PROJECT PROPOSAL FOR:

Garment Processing and Manufacturing

PROJECT LOCATION:

Dire Dawa

PROMOTER: Huda Mohamedshis Abdulmajid

August. 2024. Dire Dawa

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Contents

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List of table.....................................................................................................................................................................................4

1. Executive Summary..................................................................................................................................................................1

2. Introduction...............................................................................................................................................................................2
2.1 General Background.............................................................................................................................................................2
2.2 Objective of the project........................................................................................................................................................3
2.3. Project description...............................................................................................................................................................3
2.4 Project Rationale...................................................................................................................................................................4
2.5. The significance of the project............................................................................................................................................4
2.6 Project Location....................................................................................................................................................................5

3. The market Study......................................................................................................................................................................6

3.1 Market Analysis....................................................................................................................................................................6
3.2 The Demand-Supply Gap.....................................................................................................................................................6
3.2.1 Current supply of Retail Trade of Industrial Agricultural and Construction machinery and equipment’s..................7
3.3 Future market or Demand of commercial Building rental...................................................................................................7
3.3.1 Target customers...........................................................................................................................................................8
3.3.2 Marketing promotion and strategy................................................................................................................................8
3.3.3 Competition..................................................................................................................................................................9
3.4. The project facilities and Services plan...............................................................................................................................9

4. Technical Study.......................................................................................................................................................................11
4.1. Description of the project Service/ Product mix...............................................................................................................11
4.2 Construction work and Technology...................................................................................................................................11
4.2.1 Construction schedule.................................................................................................................................................11
4.2.2 Architectural Design & Layout..................................................................................................................................12
4.2.3 Structural design.........................................................................................................................................................12
4.2.4 Reinforced concrete....................................................................................................................................................13
4.2.5 Foundation Design......................................................................................................................................................13
4.2.6 Construction Plan and process....................................................................................................................................13
4.3. Utilities..............................................................................................................................................................................14
4.4 Project implementation.......................................................................................................................................................14
4.5 Organizational Structure.....................................................................................................................................................15
4.5.1 Organization and management...................................................................................................................................15
4.5.2 Man Power..................................................................................................................................................................15
4.5.3 Organizational Structure.............................................................................................................................................15

5. Financial Requirement and Analysis.....................................................................................................................................18

5.1 Fixed Investment................................................................................................................................................................18

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 5.2 Working Capital.................................................................................................................................................................19
5.2.1 Operating Expense at full Capacity............................................................................................................................19
5.2.2 Operating Expenses....................................................................................................................................................20
5.3 Total initial investment cost...............................................................................................................................................20
5.4 Financial analysis and Statements......................................................................................................................................20
5.4.1 Underlying Assumption..............................................................................................................................................20
5.5 Sources of Fund..................................................................................................................................................................21
5.6 Financial evaluation............................................................................................................................................................21
5.6.1 Profitability.................................................................................................................................................................21
5.6.2 Ratios..........................................................................................................................................................................21
5.6.2 Break-even Analysis...................................................................................................................................................22
5.6.3 Pay-back Period..........................................................................................................................................................22
5.6.4 Internal Rate of Return...............................................................................................................................................22

6. Environmental impact of the project...............................................................................................................................23

List of table

Table 1 1 Office Space Demand Forecast.......................................................................................................8

Table 1 2Building functions.............................................................................................................................9
Table 1 3 project Implementation schedule....................................................................................................15
Table 1. 4 L a n d , Building & Construction...................................................................................................18
Table 1. 5 Office Equipment..........................................................................................................................18
Table 1. 6 salary Expense...............................................................................................................................19
Table 1. 7 Annual Operating Cost At Full Capacity......................................................................................20
Table 1. 8 Source of fund...............................................................................................................................21

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V|Page
1. Executive Summary

1. Project name:Garment Manufacturing

2. Project Type : Garment processing and manufacturing
3. Nationality: Ethiopian
4. Project Owner: Huda Mohamedshis Abdulmajid
5. Project location: kabele 07 behind Taiwan market center Dire Dawa , Ethiopia
6. Project composition:small scale clothes,car decoration and readymade suits preparation
company
7. Total investment Cost: 10 million ETB is required from this amount 30% or 3000,000
ETB from owner equity and the rest 70% 6.4 million ETB from bank loan.
8. Employment opportunity: 12 individuals on permanent 50 on casual basis
9. Social and Economic Benefit: provide better Building service, employment opportunities,
generation of income and benefits for the local area and people.
10. Area needed for the project 400m2

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 2. Introduction

2.1 General Background

The current fast and dynamic economic growth of Ethiopia especially in urban area
necessitates equivalent growth of building and construction sector. The sector should expand
rapidly to support the overall economic development sustainable.

