Investment Office ANRS

Project Profile on the Establishment

of Apple Production Farm

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
3.1Market Study...............................................................................................................1
3.1.1Present Demand and Supply................................................................................1
3.1.2Projected Demand................................................................................................2
3.1.3Pricing and Distribution.......................................................................................3
3.2Plant Capacity.............................................................................................................3
3.3Production Program....................................................................................................3

4.Raw Materials and Utilities.......................................................................4

4.1Availability and Source of Raw Materials..................................................................4
4.2Annual Requirement and Cost of Raw Materials and Utilities...................................4

5.Location and Site........................................................................................5

6.Technology and Engineering ....................................................................5
6.1Production Process......................................................................................................5
6.2Machinery and Equipment..........................................................................................6
6.3Civil Engineering Cost................................................................................................6

7.Human Resource and Training Requirement.........................................7

7.1Human Resource.........................................................................................................7
7.2Training Requirement.................................................................................................7

8.Financial Analysis......................................................................................8
8.1Underlying Assumption .............................................................................................8
8.2Investment...................................................................................................................8
8.3Production Costs.........................................................................................................9
8.4Financial Evaluation.................................................................................................10

9.Economic and Social Benefit and Justification.....................................11

ANNEXES....................................................................................................13

1. Executive Summary
This project envisages the production of 4000 quintal apple fruit per annum. The total investment
requirement of the project including the working capital is estimated at about Birr 1 million; of
which Birr 100,000 is for machinery and equipments and Birr 286 is pre production cost while
Birr 87 thousand is the cost of the working capital. Based on the cash flow statement, the
calculated internal rate of return (IRR) and simple rate of return (SRR) of the project are 57.1 %
and 101.4 %, respectively. The net present value (NPV) at 18 % discounting rate is about Birr
2643 thousand. The plant is expected to create employment opportunities for about 36 persons.

2. Product Description and Application

Apple fruits are round in shape with juicy flesh and skin, green, red or yellow in color. An
apples primary nutritional benefit is in the pectin and fiber. Apples contain as much as fiber as
whole cereals. They also contain chemicals that play a role in prevention of certain cancers and
heart diseases. Growing apple trees in the home garden or as agro foresting production system
can be financially rewarding. There are several varieties of apple to be considered for selection
before planting for successful apple production. The four major varieties which dominate the
world production are red delicious, Golden delicious, Rome beauty and galas.

3. Market Study, Plant Capacity and Production Program

3.1

Market Study
3.1.1 Present Demand and Supply

Apples provide bulk in the diet for the proper functioning of the bodys digestive and regulatory
systems. Pectin and hemicelluloses and the acid-base ratio contribute to this pectin and mild
acids help fight body toxins, aid digestion and pep up the whole body system. Apples are rich in
pectin. Pectin has been associated with helping to keep cholesterol levels in balance and in this
connection it is felt to be significant in helping to reduce the incidence of certain types of heart
diseases. The high potassium, low sodium ratio in apples is also important in certain cardiac and

renal problems as well as in diet for over weight persons. Some studies have indicated that
people eating apples regularly have fewer headaches and other illness associated with nervous
tension. Other studies have also shown an association of regular apple consumption with a
reduced incidence of colds and other upper respiratory sickness. Apple juice is also preferred for
infant due to its mid nature and low acid content. In general, apples contain modest amount of
almost all of the most important nutrients. They have universally acceptable flavor, appeal,
versatility and convenience for use. They can also be available through out the year due to their
long shelf life. They are good for teeth, stomach, skin, nerves, smiles and good health.
Most of the apple produced in the world is packed and sold fresh; and some is produced for the
processing of apple juice production. Apple production in Ethiopia is a very recent phenomenon.
Hence, domestic markets will be the main sales outlets for local apple production. As production
grows, however, international markets are still very significant due the potential of higher
returns; this, however, require higher quality. Red delicious and Rome beauty apples have the
largest share in the world market. In recent years, organic food production has been growing
drastically on the world market. In connection to this, the highlands of the Amhara Region can
easily produce organic apple and get higher return per unit of land than producing grain crops.
In the past few years, the volume of imports of apple has increased significantly. By the year
1999 E.C alone, some 524 tons of apple has been imported to Ethiopia from South Africa, Iran,
Chain, Italy, Chile and other countries. Of the total import, 355 ton is fresh apple and 207
thousand tons is apple juice while 12 tons is dried apple.

