning from the first year of operation and increases on wards. The income statement and
other profitability indicators also show that the project is viable.

22
 II. Breakeven Analysis

The breakeven point of the projects is given by the formula:

BEP = Fixed Cost

Sale –Variable Cost at full capacity.

The project will break even at 21.8 % of capacity utilization

III. Payback Period

Investment cost and income statement projection are used in estimating the project payback
period. The project will payback fully the initial investment less working capital in three years.

IV. Simple Rate of Return

The project’s simple rate of return is given by the formula:

SRR= (Net Profit + Interest)/ (Total Investment Outlay) at full capacity utilization.

The SRR would be 22.2 % at full capacity utilization.

V. Internal Rate of Return and Net Present Value

Based on cash flow statement (Annex 2) the calculated internal rate of return (IRR) of the project
is 25.9 % and the net present value (NPV) at 18 % discount is Birr 818 thousand.

VI. Sensitivity Analysis

The sensitivity test result which undertaken by increasing the cost of production by 5 % still
indicates that the project would be viable.

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

23
 A. Profit Generation

The project is found to be financially viable and earns on average a profit of Birr 621 thousands
per year and Birr 6.2 million within the project life. Such result induces the project promoters to
reinvest the profit which, therefore, increases the investment magnitude in the region.

B. Tax Revenue

In the project life under consideration, the region will collect about Birr 2.3 million from
corporate tax payment alone (i.e. excluding income tax, sales tax and VAT). Such result create
additional fund for the regional government that will be used in expanding social and other basic
services in the region

C. Employment and Income Generation

The proposed project is expected to create employment opportunity to several citizens of the
country. That is, it will provide permanent employment to 31 professionals as well as support
stuffs. Consequently, the project creates income of Birr 241 thousands per year. This would be
one of the commendable accomplishments of the project.

D. Pro Environment Project

The proposed production process is environmentally friendly.

24
ANNEXES

25
 Annex 1: Total Net Working Capital Requirements (in Birr)
CONSTRUCTION PRODUCTION
0075%85%100%100% Year 1 Year 2 1 2 3 4

1. Total InventoryCapacity Utilization (%) 0.00 0.00 949113.26 1075661.70 1265484.35 1265484.35

Raw Materials in Stock- Total 0.00 0.00 271562.73 307771.09 362083.64 362083.64

Raw Material-Local 0.00 0.00 271562.73 307771.09 362083.64 362083.64

Raw Material-Foreign 0.00 0.00 0.00 0.00 0.00 0.00

Factory Supplies in Stock 0.00 0.00 5274.67 5977.96 7032.89 7032.89

Spare Parts in Stock and Maintenance 0.00 0.00 5112.82 5794.53 6817.09 6817.09

Work in Progress 0.00 0.00 131866.77 149449.01 175822.36 175822.36

Finished Products 0.00 0.00 263733.55 298898.02 351644.73 351644.73

2. Accounts Receivable 0.00 0.00 613636.36 695454.55 818181.82 818181.82

3. Cash in Hand 0.00 0.00 236978.18 268575.27 315970.91 315970.91

CURRENT ASSETS 0.00 0.00 1528165.08 1731920.42 2037553.44 2037553.44

4. Current Liabilities 0.00 0.00 613636.36 695454.55 818181.82 818181.82

Accounts Payable 0.00 0.00 613636.36 695454.55 818181.82 818181.82

TOTAL NET WORKING CAPITAL REQUIRMENTS 0.00 0.00 914528.72 1036465.88 1219371.62 1219371.62

INCREASE IN NET WORKING CAPITAL 0.00 0.00 914528.72 121937.16 182905.74 0.00

1
 Annex 1: Total Net Working Capital Requirements (in Birr) (continued)
PRODUCTION
100%100%100%100%100%100% 5 6 7 8 9 10