In the textile sector of the economy, the multi-purpose in the one becoming rapidly
expanding in urban areas of the nation since dynamic economic development of urban
economy requires the preparation different kinds of suits and cars decor in cities to support
the growing of business manufacturing sectors like suits for ladies, men ,boys, girls and
different kinds of cars decors is the market demand is very high in diredawa city. In this
regard, the preparation and processing garment expands in the all parts of the country.

Investment and property development play an important role in any emerging markets or
economies. Property generally comprises processing and manufacturing different kinds of
suits and cars decor for business and sale. The property investment market in Ethiopia
remained under developed for several years. As a consequence, the supply of homemade suits
and car decor in the city for the society that can be used in the country is disproportionately
low to cope with the growing demand in the country spinning from the average growth in
GDP of 5.5 percent over the last ten years and population increase. The relatively good
performance of the macro-economy (real growth in GDP, low inflation rate and growth in
investment and export sector) has stimulated unprecedented investment growth in the
property sector over the last five years. The growth of investment in the property market over
the last five years in consistent with the global experience suggesting that investment in
garment greatly influenced by the performance of the macroeconomic conditions. In general,
a stable macroeconomic condition leads to economic and business growth and develops
investors’ confidence. oowinging growing demand trends, and with the expectation of high
return their iment capital, large number of land developers pooled their financial resources
VII |invested
and P a g in the property market.
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To this effect, the owner to invest on garment processing and manufacturing industry.

who has founders been living for long time in this city, planned to construct in Dire Dawa
and undertaken this project study to check the market, technical and financial feasibility of
this project. The promoter is very ambitious and committed to realize the project. Hence,
expects to get the necessary support from the city administration to make the project to be
operational.

Looking at the past trends and permits issues by the Government to the construction of clothe
processing and manufacturing industry in the major urban areas of the country especially in
Dire Dawa one can easily conclude that the momentum is more likely to continue.

Besides, the government policies and incentives for the private sector investment are very
promising that motivates the promoter to engage in opening processing and manufacturing
suits and cars decor business company.

2.2 Objective of the project

The major goal of this project is to contribute towards the growth of the trade sector in Dire
Dawa. Its specific objectives include the following.

 To construct and develop modern Cloth outlets facilities that enable to provide standard
clothes and cars decor to the society.
 To undertake trading and other refuted business activities that enable to generate a
reasonable to the invested capital.
 To develop a modern clothe company that would provide services of international
standard in order to attract foreign visitors and thereby contribute towards the generation
of hard currency for the country.
 To create employment opportunities for the population in the city and
 Contribute towards the beautification of the city through the construction of modern
building infrastructure and facilities.

2.3. Project description

The long-term goal of the project is become the best choice in Dire Dawa and its surrounding
areas by creating a differentiated experience capitalizing on personal service. The proposed
project will have a total area of 400m2, designed to render clothe processor and
manufacturing company, which will in turn plays significant role towards solving shortage of
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clothing g cars decor in Dire Dawa.
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The relatively modern nature of the city as business unique location has laid a fertile ground
for future promising growth of the city. The owner plans the project with high quality
class to satisfy the interest of customers in the city. Based on environmental and other
considerations, the entrepreneur has determined the type and size of the building which is
already determined by the site; conceptual planning and preliminary analysis have been
carried out by analysts.

In order to attract its clients to the service, the project will develop high standard clothes and
cars decore of best choices and will also save best quality.

2.4 Project Rationale

Internationally the economic growth this country is experiencing, the good governance
created and even if the city is in its nascent stage of development these project are the first in
kind in the city are feasible and would be a model development in promoting and attracting
different urban investments.

In order to respond to the created environment the city is in need of a major, basic and
feasible urban projects to be developed.