3.1.2 Projected Demand

The future demand for apple is promising due to two main factors. First, an increase in
population in general and urbanization in particular is expected to amplify the domestic
consumption of the apple. At the same time, an increase in income inevitably improves the per
capita consumption of apple in the future. Consequently, with a conservative growth rate of 5 %
per annum, the future demand for orange is forecasted as shown in Table 3.1 below.

TABLE 3.1
DEMAND PROJECTION FOR APPLE
IN (TONS)
Year E.C
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009

At National Level
524
550
578
607
637
669
702
737
774
813
854

Table 3.1 shows that there is substantial and growing demand for apple in the coming years. At
the same time, it suggests the relevance of establishing an apple plantation so as to meet the
current and future demand from local sources.

3.1.3 Pricing and Distribution

Based on the market research result and the cost of the envisaged plantation, the selling price of a
kilogram of apple is set to be Birr 5. In distributing the output the envisaged plant shall make use
of the available sales network.

3.2

Plant Capacity

Thus, given the expected demand for apple as presented earlier, and the planned technology, the
envisaged plantation plans to produce 4,000 quintal of apple per annum on 10 hectares of land.

3.3

Production Program

During the first three years, production is 0 % of the plantation capacity. In the fourth year and
fifth years, there will be production at 60 % and 85 % of the plantation capacity. Starting from
the sixth year, 100 % of the plantation capacity is assumed. The capacity build up is established
by considering the time required for maturity of the tree.
3

4. Raw Materials and Utilities

4.1

Availability and Source of Raw Materials

Trellis material tape and twine, free training material, mulching material, compost( fertilizer),
chemicals, beehives for cross pollination are required for the process of apple production which
are available locally. The only material that is not locally available in sufficient quantity and
quality is apple tree seedlings. Seedlings or good nursery sources should be identified from
major apple producing countries such as Italy, Iran and South Africa. But, pilot project could
start with seedlings from Arba Minch. When buying apple trees (seedlings) they must be of
recommended varieties from a reliable source.

4.2

Annual Requirement and Cost of Raw Materials and Utilities

Raw material for requirement for a full capacity single shift operation of the plant and the
corresponding cost estimates are given in Table 4.1.
TABLE 4.1
RAW MATERIALS REQUIREMENT

Material and Input

Fertilizer (Compost)
Chemicals
Total Material Cost

Quantity

L.C.

Total Cost
F.C.

30,000 Kg
625 Kg

45,000
6,250
51,250

20,000KWH
8,000 liter
1000m3

11,000
56,000
2,650
69,650

Utility
Electricity
Furnace Oil
Water
Total Utility Cost

According to the above table the annual cost of input and utility is estimated to be Birr 120, 900.

5. Location and Site

For its good environment to produce apple, North Shewa zone is an appropriate choice for the
establishment of apple production farm in the Amhara region.

6. Technology and Engineering

6.1

Production Process

Apple tree growing can be rewarding for both small scale farmers as well as commercial
growers. Several factors are important to be considered for a successful apple production. Apple
variety and root stock, site selection, proper planting, training and pruning, adequate fertility, and
pest control contribute to healthy and productive trees.
Land should be well prepared for planting the apple trees. Well-drained, sandy loam with a PH
below 6.5 is best. Finer-textured-loamy clay soils will suffice if they are well drained. An
elevated slope or hilltop is best to minimize frost damages.
One year old nursery trees with good root systems should be ready. When buying apple trees
(seedlings) they must be of recommended varieties from a reliable source. To plant the apple
trees, first dig a ditch 60 cm deep and sufficiently wide for the diameter of the root system. Place
some of the loose soil back in to the hole and loosen the soil on the wall of the planting hole so
that the roots can easily penetrate the soil. Spread the roots to protect shallow root damages. As
you cover the roots press and make firm the soil to be sure it surrounds the roots and to remove
air pockets. Good sanitation practices are necessary to control pest problems. Do not add
fertilizer at planting time as the root can be burned. When you have finished planting the tree,
water well to eliminate air pockets and provide good contact between the roots and the soil.
Good quality irrigation water should be available for moisture stress period. Fencing the site is
advisable to protect from animal damage. Apple trees require full sun and big trees shade should
be avoided.