1. Total InventoryCapacity Utilization (%) 1265484.35 1265484.35 1265484.35 1265484.35 1265484.35 1265484.35

Raw Materials in Stock-Total 362083.64 362083.64 362083.64 362083.64 362083.64 362083.64

Raw Material-Local 362083.64 362083.64 362083.64 362083.64 362083.64 362083.64

Raw Material-Foreign 0.00 0.00 0.00 0.00 0.00 0.00

Factory Supplies in Stock 7032.89 7032.89 7032.89 7032.89 7032.89 7032.89

Spare Parts in Stock and Maintenance 6817.09 6817.09 6817.09 6817.09 6817.09 6817.09

Work in Progress 175822.36 175822.36 175822.36 175822.36 175822.36 175822.36

Finished Products 351644.73 351644.73 351644.73 351644.73 351644.73 351644.73

2. Accounts Receivable 818181.82 818181.82 818181.82 818181.82 818181.82 818181.82

3. Cash in Hand 315970.91 315970.91 315970.91 315970.91 315970.91 315970.91

CURRENT ASSETS 2037553.44 2037553.44 2037553.44 2037553.44 2037553.44 2037553.44

4. Current Liabilities 818181.82 818181.82 818181.82 818181.82 818181.82 818181.82

Accounts Payable 818181.82 818181.82 818181.82 818181.82 818181.82 818181.82

TOTAL NET WORKING CAPITAL REQUIRMENTS 1219371.62 1219371.62 1219371.62 1219371.62 1219371.62 1219371.62

INCREASE IN NET WORKING CAPITAL 0.00 0.00 0.00 0.00 0.00 0.00

2
 Annex 2: Cash Flow Statement (in Birr)
CONSTRUCTION PRODUCTION
1093575.002312946.626238636.
366456818.187622727.27750000
0.00 Year 1 Year 2 1 2 3 4
1. Inflow Funds TOTAL CASH
INFLOW 1093575.00 2312946.62 613636.36 81818.18 122727.27 0.00
Total Equity 437430.00 925178.65 0.00 0.00 0.00 0.00
Total Long Term Loan 656145.00 1387767.97 0.00 0.00 0.00 0.00
Total Short Term Finances 0.00 0.00 613636.36 81818.18 122727.27 0.00
2. Inflow Operation 0.00 0.00 5625000.00 6375000.00 7500000.00 7500000.00
Sales Revenue 0.00 0.00 5625000.00 6375000.00 7500000.00 7500000.00
Interest on Securities 0.00 0.00 0.00 0.00 0.00 0.00
3. Other Income 0.00 0.00 0.00 0.00 0.00 0.00
TOTAL CASH OUTFLOW 1093575.00 1093575.00 6782477.24 6149905.03 7400266.33 7066018.53
4. Increase In Fixed Assets 1093575.00 1093575.00 0.00 0.00 0.00 0.00
Fixed Investments 1041500.00 1041500.00 0.00 0.00 0.00 0.00
Pre-production
Expenditures 52075.00 52075.00 0.00 0.00 0.00 0.00
5. Increase in Current Assets 0.00 0.00 1528165.08 203755.34 305633.02 0.00
6. Operating Costs 0.00 0.00 4732231.15 5360227.97 6302223.20 6302223.20
7. Corporate Tax Paid 0.00 0.00 0.00 0.00 247366.65 259630.13
8. Interest Paid 0.00 0.00 522081.01 245269.56 204391.30 163513.04
9.Loan Repayments 0.00 0.00 0.00 340652.16 340652.16 340652.16
10.Dividends Paid 0.00 0.00 0.00 0.00 0.00 0.00
Surplus(Deficit) 0.00 1219371.62 -543840.88 306913.15 222460.95 433981.47
Cumulative Cash Balance 0.00 1219371.62 675530.75 982443.90 1204904.84 1638886.31