The existing promising investment opportunities, the demands of industry needs along with
relatively sound investment support made by the government in such kinds of feasible
projects, compelled the project promoter to initiate the multipurpose oriented business project
to be established. The mismatch between the demand for and supply of such kind of industry
in easily observed in the city.

Therefore, the existing shortage or absence in the supply of these services, along with its
commercial and administrative access, better location and infrastructure access, escalating
trend of urbanization and business activities, thus it is with such reason that this project is
identified and proposed and assumed to be more profitable.

In general, the country’s decentralized state based economy, privatized and free market
economy; good governance creates a favorable environment for the development of
investment for private investors.

2.5. The significance of the project

The envisaged project deemed to add to the economic development of the nation in general
and city in specific with following ways: Source of Revenue As public policy of any nation,
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the government collects different forms of taxes from different business organizations and
individuals. Among the different forms of taxes, business income taxes, payroll income tax
and VAT are collected from undertaking business activities. Therefore, the building will
serve as sources of revenue for the city as well as for the region.

 Employment opportunity

One of the problems that our country faced is unemployment. Therefore, the current objective
of the government is working on tackling the problem of unemployment and fostering the
development process either through creating self-employment or employment in other
organization. Hence, this project will hire 30 individuals on permanent 100 individual as
casuals during construction and operation.

 Sources of social service

In addition to serving as a source of employment and income for the region, the project
renders social services for different group of people. Hence, it is also provide the following
services;

 Serve as a source of mental satisfaction for the different users,

 It deemed to minimize the demand for suits and other bundles of clothes in the area.
Furthermore, it serves as the pilot experience and ground for other investor to enter in
to such kinds of urban development. It also contributes on the efforts made on as a
character given building for physical development pattern of the cityscape.

2.6 Project Location

As aforementioned on the introductory part the envisioned project is intended to be located

in kabele 07 around Mashilla Tera beside Diredawa Taiwan market center Dire Dawa city,
Ethiopia.

Dire Dawa is a city in eastern Ethiopia near the Somali Region and Oromo border
and one of two chartered cities in Ethiopia (the other being Addis Ababa, the capital).
Dire Dawa alongside present-day Sitti Zone were a part of the Dire Dawa
autonomous region of the Somali Region stipulated in the 1987 Ethiopian
Constitution until 1993 when it was split by the federal government into a separately
administered chartered city.[9]

It is divided administratively into two woredas, the city proper and the non-urban
woreda

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Dire Dawa lies in the eastern part of the nation, on the Dechatu River, at the foot of a
ring of cliffs. The western outskirts of the city lie on the Gorro River, a tributary of the
Dechatu River. It is located at the latitude and longitude of 9°36′N 41°52′E. The city
is an industrial centre, home to several markets and the Dire Dawa Airport.

The projected population for 2015 was 440,000 for the entire chartered city and
277,000 for the city proper, making the latter the seventh largest city in Ethiopia.

3. The market Study

3.1 Market Analysis

There are a number of factors which affects the demand of commercial center; 0f these
factors, the most important to have influence is population growth and the level of income.
The currently expanding service industry in the city and around the city has been inviting
skilled and unskilled labor forces to the city; in addition, the number of both government
and non-government offices has been increasing. Above all the increase in the number of
population of the city increases for the provision of different services. Nowadays, most of the
private business organizations need their own small-medium offices in order to render their
services and provide their products, and they prefer places that are found in the center of the
city or close to the road. As clearly indicated in the introductory part of this proposal.
D i r e D a w a i s dynamically growing city. Though the market demand gap for ready
made clothes and decore in Dire Daw is not clearly understand there is wider gap for such
demand as many merchants, organizations are flowing to the city every day. From prior
business experiences, the demand of processing and manufacturing clothes and cars decore
in Dire Dawa is very high and hence the demand and the supply gap is very wide.

3.2 The Demand-Supply Gap

Dire Dawa city is situated in the very center of Ethiopian manufacturing industry. Dire
Dawa city is also a major business company and commercial route that attracts thousands of
business travelers. These are also the most important groups of potential customers that
include both the local and foreign tourists and the modern business community who choose
services that range from economic to high class standards. These groups would also choose a
healthy
XI | P a comfortable
ge climate that combines a more traditional type with that of modern shops,
offices, bedrooms restaurants and cafeterias. Hence, the project will solve the serious demand
problem in the city.