Apple trees requires pruning for better and faster production. Proper training and pruning of fruit
trees is essential to the development of a strong tree framework that will support fruit production.
Properly shaped trees will yield high quality fruit much sooner and will live significantly longer.
Regular pruning and training will also maximize light penetration to the developing flower buds
and fruits. Apple trees often set a heavier crop of fruits than the branch (limbs) can withstand. To
ensure good fruit size, to return bloom for the following year, and to prevent tree breakage, it is
necessary to thin the fruit. Adequate tree nutrition is essential for quality apple production. To
maintain the required level of nutrition status, follow the fertilization guidelines provided by the
soil test.
Controlling weeds and grasses around young apple trees minimizes competition for soil nutrients
and moisture, encourages vigorous tree growth and increases fruit size. Avoid mechanical weed
cultivation. Diseases and insects can cause serious damage to apple trees and fruits. A regular
spray program is essential for high fruit quality and healthy trees.
Apples reach maturity at different times, depending on variety and climate. When apple fruits
skin color changes from green to yellow it indicates maturity and it will be crisp and juicy with
pleasant taste. Proper storage conditions help to prolong the shelf-life apple. Depending on the
conditions of storage, apples can be stored up to 12 months.

6.2

Machinery and Equipment

Basically, the planting and harvesting of apple do not require much machinery and equipment.
Tractor is used while preparing the land for the first planting period and therefore, the envisaged
plantation shall use hired tractor while preparing the land. The plant however, needs to acquire
12 medium capacity water pumps and the associated equipments for irrigation purpose. In
addition, small agricultural tools such spade, rakes, disks, auger, mower, sprayers and etc are
required. The cost of the machinery and equipment is estimated to be Birr 100,000. The water
pumps and equipments can be purchased from local suppliers.

6.3

Civil Engineering Cost

The envisaged orange plantation requires 10 hectares of land only. And this can be obtained by
renting land from the local government at a rate of Birr 48 per hectare per year. This rate is the
6

average rent for rural land of North Shewa. Except a small house for guards and for storage of
raw materials, it does not require any office. However, it needs good storage house for the
produced apple. Besides, fencing of the farm, procuring beehives and other important items also
involve high cost. All these are estimated to cost Birr 300,000.

7. Human Resource and Training Requirement

7.1

Human Resource

Details of the manpower requirement of the plant is shown in Table 7.1

TABLE 7.1
MANPOWER REQUIREMENT

Position
Manager/Agronomist
Personnel Officer
Accountant/Casher
Store Keeper
Supervisor
Driver
Laborers
Guards
Benefit (20%)
Total

No.
Require
d
1
1
1
1
2
1
25
4
36

Monthly
Salary
3000
2000
1200
600
750
600
300
300

Total Annual
Salary
36000
24000
14400
7200
18000
7200
90000
14400
42,240
253,440

The total annual wages and salary, including 20 % benefits, amount to Birr 253,440.

7.2

Training Requirement

On job training of personnel shall be conducted with the aim of production technology.

8. Financial Analysis
8.1

Underlying Assumption

The financial analysis of Apple Production Farm is based on the data provided in the preceding
chapters and the following assumptions.
A. Construction and Finance
Land Preparation Period

6 months

Source of Finance

40 % Equity and 60 % Loan

Tax Holidays

2 Years

Bank Interest Rate

12 %

Discount for Cash Flow

Value of Land

18 %
Based on Land Rent Rate of
ANRS

Spare Parts, Repair & Maintenance

3 % of the 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)

Spare Parts In Stock and Maintenance
Accounts Receivable
Cash In Hand
Accounts Payable

8.2

30 Days
30 Days
30 Days
30 Days

Investment
8

The total investment cost of the project including working capital is estimated at Birr 1 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
Land

L.C

Building and Civil Works

Office Equipment
Vehicles
Plant Machinery & Equipment
Total Fixed Investment Cost
Pre Production Capital
Expenditure*
Total Initial Investment
Working Capital at Full Capacity
Total

F.C

Total

300,000

300,000

10,000

10,000

250,000

250,000

100,000

100,000

660,000

660,000

286,440

286,440

946,440

946,440

86,726
1,033,166

0
0

86,726
1,033,166

*Pre-production capital expenditure includes - all expenses for pre-investment studies, consultancy fee during
construction and expenses for companys establishment, project administration expenses, commission expenses,
preproduction marketing and interest expenses during construction.

The foreign component of the project amounts zero.

8.3

Production Costs

The total production cost at full capacity operation is estimated at Birr 602 thousand (See Table
8.2). Raw materials and utilities account for 20.1 %.