3
 Annex 2: Cash Flow Statement (in Birr): Continued
PRODUCTION
7500000.007500000.007500000.
007500000.007500000.00750000
0.00 5 6 7 8 9 10
1. Inflow Funds TOTAL CASH
INFLOW 0.00 0.00 0.00 0.00 0.00 0.00
Total Equity 0.00 0.00 0.00 0.00 0.00 0.00
Total Long Term Loan 0.00 0.00 0.00 0.00 0.00 0.00
Total Short Term Finances 0.00 0.00 0.00 0.00 0.00 0.00
2. Inflow Operation 7500000.00 7500000.00 7500000.00 7500000.00 7500000.00 7500000.00
Sales Revenue 7500000.00 7500000.00 7500000.00 7500000.00 7500000.00 7500000.00
Interest on Securities 0.00 0.00 0.00 0.00 0.00 0.00
3. Other Income 0.00 0.00 0.00 0.00 0.00 0.00
TOTAL CASH OUTFLOW 7037403.75 7015037.97 6986423.18 6617156.24 6617156.24 6617156.24
4. Increase In Fixed Assets 0.00 0.00 0.00 0.00 0.00 0.00
Fixed Investments 0.00 0.00 0.00 0.00 0.00 0.00
Pre-production
Expenditures 0.00 0.00 0.00 0.00 0.00 0.00
5. Increase in Current Assets 0.00 0.00 0.00 0.00 0.00 0.00
6. Operating Costs 6302223.20 6302223.20 6302223.20 6302223.20 6302223.20 6302223.20
7. Corporate Tax Paid 271893.61 290406.08 302669.56 314933.04 314933.04 314933.04
8. Interest Paid 122634.78 81756.52 40878.26 0.00 0.00 0.00
9. Loan Repayments 340652.16 340652.16 340652.16 0.00 0.00 0.00
10.Dividends Paid 0.00 0.00 0.00 0.00 0.00 0.00
Surplus(Deficit) 462596.25 484962.03 513576.82 882843.76 882843.76 882843.76
Cumulative Cash Balance 2101482.57 2586444.60 3100021.42 3982865.18 4865708.94 5748552.70

4
 Annex 3: DISCOUNTED CASH FLOW-TOTAL CAPITAL INVESTED
CONSTRUCTION PRODUCTION
0.000.005625000.006375000.007500000.
007500000.00 Year 1 Year 2 1 2 3 4
1. Inflow OperationTOTAL CASH
INFLOW 0.00 0.00 5625000.00 6375000.00 7500000.00 7500000.00

Sales Revenue 0.00 0.00 5625000.00 6375000.00 7500000.00 7500000.00

Interest on Securities 0.00 0.00 0.00 0.00 0.00 0.00

2. Other Income 0.00 0.00 0.00 0.00 0.00 0.00

TOTAL CASH OUTFLOW 1093575.00 1093575.00 5646759.87 5482165.13 6485128.94 6561853.33

3. Increase in Fixed Assets 1093575.00 1093575.00 0.00 0.00 0.00 0.00

Fixed Investments 1041500.00 1041500.00 0.00 0.00 0.00 0.00

Pre-production Expenditures 52075.00 52075.00 0.00 0.00 0.00 0.00

4. Increase in Net Working Capital 0.00 0.00 914528.72 121937.16 182905.74 0.00

5. Operating Costs 0.00 0.00 4732231.15 5360227.97 6302223.20 6302223.20

6. Corporate Tax Paid 0.00 0.00 0.00 0.00 0.00 259630.13

NET CASH FLOW -1093575.00 -1093575.00 -21759.87 892834.87 1014871.06 938146.67

CUMMULATIVE NET CASH FLOW -1093575.00 -2187150.00 -2208909.87 -1316075.00 -301203.94 636942.73

Net Present Value (at 18%) -1093575.00 -926758.47 -15627.60 543406.86 523459.20 410072.56

Cumulative Net present Value -1093575.00 -2020333.47 -2035961.07 -1492554.21 -969095.01 -559022.45

Annex 3: DISCOUNTED CASH FLOW-TOTAL CAPITAL INVESTED (Continued)

