FEASIBILITY STUDY FOR Establishment

of candle PRODUCING PLANT

MAY 2021
JIGJIGA
0 Page

Table of Contents

0|Page
1. Executive Summary..........................................................................1
2. Product Description and Application..............................................1
3. Market Study, Plant Capacity and Production Program..............2
3.1 Market Study...................................................................................................................2
3.1.1 Present Demand and Supply....................................................................................2
3.1.2 Projected Demand....................................................................................................5
3.1.3 Pricing and Distribution...........................................................................................7
3.2 Plant Capacity..................................................................................................................7
3.3 Production Program.........................................................................................................8
4. Raw Materials and Utilities..............................................................8
4.1 Availability and Source of Raw Materials.......................................................................8
4.2 Annual Requirement and Cost of Raw Materials and Utilities.......................................8
5. Location and Site...............................................................................9
6. Technology and Engineering............................................................9
6.1 Production Process...........................................................................................................9
6.2 Machinery and Equipment.............................................................................................10
6.3 Civil Engineering Cost..................................................................................................11
7. Human Resource and Training Requirement..............................11
7.1 Human Resource............................................................................................................11
7.2 Training Requirement....................................................................................................11
8. Financial Analysis............................................................................12
8.1 Underlying Assumption.................................................................................................12
8.2 Investment......................................................................................................................13
8.3 Production Costs............................................................................................................13
8.4 Financial Evaluation......................................................................................................14
9. Economic and Social Benefit and Justification.............................15
ANNEXES.............................................................................................17

1. Executive Summary

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The project envisages the manufacturing of 308 tons of candles per year in Somali Regional
State.

The market study shows the existence of sufficient demand for the product.

The initial investment cost is estimated at about Birr 1.8 million.

The project will create employment opportunities for 10 persons.

The internal rate of return (IRR) of the project is 28.7% and the net present value is more than
Birr 456 thousands discounted at 18%.

2. Product Description and Application

From ancient times candles have been important as sources of light, and although they were
replaced first by kerosene lamps and later by incandescent electric lamps, their use has actually
expanded because of their ornamental value. In spite of the technical progress in lighting, the
term “candle power” is used as a unit for measuring the brilliance of any given light.

Candles were manufactured by molding a blend of fats and wax around flax or cotton wick and
so are their modern varieties. Machines have replaced manual labor, new wax formulations have
been introduced for decorative effects. The first waxes used were mutton tallow and beeswax.
Spermaceti obtained from whales was introduced to candle manufacture at the time of the
American Revolution. Since the middle of the nineteenth century paraffin wax was added to the
list of waxes commended for candle manufacture.

The classical household candle is the basis of any candle factory. It ensures steady sales and low
production costs. Sizes of household candles differ slightly in various parts of the world. A
candle size which is very frequently found is a 40-gram candle with a diameter of 19 mm (3/4”)
and a length of 200 mm (8”).

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 3. Market Study, Plant Capacity and Production Program

3.1 Market Study

3.1.1 Present Demand and Supply

Candles are sources of light for homes during evenings and as such they are items of necessity
especially in rural areas. Modern candle processing from paraffin is a young venture, but candle
making from bees wax (Tuaf) is one of the oldest and ancient traditional arts of Ethiopia. The art
is still in existence but due to the expensive nature of the input, the low quality of the product
and the finding of cheap and quality substitute for it, paraffin wax candle-drove it out of the
market.

Candle is demanded by all income groups both in urban and rural areas. However, its importance
becomes more crucial in a country like Ethiopia where modern electricity supplies are minimal
and the numbers of churches using the product are numerous.

In Ethiopia the per-capita consumption of domestic electricity, (as indicated in the report of
world bank 2014) is about 69.5 kwh, which is one of the lowest by world standard. The great
majority of the population, about 85%, is still using other means of lighting. These include
imported kerosene lamps, imported hurricane and pressure lamps, imported and locally produced
candles and fire wood and to a lesser extent electricity.

The general picture of electricity consumption is also true to Somali region. Currently it is
estimated that about 3-5% of the people in Somali Region have access to electric light and
energy while the rest of the people, about 12.5 million, use traditional sources of energy for
getting light and heat.

Fuel wood and kerosene are the two main sources of light for homes in places where there is no
electric power supply. Kerosene, as the only alternative, is only used by “well to do” farmers
because of its price and by low income groups of urban dwellers where there is electric power
and by most urban dwellers, where there is no power supply. For these reasons, more than 95%
of house in the rural areas and a significant number of urban with no electric power of the Somali

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Region do not have lights during the evening, especially after meals are cooked. Hence, it could
be said that Somali land is as dark as darkness itself after sunset, which manifests the general
backwardness of the Region.