TABLE 8.2
PRODUCTION COST AT FULL CAPACITY
9

Raw Material
Requirement
1. Local Raw Materials
2. Foreign Raw Materials

Cost
51,250
0

Total Production Cost at full Capacity

Items
Cost
1. Raw materials

51,250

2. Utilities

69,650

3. Wages and Salaries

4. Spares and Maintenance
Factory Costs
5. Depreciation
6. Financial Costs

Total Production Cost

8.4

253,440
19,800
394,140
133,288
74,388
601,816

Financial Evaluation
I.

Profitability

According to the projected income statement (See Annex 4) the project will generate profit
beginning from the fourth year after plantation (the first year of production) and increases on
wards. The income statement and other profitability indicators also show that the project is
viable.
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 14 % of capacity utilization

10

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 four years
after plantation.
IV.

Simple Rate of Return

The projects simple rate of return (SRR) is given by the formula:

SRR= (Net Profit + Interest)/ (Total Investment Outlay) at full capacity utilization.
The SRR would be 101.4 % at full capacity utilization.
V.

Internal Rate of Return and Net Present Value

Based on cash flow statement (See Annex 2) the calculated internal rate of return (IRR) of the
project is 57.1 % and the net present value (NPV) at 18 % discount is Birr 2643 thousands.
VI.

Sensitivity Analysis

The sensitivity test result which undertaken by increasing the cost of production by 10 % 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:

11

A. Profit Generation
The project is found to be financially viable and earns on average a profit of Birr 882 thousand
per year and Birr 8.8 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 3.6 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. Import Substitution and Foreign Exchange Saving
As there is no enough production of apple in the country, the commencement of this project
relieves a portion of the import burden. That is, based on the projected figure we learn that in the
project life an estimated amount of US Dollar 1.7 million will be saved as a result of the
proposed project. This will create room for the saved hard currency to be allocated on other vital
and strategic sectors
D. 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 36 professionals as well as support
stuffs. Consequently the project creates income of Birr 253 thousands per year. This would be
one of the commendable accomplishments of the project.
E. Pro Environment Project
The proposed production process is environment friendly.

12

ANNEXES

13

Annex 1: Total Net Working Capital Requirements (in Birr)

CONSTRUCTION

PRODUCTION

Year 1

Year 2

0%

60%

85%

100%

0.00

0.00

0.00

34242.24

48509.84

57070.39

0.00

0.00

0.00

3354.55

4752.27

5590.91

Raw Material-Local

0.00

0.00

0.00

3354.55

4752.27

5590.91

Raw Material-Foreign

0.00

0.00

0.00

0.00

0.00

0.00

Factory Supplies in Stock

0.00

0.00

0.00

345.23

489.07

575.38

Spare Parts in Stock and Maintenance

0.00

0.00

0.00

1296.00

1836.00

2160.00

Work in Progress

0.00

0.00

0.00

8630.64

12226.74

14384.40

Finished Products

0.00

0.00

0.00

17261.28

24453.48

28768.80

2. Accounts Receivable

0.00

0.00

0.00

130909.09

185454.55

218181.82

3. Cash in Hand

0.00

0.00

0.00

21147.71

29959.25

35246.18

0.00

0.00

0.00

182944.49

259171.36

304907.49

4. Current Liabilities

0.00

0.00

0.00

130909.09

185454.55

218181.82

Accounts Payable

0.00

0.00

0.00

130909.09

185454.55

218181.82

TOTAL NET WORKING CAPITAL REQUIRMENTS

0.00

0.00

0.00

52035.40

73716.82

86725.67

INCREASE IN NET WORKING CAPITAL

0.00

0.00

0.00

52035.40

21681.42

13008.85

Capacity Utilization (%)

1. Total Inventory
Raw Materials in Stock- Total

CURRENT ASSETS

Annex 1: Total Net Working Capital Requirements (in Birr)

(continued)