5
 PRODUCTION
7500000.007500000.007500000.00750000
0.007500000.007500000.00 5 6 7 8 9 10
1. Inflow OperationTOTAL CASH
INFLOW 7500000.00 7500000.00 7500000.00 7500000.00 7500000.00 7500000.00

Sales Revenue 7500000.00 7500000.00 7500000.00 7500000.00 7500000.00 7500000.00

Interest on Securities 0.00 0.00 0.00 0.00 0.00 0.00

2. Other Income 0.00 0.00 0.00 0.00 0.00 0.00

TOTAL CASH OUTFLOW 6574116.81 6592629.28 6604892.76 6617156.24 6617156.24 6617156.24

3. Increase in Fixed Assets 0.00 0.00 0.00 0.00 0.00 0.00

Fixed Investments 0.00 0.00 0.00 0.00 0.00 0.00

Pre-production Expenditures 0.00 0.00 0.00 0.00 0.00 0.00

4. Increase in Net Working Capital 0.00 0.00 0.00 0.00 0.00 0.00

5. Operating Costs 6302223.20 6302223.20 6302223.20 6302223.20 6302223.20 6302223.20

6. Corporate Tax Paid 271893.61 290406.08 302669.56 314933.04 314933.04 314933.04

NET CASH FLOW 925883.19 907370.72 895107.24 882843.76 882843.76 882843.76

CUMMULATIVE NET CASH FLOW 1562825.92 2470196.64 3365303.88 4248147.64 5130991.40 6013835.16

Net Present Value (at 18%) 342976.34 284846.38 238132.69 199042.49 168680.07 142949.21

Cumulative Net present Value -216046.11 68800.27 306932.95 505975.44 674655.51 817604.73

Net Present Value (at 18%) 817,604.73

Internal Rate of Return 25.9%

6
 Annex 4: NET INCOME STATEMENT ( in Birr)
PRODUCTION
1 2 3 4 5
Capacity Utilization (%) 75% 85% 100% 100% 100%

1. Total Income 5625000.00 6375000.00 7500000.00 7500000.00 7500000.00

Sales Revenue 5625000.00 6375000.00 7500000.00 7500000.00 7500000.00
Other Income 0.00 0.00 0.00 0.00 0.00
2. Less Variable Cost 4637616.15 5255964.97 6183488.20 6183488.20 6183488.20
VARIABLE MARGIN 987383.85 1119035.03 1316511.80 1316511.80 1316511.80
(In % of Total Income) 17.55 17.55 17.55 17.55 17.55
3. Less Fixed Costs 263445.00 273093.00 287565.00 287565.00 287565.00
OPERATIONAL MARGIN 723938.85 845942.03 1028946.80 1028946.80 1028946.80
(In % of Total Income) 12.87 13.27 13.72 13.72 13.72
4. Less Cost of Finance 522081.01 245269.56 204391.30 163513.04 122634.78
5. GROSS PROFIT 201857.84 600672.47 824555.50 865433.76 906312.02
6. Income (Corporate) Tax 0.00 0.00 247366.65 259630.13 271893.61
7. NET PROFIT 201857.84 600672.47 577188.85 605803.63 634418.42
RATIOS (%)
Gross Profit/Sales 3.59% 9.42% 10.99% 11.54% 12.08%
Net Profit After Tax/Sales 3.59% 9.42% 7.70% 8.08% 8.46%
Return on Investment 23.34% 26.24% 22.94% 22.58% 22.22%
Return on Equity 14.81% 44.08% 42.36% 44.46% 46.56%

7
 Annex 4: NET INCOME STATEMENT (in Birr):Continued
PRODUCTION
6 7 8 9 10
Capacity Utilization (%) 100% 100% 100% 100% 100%