Candle in Ethiopia is not demanded by rural and urban centers with no power but also by urban
centers having power during power interruption, which is a frequent phenomenon of the country
and by a number of churches as a substitute of ‘Tuaf’. More than 3100 churches are estimated to
exist in Amhara Region and 18,000 in the country.

Orthodox Church believers usually vow to light candles in churches during high mass ceremony.
Candle is also demanded during special occasions like birthday, marriage, Christmas, vow day
etc. Hotels, bars and restaurants are also major consumers of candle.
Demand for candle in Ethiopia is satisfied through domestic production and imports.

A) Domestic production:- All commercial candles produced in the country are produced
in and around Addis Ababa. The CSA statistical bulletins reveal that the country has
produced about 593 tons, which is equivalent to 11.86 million of candle on the
average between the last ten years (1990 and 1999 E.C). Local production of candles
has fluctuated over the years.

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 Table -1-
Domestic Production of candles

Year Quantity ( In Tons)

90 946

91 719

92 769

93 559

94 677

95 614

96 348

97 256

98 319

99 725

Averag 593
e

Source: CSA, Statistical Bulletins, 1990-1999

B) Import of Candles:- As per the record of Central Statistics and Customs Authority,
the country has imported about 2,856 tons of candles during the last ten years at CIF
value of about Birr 134.32 million on the average. This indicates that more than four
folds of candles come from abroad (table -2- )

The current total effective demand for candles in the country is therefore about 3449 tons, which
is equivalent to about 6.9 million pieces.

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 Table -2-
Imports of Candles

Year Quantity (in Tons) Value (in ‘000’ Birr)

1990 138 817
1991 749 4315
1992 326 2033
1993 1231 7756
1994 12800 77393
1995 1986 11865
1996 670 4186
1997 1967 12280
1998 7181 1073
1999 1510 12605
Average 2856 13432

Source: CSA & Customs Authority Statistical Bulletins, 1990-1999

3.1.2 Projected Demand

As indicated above the major determinants or target markets, for candles are growth in urban
population and income. In addition hotels, bars & restaurants, churches and special accessions as
well as well-to-do rural population demand candles for various reasons.

In this respect national demand for candles is conservatively forecasted based on the following
assumptions:-

a) Urban Population (of 2007):- 31,151,000 or 6,230,200 families

- 80% of the families (4,984,160) are expected to use 3 packets (24 pieces or 1.2 kgs)
per annum per family for household consumption, which totals to about 14,958,480
packets or about 5,981 tons.

b) Hotels, Bars & Restaurants:- Out of the estimated number of government and private
hotels, bars & restaurants rooms (100,000), 75% are expected to use 50 candles /year

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 (under normal condition a candle burns for about 5 hours). This group will require
about 5,000,000 pieces of candle, which is equivalent to about 250 tons.

c) Churches:- out of the estimated churches of the country (18,000) about 50% (9,000) are
expected to celebrate a minimum of 18 holidays/month and perform high mass where in
three candles are consumed in each church during mass. This will require a total of
5,832,000 pieces for 292 tons. This will include special occasions and vowers’ demand.

d) Well-to-do Rural Facilities – Out of the total 66,780,000 of Rural population of 2007
(13,357,400 families), o.01% of the family is expected to use two packets (16 pcs) per
year, which totals to about 2,137,184 pieces, or about 107 tons of candles per year.

e) The candle consumption will grow by the combined average growth rate of, GDP
growth of 10.7% and urban population growth of 4.5%. which is 7.6% per year.

Based on the above assumptions the forecasted demand for candle for the next ten years is
indicated in table -3- below. Aggregate demand for candles ranges from 6,630 tons in 2001 to
12,818 tons in 2010.

The comparison between effective and projected demand for candles shows that there is excess
demand at national level.