PRODUCTION
5

10

100%

100%

100%

100%

100%

100%

57070.39

57070.39

57070.39

57070.39

57070.39

57070.39

5590.91

5590.91

5590.91

5590.91

5590.91

5590.91

5590.91

5590.91

5590.91

5590.91

5590.91

5590.91

Raw Material-Foreign

0.00

0.00

0.00

0.00

0.00

0.00

Factory Supplies in Stock

575.38

575.38

575.38

575.38

575.38

575.38

Spare Parts in Stock and Maintenance

2160.00

2160.00

2160.00

2160.00

2160.00

2160.00

Work in Progress

14384.40

14384.40

14384.40

14384.40

14384.40

14384.40

Finished Products

28768.80

28768.80

28768.80

28768.80

28768.80

28768.80

2. Accounts Receivable

218181.82

218181.82

218181.82

218181.82

218181.82

218181.82

3. Cash in Hand

35246.18

35246.18

35246.18

35246.18

35246.18

35246.18

304907.49

304907.49

304907.49

304907.49

304907.49

304907.49

4. Current Liabilities

218181.82

218181.82

218181.82

218181.82

218181.82

218181.82

Accounts Payable

218181.82

218181.82

218181.82

218181.82

218181.82

218181.82

TOTAL NET WORKING CAPITAL REQUIRMENTS

86725.67

86725.67

86725.67

86725.67

86725.67

86725.67

0.00

0.00

0.00

0.00

0.00

0.00

Capacity Utilization (%)

1. Total Inventory
Raw Materials in Stock-Total
Raw Material-Local

CURRENT ASSETS

INCREASE IN NET WORKING CAPITAL

Annex 2: Cash Flow Statement (in Birr)

CONSTRUCTION

PRODUCTION

Year 1

Year 2

473220.00

559945.67

0.00

1330909.09

1754545.45

2032727.27

473220.00

559945.67

0.00

130909.09

54545.45

32727.27

Total Equity

189288.00

223978.27

0.00

0.00

0.00

0.00

Total Long Term Loan

283932.00

335967.40

0.00

0.00

0.00

0.00

0.00

0.00

0.00

130909.09

54545.45

32727.27

2. Inflow Operation

0.00

0.00

0.00

1200000.00

1700000.00

2000000.00

Sales Revenue

0.00

0.00

0.00

1200000.00

1700000.00

2000000.00

Interest on Securities

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

TOTAL CASH OUTFLOW

473220.00

473220.00

172834.54

595017.55

923440.49

1014130.65

4. Increase In Fixed Assets

473220.00

473220.00

0.00

0.00

0.00

0.00

Fixed Investments

330000.00

330000.00

0.00

0.00

0.00

0.00

Pre-production Expenditures

143220.00

143220.00

0.00

0.00

0.00

0.00

5. Increase in Current Assets

0.00

0.00

0.00

182944.49

76226.87

45736.12

6. Operating Costs

0.00

0.00

6600.00

234368.57

329272.14

386214.28

7. Corporate Tax Paid

0.00

0.00

0.00

0.00

352634.98

429271.73

8. Interest Paid

0.00

0.00

166234.54

74387.93

61989.94

49591.95

9.Loan Repayments

0.00

0.00

0.00

103316.57

103316.57

103316.57

10.Dividends Paid

0.00

0.00

0.00

0.00

0.00

Surplus(Deficit)

0.00

86725.67

0.00
172834.54

735891.54

831104.96

1018596.62

Cumulative Cash Balance

0.00

86725.67

-86108.87

649782.67

1480887.63

2499484.25

TOTAL CASH INFLOW

1. Inflow Funds

Total Short Term Finances

3. Other Income

Annex 2: Cash Flow Statement (in Birr): Continued

PRODUCTION
5
2000000.00

6
2000000.00

7
2000000.00

8
2000000.00

9
2000000.00

10
2000000.00

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

2000000.00

2000000.00

2000000.00

2000000.00

2000000.00

2000000.00

Sales Revenue

2000000.00

2000000.00

2000000.00

2000000.00

2000000.00

2000000.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

959715.94

983223.75

974545.15

862550.00

862550.00

862550.00

4. Increase In Fixed Assets

0.00

0.00

0.00

0.00

0.00

0.00

Fixed Investments
Pre-production
Expenditures

0.00

0.00

0.00

0.00

0.00

0.00

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

386214.28

386214.28

386214.28

386214.28

386214.28

386214.28

7. Corporate Tax Paid

432991.13

468896.92

472616.32

476335.72

476335.72

476335.72

8. Interest Paid

37193.96

24795.98

12397.99

0.00

0.00

0.00

9. Loan Repayments

103316.57

103316.57

103316.57

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

Surplus(Deficit)