1. Total Income 7500000.00 7500000.00 7500000.00 7500000.00 7500000.00

Sales Revenue 7500000.00 7500000.00 7500000.00 7500000.00 7500000.00
Other Income 0.00 0.00 0.00 0.00 0.00
2. Less Variable Cost 6183488.20 6183488.20 6183488.20 6183488.20 6183488.20
VARIABLE MARGIN 1316511.80 1316511.80 1316511.80 1316511.80 1316511.80
(In % of Total Income) 17.55 17.55 17.55 17.55 17.55
3. Less Fixed Costs 266735.00 266735.00 266735.00 266735.00 266735.00
OPERATIONAL MARGIN 1049776.80 1049776.80 1049776.80 1049776.80 1049776.80
(In % of Total Income) 14.00 14.00 14.00 14.00 14.00
4. Less Cost of Finance 81756.52 40878.26 0.00 0.00 0.00
5. GROSS PROFIT 968020.28 1008898.54 1049776.80 1049776.80 1049776.80
6. Income (Corporate) Tax 290406.08 302669.56 314933.04 314933.04 314933.04
7. NET PROFIT 677614.20 706228.98 734843.76 734843.76 734843.76
RATIOS (%)
Gross Profit/Sales 12.91% 13.45% 14.00% 14.00% 14.00%
Net Profit After Tax/Sales 9.03% 9.42% 9.80% 9.80% 9.80%
Return on Investment 22.29% 21.93% 21.57% 21.57% 21.57%
Return on Equity 49.73% 51.83% 53.93% 53.93% 53.93%

8
 Annex 5: Projected Balance Sheet (in Birr)
CONSTRUCTION PRODUCTION
1093575.003406521.624222015.834563854.324
923118.285188269.75 Year 1 Year 2 1 2 3 4
1. Total Current AssetsTOTAL ASSETS 0.00 1219371.62 2203695.83 2714364.32 3242458.28 3676439.75
Inventory on Materials and Supplies 0.00 0.00 281950.22 319543.58 375933.62 375933.62
Work in Progress 0.00 0.00 131866.77 149449.01 175822.36 175822.36
Finished Products in Stock 0.00 0.00 263733.55 298898.02 351644.73 351644.73
Accounts Receivable 0.00 0.00 613636.36 695454.55 818181.82 818181.82
Cash in Hand 0.00 0.00 236978.18 268575.27 315970.91 315970.91
Cash Surplus, Finance Available 0.00 1219371.62 675530.75 982443.90 1204904.84 1638886.31
Securities 0.00 0.00 0.00 0.00 0.00 0.00
2. Total Fixed Assets, Net of Depreciation 1093575.00 2187150.00 2018320.00 1849490.00 1680660.00 1511830.00
Fixed Investment 0.00 1041500.00 2083000.00 2083000.00 2083000.00 2083000.00
Construction in Progress 1041500.00 1041500.00 0.00 0.00 0.00 0.00
Pre-Production Expenditure 52075.00 104150.00 104150.00 104150.00 104150.00 104150.00
Less Accumulated Depreciation 0.00 0.00 168830.00 337660.00 506490.00 675320.00
3. Accumulated Losses Brought Forward 0.00 0.00 0.00 0.00 0.00 0.00
4. Loss in Current Year 0.00 0.00 0.00 0.00 0.00 0.00
TOTAL LIABILITIES 1093575.00 3406521.62 4222015.83 4563854.32 4923118.28 5188269.75
5. Total Current Liabilities 0.00 0.00 613636.36 695454.55 818181.82 818181.82
Accounts Payable 0.00 0.00 613636.36 695454.55 818181.82 818181.82
Bank Overdraft 0.00 0.00 0.00 0.00 0.00 0.00
6. Total Long-term Debt 656145.00 2043912.97 2043912.97 1703260.81 1362608.65 1021956.49
Loan A 656145.00 2043912.97 2043912.97 1703260.81 1362608.65 1021956.49
Loan B 0.00 0.00 0.00 0.00 0.00 0.00
7. Total Equity Capital 437430.00 1362608.65 1362608.65 1362608.65 1362608.65 1362608.65
Ordinary Capital 437430.00 1362608.65 1362608.65 1362608.65 1362608.65 1362608.65
Preference Capital 0.00 0.00 0.00 0.00 0.00 0.00
Subsidies 0.00 0.00 0.00 0.00 0.00 0.00
8. Reserves, Retained Profits Brought
Forward 0.00 0.00 0.00 201857.84 802530.31 1379719.17
9.Net Profit After Tax 0.00 0.00 201857.84 600672.47 577188.85 605803.63
Dividends Payable 0.00 0.00 0.00 0.00 0.00 0.00
Retained Profits 0.00 0.00 201857.84 600672.47 577188.85 605803.63