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 Table -3 –
Forecasted Demand for Candle (tons)
Urban Hotels Rural
Year Population &Bars Churches Population Total
2001 5981 250 292 107 6630
2002 6436 269 314 115 7134
2003 6925 289 338 124 7676
2004 7451 311 364 133 8260
2005 8018 335 391 143 8887
2006 8627 361 421 154 9563
2007 9283 388 453 166 10290
2008 9988 417 487 178 11072
2009 10747 449 524 192 11913
2010 11564 483 564 207 12818

In Amhara Region there is no plant that produces candle to date. On the other hand due to its vast
population and increased urbanization the average level of candle consumption of the region
during the last four years was (21996 - 1999) estimated to be about 165 tons which is equivalent
to 3.3 million pieces of candle (Project Idea). Thus, the future candle consumption of the Region
could grow by 7.6 % (average growth rate figure of GDP, 10.7% and urban population, 4.5%).
Consumption of candle per head and per family to the 2007 projected population of the Region
(19,624,000) could be about 0.2 and 0.9 or consumption per head and per family to the urban
population (2,299,000) could be about 1.6 candles and 7.8 candles per year, respectively.

In this respect the establishment of a wax candle manufacturing plant could reduce the lack of
resources of light in the Amhara Region as well as reduce the import volume and save foreign
exchange of the country.

3.1.3 Pricing and Distribution

In view of inflation, the factory gate price of the proposed plant is assumed to be Birr 16,000 per
ton, which is equivalent to total sales of about Birr 5.0 million at full capacity utilization .The

distribution Channels of the product could be through wholesale traders.

3.2 Plant Capacity

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The output of the proposed plant will be about 28,000 household candles per 8 hour a day, which
is equivalent to 7.7 million Pieces or 308 tons of candles per annum (275 working days).

3.3 Production Program

The plant is assumed to start production at 80% capacity in year one which will increase by 10%
until 100% capacity is reached.

4. Raw Materials and Utilities

4.1 Availability and Source of Raw Materials

The main direct raw material required for the manufacture of household candles are paraffin
wax, a by-product of the oil refining industry, wick and a very small quantity of paraffin oil.
Paraffin wax and oil are imported items while wick is produced locally by the Ethiopian Thread
Factory.

The paraffin wax to be used for the manufacture of household candles on the machinery and
equipment described hereafter should have a maximum oil content of 0.5% and a melting point
of 56 to 62 “C.

Indirect inputs such as packing for candles are packets, cartons and labels. These materials are
produced in local Factories. Utilities such as Electrical power (AC 380 V, 50 c/s, 3-phase 27
kW), water, P.T.T etc could be available at the plant site.

4.2 Annual Requirement and Cost of Raw Materials and Utilities

It is assumed that from 1 ton of paraffin wax 25,000 candles can be produced.
Required direct and indirect materials and utilities for the production of 308 tons of candles are
indicated in the following table:

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 Table -4 -
Annual Raw Materials and Utilities and Cost (in ’000’ Birr)

Cost
Items Unit Quantity Total
L F
A) Materials
Paraffin wax tons 3,08 - 2,464 2,464
Wick mt 1,771,000 18 18
Paraffin Oil lt. 3080 - 46 46
Carton Pcs 32,080 160 160
Packet Pcs 962,500 963 - 963
Sub total 1,141 2,510 3,651
B) Utilities
Power Kwh 216 475 - 475
Total 1,616 2,510 4,126

5. Location and Site

The candle making plant will be located in jijiga city

6. Technology and Engineering

6.1 Production Process

The production of candle is simple and does not require special knowledge.

The paraffin wax which is normally supplied in solid slabs of 5 kg each, is melted in electrically
heated melting pans pumped by means of a special wax pump into the higher positioned wax
feeding tanks), from where it flows into the moulds of the molding machines, where the candle
wick has already been placed in the right position. As soon as the moulds are filled, cooling
water from the water cooling unit flows through the molding machines to solidify the paraffin
wax in the moulds. After solidification time of approx. 20 minutes the finished candles can be
ejected and packed.

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Packaging machinery has not been included since in countries with comparatively low labor
costs the packing is better done by hand. In many countries the household candles are simply
packed in blue paper, in cellophane bags or cardboard boxes.

First paraffin wax is manually fed into the boiler. The melted paraffin is then transferred to the
machine, through pipes to fill the moulds; the moulds are cooled by water circulating through the
machine. After the wax in the moulds is solidified to a certain standard, the machine overturns by
a device and the wick is cut automatically. Each candle is collected manually and then packed in
packets for delivery. The technology and capital is simple and affordable.

The producer can use alternative technology that produces less than 40 grams in weight and 19
mm in diameter and 200 mm in length, (like local candle factories) as well as use automatic
packing machine.

6.2 Machinery and Equipment

Required machinery and equipments are:

Item Pieces
1. Electrically heated wax melting pans 2
2. Wax pump 1
3. Electrically heated wax feeding tanks 2
4. Candle molding machines 2
5 Water cooling unit 1

Total Price for machinery and equipment is about Birr 200,000.00, of which 75% is in
foreign currency.