1040284.06

1016776.25

1025454.85

1137450.00

1137450.00

1137450.00

Cumulative Cash Balance

3539768.31

4556544.57

5581999.41

6719449.42

7856899.42

8994349.42

TOTAL CASH INFLOW

1. Inflow Funds

Interest on Securities
3. Other Income
TOTAL CASH OUTFLOW

10.Dividends Paid

Annex 3: DISCOUNTED CASH FLOW-TOTAL CAPITAL INVESTED

CONSTRUCTION

PRODUCTION

Year 1

Year 2

TOTAL CASH INFLOW

0.00

0.00

0.00

1200000.00

1700000.00

2000000.00

1. Inflow Operation

0.00

0.00

0.00

1200000.00

1700000.00

2000000.00

Sales Revenue

0.00

0.00

0.00

1200000.00

1700000.00

2000000.00

Interest on Securities

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

TOTAL CASH OUTFLOW

473220.00

473220.00

6600.00

286403.97

350953.55

828494.86

3. Increase in Fixed Assets

473220.00

473220.00

0.00

0.00

0.00

0.00

Fixed Investments

330000.00

330000.00

0.00

0.00

0.00

0.00

Pre-production Expenditures

143220.00

143220.00

0.00

0.00

0.00

0.00

4. Increase in Net Working Capital

0.00

0.00

0.00

52035.40

21681.42

13008.85

5. Operating Costs

0.00

0.00

6600.00

234368.57

329272.14

386214.28

6. Corporate Tax Paid

0.00

0.00

0.00

0.00

0.00

429271.73

NET CASH FLOW

-473220.00

-473220.00

-6600.00

913596.03

1349046.45

1171505.14

CUMMULATIVE NET CASH FLOW

-473220.00

-946440.00

-953040.00

-39443.97

1309602.48

2481107.62

Net Present Value (at 18%)

-473220.00

-401033.90

-4740.02

556042.75

695823.15

512075.69

Cumulative Net present Value

-473220.00

-874253.90

-878993.92

-322951.17

372871.98

884947.68

2. Other Income

Annex 3: DISCOUNTED CASH FLOW-TOTAL CAPITAL INVESTED

(Continued)

PRODUCTION
5

10

TOTAL CASH INFLOW

2000000.00

2000000.00

2000000.00

2000000.00

2000000.00

2000000.00

1. Inflow Operation

2000000.00

2000000.00

2000000.00

2000000.00

2000000.00

2000000.00

Sales Revenue

2000000.00

2000000.00

2000000.00

2000000.00

2000000.00

2000000.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

819205.41

855111.20

858830.60

862550.00

862550.00

862550.00

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

0.00

0.00

0.00

0.00

0.00

0.00

5. Operating Costs

386214.28

386214.28

386214.28

386214.28

386214.28

386214.28

6. Corporate Tax Paid

432991.13

468896.92

472616.32

476335.72

476335.72

476335.72

NET CASH FLOW

1180794.59

1144888.80

1141169.40

1137450.00

1137450.00

1137450.00

CUMMULATIVE NET CASH FLOW

3661902.21

4806791.01

5947960.41

7085410.41

8222860.42

9360310.42

Net Present Value (at 18%)

437403.56

359409.25

303594.61

256445.01

217326.28

184174.81

Cumulative Net present Value

1322351.24

1681760.49

1985355.10

2241800.11

2459126.39

2643301.20

Interest on Securities
2. Other Income
TOTAL CASH OUTFLOW

4. Increase in Net Working Capital

Net Present Value (at 18%)

Internal Rate of Return

2,643,301.20

57.1%

Annex 4: NET INCOME STATEMENT ( in Birr)

PRODUCTION
1

0%

60%

85%

100%

100%

0.00

1200000.00

1700000.00

2000000.00

2000000.00

Sales Revenue

0.00

1200000.00

1700000.00

2000000.00

2000000.00

Other Income

0.00

0.00

0.00

0.00

0.00

2. Less Variable Cost

0.00

166942.97

236502.54

278238.28

278238.28

0.00

1033057.03

1463497.46

1721761.72

1721761.72

#DIV/0!

86.09

86.09

86.09

86.09

139888.00

200713.60

226057.60

241264.00

241264.00

-139888.00

832343.43

1237439.86

1480497.72

1480497.72

#DIV/0!

69.36

72.79

74.02

74.02

4. Less Cost of Finance

166234.54

74387.93

61989.94

49591.95

37193.96

5. GROSS PROFIT

-306122.54

757955.50

1175449.92

1430905.77

1443303.76

0.00

0.00

352634.98

429271.73

432991.13

-306122.54

757955.50

822814.95

1001634.04

1010312.63

Gross Profit/Sales

#DIV/0!