9
 Annex 5: Projected Balance Sheet (in Birr): Continued
PRODUCTION
5482036.015818998.046184574.866919418.627
654262.388389106.14 5 6 7 8 9 10
1. Total Current Assets TOTAL ASSETS 4139036.01 4623998.04 5137574.86 6020418.62 6903262.38 7786106.14
Inventory on Materials and Supplies 375933.62 375933.62 375933.62 375933.62 375933.62 375933.62
Work in Progress 175822.36 175822.36 175822.36 175822.36 175822.36 175822.36
Finished Products in Stock 351644.73 351644.73 351644.73 351644.73 351644.73 351644.73
Accounts Receivable 818181.82 818181.82 818181.82 818181.82 818181.82 818181.82
Cash in Hand 315970.91 315970.91 315970.91 315970.91 315970.91 315970.91
Cash Surplus, Finance Available 2101482.57 2586444.60 3100021.42 3982865.18 4865708.94 5748552.70
Securities 0.00 0.00 0.00 0.00 0.00 0.00
2. Total Fixed Assets, Net of Depreciation 1343000.00 1195000.00 1047000.00 899000.00 751000.00 603000.00
Fixed Investment 2083000.00 2083000.00 2083000.00 2083000.00 2083000.00 2083000.00
Construction in Progress 0.00 0.00 0.00 0.00 0.00 0.00
Pre-Production Expenditure 104150.00 104150.00 104150.00 104150.00 104150.00 104150.00
Less Accumulated Depreciation 844150.00 992150.00 1140150.00 1288150.00 1436150.00 1584150.00
3. Accumulated Losses Brought Forward 0.00 0.00 0.00 0.00 0.00 0.00
4. Loss in Current Year 0.00 0.00 0.00 0.00 0.00 0.00
TOTAL LIABILITIES 5482036.01 5818998.04 6184574.86 6919418.62 7654262.38 8389106.14
5. Total Current Liabilities 818181.82 818181.82 818181.82 818181.82 818181.82 818181.82
Accounts Payable 818181.82 818181.82 818181.82 818181.82 818181.82 818181.82
Bank Overdraft 0.00 0.00 0.00 0.00 0.00 0.00
6. Total Long-term Debt 681304.32 340652.16 0.00 0.00 0.00 0.00
Loan A 681304.32 340652.16 0.00 0.00 0.00 0.00
Loan B 0.00 0.00 0.00 0.00 0.00 0.00
7. Total Equity Capital 1362608.65 1362608.65 1362608.65 1362608.65 1362608.65 1362608.65
Ordinary Capital 1362608.65 1362608.65 1362608.65 1362608.65 1362608.65 1362608.65
Preference Capital 0.00 0.00 0.00 0.00 0.00 0.00
Subsidies 0.00 0.00 0.00 0.00 0.00 0.00
8. Reserves, Retained Profits Brought
Forward 1985522.80 2619941.21 3297555.41 4003784.39 4738628.15 5473471.91
9. Net Profit After Tax 634418.42 677614.20 706228.98 734843.76 734843.76 734843.76
Dividends Payable 0.00 0.00 0.00 0.00 0.00 0.00
Retained Profits 634418.42 677614.20 706228.98 734843.76 734843.76 734843.76

10