The promoter can reach machinery Supplier by the following address.

Contact InformationCompany Name: Hot Wax Candle Co., Inc.
Contact Person: Mr. Steve Gordon
Street Address: 3500 North O'Henry Blvd
City: Greensboro
Province/State: North Carolina
Country/Region: United States
Zip: 27405
Telephone: 1-336-3757892
Fax: 1-336-3757895

Alternative technology could be found in India, China or Japan.

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 6.3 Civil Engineering Cost

The plant will require about 1,000 m2 plot of land of which,

Production area 100 m2,
Storage area 27 m2 and
Facilities area 54 m2
Total built up area 181 m2

The cost of the building which is to be built with hollow blocks is about Birr 362,200 (Birr
2000/m2) and the land lease is Birr 60/m2.

7. Human Resource and Training Requirement

7.1 Human Resource

The plant will require about 15 employees as indicated in table 5 below.

Table -5-
Manpower Requirements

No. Salary/Month/Person Annual/Salary

Post
Plant manager 1 2,000 24,000
7.2 Mechanic Requirement
Training 1 1,000 12,000
Ass/Mechanic 1 800 9,600
Book keeper 1 750 9,000
Training of
Secretary 1 750 9,000
Laborers 5 400 24,000
Guards 3 400 14,400
Cleaners 2 400 9,600
Total 15 - 111,600
20% Benefit - 22,320
Total - 133,920
manpower could be carried out in any one of similar plants established in Addis Ababa at
marginal cost.

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 8. Financial Analysis
8.1 Underlying Assumption

The financial analysis of candle 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

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 8.2 Investment
The total investment cost of the project including working capital (table 6) is estimated to be
about Birr 1.8 million. The owner could contribute about 40% of the total investment while the
rest 60% could be financed by long term bank loan The foreign component of the project
accounts for Birr 0.65 million or 36% of the total investment cost.

Table 6: Total initial investment

  LC FC Total
Land
3,000   3,000
Building
362,200   362,200
Office equipment
10,000   10,000
Vehicles
0   0
machinery & equipment
50,000 150,000 200,000
Total Fixed Investment
425,200 150,000 575,200
Pre production
28,760   28,760
Total Initial Investment
453,960 150,000 603,960
Working capital
700,465 497,891 1,198,355
Total 1,154,425 647,891 1,802,315
*Pre-production capital expenditure includes - all expenses for pre-investment studies,
consultancy fee during construction and expenses for company‘s establishment, project
administration expenses, commission expenses, preproduction marketing and interest expenses
during construction.

8.3 Production Costs

The total production cost at full capacity operation is estimated to be about Birr 4.4 million
(Table 7). Raw materials and utilities account for 82.4% of the total factory cost.

Table -7-
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 Total Production Cost at full Capacity
Items Cost
1.      Raw materials 3,651,000
2.      Utilities 475,000
3.      Wages and Salaries 133,920
4.      Spares and Maintenance 17,256
Factory costs 4,277,176
5.      Depreciation 44,862
6.      Financial costs
108,139
  Total Production Cost 4,430,177

8.4 Financial Evaluation

I. Profitability
According to the projected income statement the project will generate profit beginning from the
first year of operation. The income statement and other profitability indicators show that the
project will get 29.% return on investment and 26% return on equity as well.

II. Breakeven Analysis

The project will break even at 14.8 % of capacity utilization.

III. Payback Period

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

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 IV. Simple Rate of Return
The project’s simple rate of return is 23.3% at full capacity utilization.

V. Internal Rate of Return and Net Present Value

Based on cash flow statement the calculated IRR of the project is 28.7% and the net present
value at 18% discount is Birr 456 thousands.

VI. Sensitivity Analysis

If costs of raw materials are increased by 10 %, the plant will absorb it profitably.

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 will improve the health condition of the population, reduce
deforestation and promote the socio-economic goals and objectives stated in the strategic plan of
the Amhara National Regional State. These benefits are listed as follows:

A. Profit Generation

The project is found to be financially viable and earns on average a profit of birr 0.36 million per
year and birr 3.6 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 1.3 million from
corporate tax payment alone (i.e. excluding income tax, sales tax and VAT). Such result creates
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

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 5.3 million

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will be saved as a result of the proposed project. This will create room for the saved hard
currency to be allocated to other vital and strategic sectors.