63.16%

69.14%

71.55%

72.17%

Net Profit After Tax/Sales

#DIV/0!

63.16%

48.40%

50.08%

50.52%

Return on Investment

-14.78%

83.36%

86.73%

101.75%

101.39%

Return on Equity

-74.07%

183.41%

199.10%

242.37%

244.47%

Capacity Utilization (%)

1. Total Income

VARIABLE MARGIN
(In % of Total Income)
3. Less Fixed Costs
OPERATIONAL MARGIN
(In % of Total Income)

6. Income (Corporate) Tax

7. NET PROFIT
RATIOS (%)

Annex 4: NET INCOME STATEMENT (in Birr): Continued

PRODUCTION
6

10

100%

100%

100%

100%

100%

2000000.00

2000000.00

2000000.00

2000000.00

2000000.00

2000000.00

2000000.00

2000000.00

2000000.00

2000000.00

Other Income

0.00

0.00

0.00

0.00

0.00

2. Less Variable Cost

278238.28

278238.28

278238.28

278238.28

278238.28

1721761.72

1721761.72

1721761.72

1721761.72

1721761.72

86.09

86.09

86.09

86.09

86.09

133976.00

133976.00

133976.00

133976.00

133976.00

1587785.72

1587785.72

1587785.72

1587785.72

1587785.72

79.39

79.39

79.39

79.39

79.39

24795.98

12397.99

0.00

0.00

0.00

5. GROSS PROFIT

1562989.74

1575387.73

1587785.72

1587785.72

1587785.72

6. Income (Corporate) Tax

468896.92

472616.32

476335.72

476335.72

476335.72

7. NET PROFIT

1094092.82

1102771.41

1111450.00

1111450.00

1111450.00

Gross Profit/Sales

78.15%

78.77%

79.39%

79.39%

79.39%

Net Profit After Tax/Sales

54.70%

55.14%

55.57%

55.57%

55.57%

Return on Investment

108.30%

107.94%

107.58%

107.58%

107.58%

Return on Equity

264.74%

266.84%

268.94%

268.94%

268.94%

Capacity Utilization (%)

1. Total Income
Sales Revenue

VARIABLE MARGIN
(In % of Total Income)
3. Less Fixed Costs
OPERATIONAL MARGIN
(In % of Total Income)
4. Less Cost of Finance

RATIOS (%)

Annex 5: Projected Balance Sheet (in Birr)

CONSTRUCTION
TOTAL ASSETS
1. Total Current Assets
Inventory on Materials and Supplies
Work in Progress
Finished Products in Stock
Accounts Receivable
Cash in Hand
Cash Surplus, Finance Available
Securities
2. Total Fixed Assets, Net of Depreciation
Fixed Investment
Construction in Progress
Pre-Production Expenditure
Less Accumulated Depreciation
3. Accumulated Losses Brought Forward
4. Loss in Current Year
TOTAL LIABILITIES
5. Total Current Liabilities
Accounts Payable
Bank Overdraft
6. Total Long-term Debt
Loan A
Loan B
7. Total Equity Capital
Ordinary Capital
Preference Capital
Subsidies
8. Reserves, Retained Profits Brought Forward
9.Net Profit After Tax
Dividends Payable
Retained Profits

Year 1
473220.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
473220.00
0.00
330000.00
143220.00
0.00
0.00
0.00
473220.00
0.00
0.00
0.00
283932.00
283932.00
0.00
189288.00
189288.00
0.00
0.00
0.00
0.00
0.00
0.00

Year 2
1033165.67
86725.67
0.00
0.00
0.00
0.00
0.00
86725.67
0.00
946440.00
330000.00
330000.00
286440.00
0.00
0.00
0.00
1033165.67
0.00
0.00
0.00
619899.40
619899.40
0.00
413266.27
413266.27
0.00
0.00
0.00
0.00
0.00
0.00

PRODUCTION
1
1033165.67
-86108.87
0.00
0.00
0.00
0.00
0.00
-86108.87
0.00
813152.00
660000.00
0.00
286440.00
133288.00
0.00
306122.54
1033165.67
0.00
0.00
0.00
619899.40
619899.40
0.00
413266.27
413266.27
0.00
0.00
0.00
0.00
0.00
0.00