D. Employment and Income Generation

The proposed project is expected to create employment opportunity to 15 professionals as well as

support staff. Consequently the project creates income for birr 134 thousand per year. This would
be one of the commendable accomplishments of the project.

E. Pro Environment Project

The proposed production process is environment friendly.

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 ANNEXES

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 Annex 1: Total Net Working Capital Requirements (in Birr)
CONSTRUCTIO
N PRODUCTI
  Year 1 Year 2 1 2

Capacity Utilization (%) 0.00 0.00 80% 90% 1

1. Total Inventory 0.00 0.00 1522909.52 1713273.21 190

Raw Materials in Stock- Total 0.00 0.00 617367.27 694538.18 771

Raw Material-Local 0.00 0.00 219054.55 246436.36 273

Raw Material-Foreign 0.00 0.00 398312.73 448101.82 497

Factory Supplies in Stock 0.00 0.00 3771.96 4243.46 47

Spare Parts in Stock and Maintenance 0.00 0.00 1505.98 1694.23 18

Work in Progress 0.00 0.00 94299.01 106086.39 117

Finished Products 0.00 0.00 188598.02 212172.77 235

2. Accounts Receivable 0.00 0.00 430080.00 483840.00 537

3. Cash in Hand 0.00 0.00 53142.11 59784.87 66

CURRENT ASSETS 0.00 0.00 1388764.35 1562359.90 173

4. Current Liabilities 0.00 0.00 430080.00 483840.00 537

Accounts Payable 0.00 0.00 430080.00 483840.00 537

TOTAL NET WORKING CAPITAL REQUIRMENTS 0.00 0.00 958684.35 1078519.90 119

INCREASE IN NET WORKING CAPITAL 0.00 0.00 958684.35 119835.54 119

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

pacity Utilization (%) 100% 100% 100% 100% 100% 100%

Total Inventory 1903636.90 1903636.90 1903636.90 1903636.90 1903636.90 1903636

Raw Materials in Stock-Total 771709.09 771709.09 771709.09 771709.09 771709.09 771709.

Raw Material-Local 273818.18 273818.18 273818.18 273818.18 273818.18 273818.

Raw Material-Foreign 497890.91 497890.91 497890.91 497890.91 497890.91 497890.

Factory Supplies in Stock 4714.95 4714.95 4714.95 4714.95 4714.95 4714.9

Spare Parts in Stock and Maintenance 1882.47 1882.47 1882.47 1882.47 1882.47 1882.4

Work in Progress 117873.76 117873.76 117873.76 117873.76 117873.76 117873.

Finished Products 235747.53 235747.53 235747.53 235747.53 235747.53 235747.

Accounts Receivable 537600.00 537600.00 537600.00 537600.00 537600.00 537600.

Cash in Hand 66427.64 66427.64 66427.64 66427.64 66427.64 66427.6

CURRENT ASSETS 1735955.44 1735955.44 1735955.44 1735955.44 1735955.44 1735955

Current Liabilities 537600.00 537600.00 537600.00 537600.00 537600.00 537600.

Accounts Payable 537600.00 537600.00 537600.00 537600.00 537600.00 537600.

TOTAL NET WORKING CAPITAL REQUIRMENTS 1198355.44 1198355.44 1198355.44 1198355.44 1198355.44 1198355

NCREASE IN NET WORKING CAPITAL 0.00 0.00 0.00 0.00 0.00 0.00

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 Annex 2: Cash Flow Statement (in Birr)
CONSTRUCTION PRODUCTION
  Year 1 Year 2 1 2 3 4
TOTAL CASH INFLOW 301980.00 1500335.44 4372480.00 4488960.00 4981760.00 4928000.00
1. Inflow Funds 301980.00 1500335.44 430080.00 53760.00 53760.00 0.00
Total Equity 120792.00 600134.18 0.00 0.00 0.00 0.00
Total Long Term Loan 181188.00 900201.26 0.00 0.00 0.00 0.00
Total Short Term Finances 0.00 0.00 430080.00 53760.00 53760.00 0.00
2. Inflow Operation 0.00 0.00 3942400.00 4435200.00 4928000.00 4928000.00
Sales Revenue 0.00 0.00 3942400.00 4435200.00 4928000.00 4928000.00
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 301980.00 301980.00 5099252.51 4363597.14 4911687.90 4722952.91
4. Increase In Fixed Assets 301980.00 301980.00 0.00 0.00 0.00 0.00
Fixed Investments 287600.00 287600.00 0.00 0.00 0.00 0.00
Pre-production Expenditures 14380.00 14380.00 0.00 0.00 0.00 0.00
5. Increase in Current Assets 0.00 0.00 1388764.35 173595.54 173595.54 0.00
6. Operating Costs 0.00 0.00 3449689.30 3880003.34 4310317.38 4310317.38
7. Corporate Tax Paid 0.00 0.00 0.00 0.00 139404.51 145892.84
8. Interest Paid 0.00 0.00 260798.86 129766.71 108138.93 86511.14
[Link] Repayments 0.00 0.00 0.00 180231.54 180231.54 180231.54
[Link] Paid 0.00 0.00 0.00 0.00 0.00 0.00
Surplus(Deficit) 0.00 1198355.44 -726772.51 125362.86 70072.10 205047.09
Cumulative Cash Balance 0.00 1198355.44 471582.93 596945.79 667017.88 872064.97