2
1512591.16
832727.16
4995.77
8630.64
17261.28
130909.09
21147.71
649782.67
0.00
679864.00
660000.00
0.00
286440.00
266576.00
0.00
0.00
1512591.16
130909.09
130909.09
0.00
516582.83
516582.83
0.00
413266.27
413266.27
0.00
0.00
-306122.54
757955.50
0.00
757955.50

3
2286634.99
1740058.99
7077.34
12226.74
24453.48
185454.55
29959.25
1480887.63
0.00
546576.00
660000.00
0.00
286440.00
399864.00
0.00
0.00
2286634.99
185454.55
185454.55
0.00
413266.27
413266.27
0.00
413266.27
413266.27
0.00
0.00
451832.97
822814.95
0.00
822814.95

4
3217679.73
2804391.73
8326.29
14384.40
28768.80
218181.82
35246.18
2499484.25
0.00
413288.00
660000.00
0.00
286440.00
533152.00
0.00
0.00
3217679.73
218181.82
218181.82
0.00
309949.70
309949.70
0.00
413266.27
413266.27
0.00
0.00
1274647.91
1001634.04
0.00
1001634.04

Annex 5: Projected Balance Sheet (in Birr):

Continued

PRODUCTION
TOTAL ASSETS
1. Total Current Assets
Inventory on Materials and Supplies
Work in Progress
Finished Products in Stock
Accounts Receivable
Cash in Hand
Cash Surplus, Finance Available
Securities
2. Total Fixed Assets, Net of Depreciation
Fixed Investment
Construction in Progress
Pre-Production Expenditure
Less Accumulated Depreciation
3. Accumulated Losses Brought Forward
4. Loss in Current Year
TOTAL LIABILITIES
5. Total Current Liabilities
Accounts Payable
Bank Overdraft
6. Total Long-term Debt
Loan A
Loan B
7. Total Equity Capital
Ordinary Capital
Preference Capital
Subsidies
8. Reserves, Retained Profits Brought
Forward
9. Net Profit After Tax
Dividends Payable
Retained Profits

5
4124675.80
3844675.80
8326.29
14384.40
28768.80
218181.82
35246.18
3539768.31
0.00
280000.00
660000.00
0.00
286440.00
666440.00
0.00
0.00
4124675.80
218181.82
218181.82
0.00
206633.13
206633.13
0.00
413266.27
413266.27
0.00
0.00

6
5115452.05
4861452.05
8326.29
14384.40
28768.80
218181.82
35246.18
4556544.57
0.00
254000.00
660000.00
0.00
286440.00
692440.00
0.00
0.00
5115452.05
218181.82
218181.82
0.00
103316.57
103316.57
0.00
413266.27
413266.27
0.00
0.00

7
6114906.90
5886906.90
8326.29
14384.40
28768.80
218181.82
35246.18
5581999.41
0.00
228000.00
660000.00
0.00
286440.00
718440.00
0.00
0.00
6114906.90
218181.82
218181.82
0.00
0.00
0.00
0.00
413266.27
413266.27
0.00
0.00

8
7226356.90
7024356.90
8326.29
14384.40
28768.80
218181.82
35246.18
6719449.42
0.00
202000.00
660000.00
0.00
286440.00
744440.00
0.00
0.00
7226356.90
218181.82
218181.82
0.00
0.00
0.00
0.00
413266.27
413266.27
0.00
0.00

9
8337806.90
8161806.90
8326.29
14384.40
28768.80
218181.82
35246.18
7856899.42
0.00
176000.00
660000.00
0.00
286440.00
770440.00
0.00
0.00
8337806.90
218181.82
218181.82
0.00
0.00
0.00
0.00
413266.27
413266.27
0.00
0.00

10
9449256.91
9299256.91
8326.29
14384.40
28768.80
218181.82
35246.18
8994349.42
0.00
150000.00
660000.00
0.00
286440.00
796440.00
0.00
0.00
9449256.91
218181.82
218181.82
0.00
0.00
0.00
0.00
413266.27
413266.27
0.00
0.00

2276281.95
1010312.63
0.00
1010312.63

3286594.58
1094092.82
0.00
1094092.82

4380687.40
1102771.41
0.00
1102771.41

5483458.81
1111450.00
0.00
1111450.00

6594908.82
1111450.00
0.00
1111450.00

7706358.82
1111450.00
0.00
1111450.00

10