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 Annex 2: Cash Flow Statement (in Birr): Continued
PRODUCTION
  5 6 7 8 9 10
TOTAL CASH INFLOW 4928000.00 4928000.00 4928000.00 4928000.00 4928000.00 4928000.00
1. Inflow Funds 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 4928000.00 4928000.00 4928000.00 4928000.00 4928000.00 4928000.00
Sales Revenue 4928000.00 4928000.00 4928000.00 4928000.00 4928000.00 4928000.00
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 4707813.46 4694399.61 4679260.16 4483889.17 4483889.17 4483889.17
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 4310317.38 4310317.38 4310317.38 4310317.38 4310317.38 4310317.38
7. Corporate Tax Paid 152381.18 160595.11 167083.45 173571.79 173571.79 173571.79
8. Interest Paid 64883.36 43255.57 21627.79 0.00 0.00 0.00
9. Loan Repayments 180231.54 180231.54 180231.54 0.00 0.00 0.00
[Link] Paid 0.00 0.00 0.00 0.00 0.00 0.00
Surplus(Deficit) 220186.54 233600.39 248739.84 444110.83 444110.83 444110.83
Cumulative Cash Balance 1092251.51 1325851.90 1574591.75 2018702.58 2462813.41 2906924.25

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 Annex 3: DISCOUNTED CASH FLOW-TOTAL CAPITAL INVESTED
CONSTRUCTION PRODUCTION
  Year 1 Year 2 1 2 3 4
TOTAL CASH INFLOW 0.00 0.00 3942400.00 4435200.00 4928000.00 4928000.00

1. Inflow Operation 0.00 0.00 3942400.00 4435200.00 4928000.00 4928000.00

Sales Revenue 0.00 0.00 3942400.00 4435200.00 4928000.00 4928000.00

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 301980.00 301980.00 4408373.66 3999838.89 4569557.43 4456210.22

3. Increase in Fixed Assets 301980.00 301980.00 0.00 0.00 0.00 0.00

Fixed Investments 287600.00 287600.00 0.00 0.00 0.00 0.00

Pre-production Expenditures 14380.00 14380.00 0.00 0.00 0.00 0.00

4. Increase in Net Working Capital 0.00 0.00 958684.35 119835.54 119835.54 0.00

5. Operating Costs 0.00 0.00 3449689.30 3880003.34 4310317.38 4310317.38

6. Corporate Tax Paid 0.00 0.00 0.00 0.00 139404.51 145892.84

NET CASH FLOW -301980.00 -301980.00 -465973.66 435361.11 358442.57 471789.78

CUMMULATIVE NET CASH FLOW -301980.00 -603960.00 -1069933.66 -634572.54 -276129.98 195659.80

Net Present Value (at 18%) -301980.00 -255915.25 -334655.03 264974.21 184880.69 206223.66

Cumulative Net present Value -301980.00 -557895.25 -892550.28 -627576.06 -442695.38 -236471.72

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 Annex 3: DISCOUNTED CASH FLOW-TOTAL CAPITAL INVESTED (Continued)
PRODUCTION
  5 6 7 8 9 10
TOTAL CASH INFLOW 4928000.00 4928000.00 4928000.00 4928000.00 4928000.00 4928000.00

1. Inflow Operation 4928000.00 4928000.00 4928000.00 4928000.00 4928000.00 4928000.00

Sales Revenue 4928000.00 4928000.00 4928000.00 4928000.00 4928000.00 4928000.00

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 4462698.56 4470912.49 4477400.83 4483889.17 4483889.17 4483889.17

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 4310317.38 4310317.38 4310317.38 4310317.38 4310317.38 4310317.38

6. Corporate Tax Paid 152381.18 160595.11 167083.45 173571.79 173571.79 173571.79

NET CASH FLOW 465301.44 457087.51 450599.17 444110.83 444110.83 444110.83

CUMMULATIVE NET CASH FLOW 660961.24 1118048.75 1568647.92 2012758.75 2456869.58 2900980.42

Net Present Value (at 18%) 172362.33 143491.21 119876.58 100127.48 84853.80 71910.00

Cumulative Net present Value -64109.39 79381.82 199258.40 299385.88 384239.68 456149.68

Net Present Value (at 18%) 456,149.68

Internal Rate of Return 28.7%

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 Annex 4: NET INCOME STATEMENT ( in Birr)
PRODUCTION
  1 2 3 4 5
Capacity Utilization (%) 80% 90% 100% 100% 100%

1. Total Income 3942400.00 4435200.00 4928000.00 4928000.00 4928000.00

Sales Revenue 3942400.00 4435200.00 4928000.00 4928000.00 4928000.00
Other Income 0.00 0.00 0.00 0.00 0.00
2. Less Variable Cost 3399657.90 3824615.14 4249572.38 4249572.38 4249572.38
VARIABLE MARGIN 542742.10 610584.86 678427.62 678427.62 678427.62
(In % of Total Income) 13.77 13.77 13.77 13.77 13.77
3. Less Fixed Costs 94893.40 100250.20 105607.00 105607.00 105607.00
OPERATIONAL MARGIN 447848.70 510334.66 572820.62 572820.62 572820.62
(In % of Total Income) 11 12 12 12 12
4. Less Cost of Finance 260798.86 129766.71 108138.93 86511.14 64883.36
5. GROSS PROFIT 187049.84 380567.95 464681.69 486309.48 507937.26
6. Income (Corporate) Tax 0.00 0.00 139404.51 145892.84 152381.18
7. NET PROFIT 187049.84 380567.95 325277.19 340416.64 355556.08
RATIOS (%)  
Gross Profit/Sales 5% 9% 9% 10% 10%
Net Profit After Tax/Sales 5% 9% 7% 7% 7%
Return on Investment 29% 30% 24% 24% 23%
Return on Equity 26% 53% 45% 47% 49%
Annex 4: NET INCOME STATEMENT (in Birr):Continued
PRODUCTION
  6 7 8 9 10
Capacity Utilization (%) 100% 100% 100% 100% 100%

1. Total Income 4928000.00 4928000.00 4928000.00 4928000.00 4928000.00

Sales Revenue 4928000.00 4928000.00 4928000.00 4928000.00 4928000.00
Other Income 0.00 0.00 0.00 0.00 0.00
2. Less Variable Cost 4249572.38 4249572.38 4249572.38 4249572.38 4249572.38
VARIABLE MARGIN 678427.62 678427.62 678427.62 678427.62 678427.62
(In % of Total Income) 14 14 14 14 14
3. Less Fixed Costs 99855.00 99855.00 99855.00 99855.00 99855.00

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 OPERATIONAL MARGIN 578572.62 578572.62 578572.62 578572.62 578572.62
(In % of Total Income) 12 12 12 12 12
4. Less Cost of Finance 43255.57 21627.79 0.00 0.00 0.00
5. GROSS PROFIT 535317.05 556944.83 578572.62 578572.62 578572.62
6. Income (Corporate) Tax 160595.11 167083.45 173571.79 173571.79 173571.79
7. NET PROFIT 374721.93 389861.38 405000.83 405000.83 405000.83
RATIOS (%)  
Gross Profit/Sales 11% 11% 12% 12% 12%
Net Profit After Tax/Sales 8% 8% 8% 8% 8%
Return on Investment 23% 23% 22% 22% 22%
Return on Equity 52% 54% 56% 56% 56%

Annex 5: Projected Balance Sheet (in Birr)

CONSTRUCTION PRODUCTIO
  Year 1 Year 2 1 2
TOTAL ASSETS 301980.00 1802315.44 2419445.28 2673541.68 2872
1. Total Current Assets 0.00 1198355.44 1860347.28 2159305.68 2402
Inventory on Materials and Supplies 0.00 0.00 622645.21 700475.86 7783
Work in Progress 0.00 0.00 94299.01 106086.39 1178
Finished Products in Stock 0.00 0.00 188598.02 212172.77 2357
Accounts Receivable 0.00 0.00 430080.00 483840.00 5376
Cash in Hand 0.00 0.00 53142.11 59784.87 664
Cash Surplus, Finance Available 0.00 1198355.44 471582.93 596945.79 6670
Securities 0.00 0.00 0.00 0.00 0
2. Total Fixed Assets, Net of Depreciation 301980.00 603960.00 559098.00 514236.00 4693
Fixed Investment 0.00 287600.00 575200.00 575200.00 5752
Construction in Progress 287600.00 287600.00 0.00 0.00 0
Pre-Production Expenditure 14380.00 28760.00 28760.00 28760.00 287
Less Accumulated Depreciation 0.00 0.00 44862.00 89724.00 1345
3. Accumulated Losses Brought Forward 0.00 0.00 0.00 0.00 0
4. Loss in Current Year 0.00 0.00 0.00 0.00 0
TOTAL LIABILITIES 301980.00 1802315.44 2419445.28 2673541.68 2872
5. Total Current Liabilities 0.00 0.00 430080.00 483840.00 5376
Accounts Payable 0.00 0.00 430080.00 483840.00 5376
Bank Overdraft 0.00 0.00 0.00 0.00 0
6. Total Long-term Debt 181188.00 1081389.26 1081389.26 901157.72 7209
Loan A 181188.00 1081389.26 1081389.26 901157.72 7209
Loan B 0.00 0.00 0.00 0.00 0
7. Total Equity Capital 120792.00 720926.18 720926.18 720926.18 7209
Ordinary Capital 120792.00 720926.18 720926.18 720926.18 7209
Preference Capital 0.00 0.00 0.00 0.00 0

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 Subsidies 0.00 0.00 0.00 0.00 0
8. Reserves, Retained Profits Brought Forward 0.00 0.00 0.00 187049.84 5676
[Link] Profit After Tax 0.00 0.00 187049.84 380567.95 3252
Dividends Payable 0.00 0.00 0.00 0.00 0
Retained Profits 0.00 0.00 187049.84 380567.95 3252
Annex 5: Projected Balance Sheet (in Birr): Continued
PRODUCTION
  5 6 7 8
TOTAL ASSETS 3207856.96 3402347.35 3611977.19 4016978.02 4421
1. Total Current Assets 2828206.96 3061807.35 3310547.19 3754658.02 4198
Inventory on Materials and Supplies 778306.51 778306.51 778306.51 778306.51 778
Work in Progress 117873.76 117873.76 117873.76 117873.76 117
Finished Products in Stock 235747.53 235747.53 235747.53 235747.53 235
Accounts Receivable 537600.00 537600.00 537600.00 537600.00 537
Cash in Hand 66427.64 66427.64 66427.64 66427.64 664
Cash Surplus, Finance Available 1092251.51 1325851.90 1574591.75 2018702.58 2462
Securities 0.00 0.00 0.00 0.00 0
2. Total Fixed Assets, Net of Depreciation 379650.00 340540.00 301430.00 262320.00 223
Fixed Investment 575200.00 575200.00 575200.00 575200.00 575
Construction in Progress 0.00 0.00 0.00 0.00 0
Pre-Production Expenditure 28760.00 28760.00 28760.00 28760.00 287
Less Accumulated Depreciation 224310.00 263420.00 302530.00 341640.00 380
3. Accumulated Losses Brought Forward 0.00 0.00 0.00 0.00 0
4. Loss in Current Year 0.00 0.00 0.00 0.00 0
TOTAL LIABILITIES 3207856.96 3402347.35 3611977.19 4016978.02 4421
5. Total Current Liabilities 537600.00 537600.00 537600.00 537600.00 537
Accounts Payable 537600.00 537600.00 537600.00 537600.00 537
Bank Overdraft 0.00 0.00 0.00 0.00 0
6. Total Long-term Debt 360463.09 180231.54 0.00 0.00 0
Loan A 360463.09 180231.54 0.00 0.00 0
Loan B 0.00 0.00 0.00 0.00 0
7. Total Equity Capital 720926.18 720926.18 720926.18 720926.18 720
Ordinary Capital 720926.18 720926.18 720926.18 720926.18 720
Preference Capital 0.00 0.00 0.00 0.00 0
Subsidies 0.00 0.00 0.00 0.00 0
8. Reserves, Retained Profits Brought Forward 1233311.61 1588867.69 1963589.63 2353451.01 2758
9. Net Profit After Tax 355556.08 374721.93 389861.38 405000.83 405
Dividends Payable 0.00 0.00 0.00 0.00 0
Retained Profits 355556.08 374721.93 389861.38 405000.83 405

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