Over the last decade, there has been a significant growth in the number of local and
international trades across the country. This increase is mainly associated with the stimulation
of economic activist and partly due to an increase in the flow of international and local
traders in to the city. Since Dire Dawa is an important commercial center in addition there is
a significant increase in business activates and hence increasing the number of traders to the
city. Even though there is a lack of quantitative estimates that number of traders to the city.
Even though there is a lack of quantitative estimates that deficit the actual demand and also
the annual growth rate Hotel facilities and urban commercial facilities are scarce in the city.
So far in the city there is no development of such kind standard retail building and it is the
first of its kind in the city and will promote other investors from the city and the surrounding
areas. As a result there is a large gap between the developed and that of the supply for
modern Retail Trade of Industrial Agricultural and Construction machinery and equipment’s,
so, this project would not face any problem of demand scarcity for it business center and it
would provide good service to customers.

3.2.1 Current supply of Garment

Garment processing and manufacturing sector has shown a dynamic change in the past few
years. The reason for this could be rapid economic growth and a supporting public
infrastructural development. Other factors relevant in the specific case of commercial
buildings are the large increases in national and international businesses, particularly firms in
the services sector.

The business of Garment processing and manufacturing in Dire Dawa in booming highly due
to the recent rapid growth experienced in Ethiopia. As a result, a good number of local and
international organizational are coming in place. Government demand of the product which
used to operate in limited product's all over the city are also concentrating on leasing new and
modern Garment . Increasing numbers of international organization and NGOs which in the
past had typically converted residences into Garment manufacturing are now moving
towards renting whole floors or even multiple floors in modern city-center commercial

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buildings.

3.3.1 Target customers

The target customers of this envisaged project include:-

1. Mixed business Community

2. Nearby business organization
3. the government bureau
4. small accounts(SOHO) SME
5. Nongovernmental organizations

3.3.2 Marketing promotion and strategy

In order to penetrate and gain considerable market share, one of the major marketing
strategies for the project is consistently rendering quality service to its tenants. Due emphasis
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must be placed on improving quality of service and facilities. The major marketing strategies
to promote the project and gain considerable market share include:

 Advertising through different means focusing on the existing service and facilities
 Promote in association to the key location and nearby business
 Working on sustained promotional work.
 Working on public relations to reach and influence key personals and organization with a
capacity of making decision.
 Keeping the quality of its product/ facilities and consistently improving with changing
situations.
 Seasonal discount pricing different others customer centric marketing strategies will be
used by the company.

3.3.3 Competition

There are different forms of competition that may face the envisaged company of cloth
processing and manufacturing and cars decor preparation. These are price and non-price
based competition. Moreover, there are different competitors that will compete with the
project either directly or indirectly. But the Garment processing and manufacturing company
under discussion has diversified marketing strategies that could enable it cop up with the
different competitors in the market. Moreover it will frequently conduct competitors research
which focuses on, the strength and the weaknesses, the different competitors’ strategies, the
techniques they use in rendering the service, their customer handling methods, and others.
Generally the project has many other projects all over Ethiopia which compete with it.

3.4. The project facilities and Product plan

In order to provide products of a high standard, it has been planned to construct and develop
the infrastructure and facilities that would viable to meet the requirements of an international
standard business company. Accordingly, various products and facilities will be prepared
phase by phase starting with the most needed ones that are essential to commence the
operation of its business activities. With the completion of construction, the company will
provide a combined products such as shoes, and clothes as well as modern cars decore that
primarily serve its guests and major clients. The plan is that the building will be partitioned in
to different functions:

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 Table 1 2Building functions

Building Description UOM Availed

area

Ground selling products reception room M2 100

Garment processing and
manufacturing

1st FLOOR Sewing, designed grading M2 100

2nd FLOOR Planning,cutting .... M2 100

3rd Finishing ,packing etc. M2 100

Since the project will be engaged in mixed building the main sources of its annual revenue
would be from the selling of clothes and tapseries products such as T_shirst,shoes,coats and
so on Therefore, the sources of revenue have been classified in to one category nemaly
processing and manufacturing clothes based on these Classifications. Based on the market
price of similar clothes in area, the envisioned company . set the following fair price (Before
VAT) for its products, hence when the building construction fully get operational it is
assumed to generate a yearly income of ETB 3.2 Million.

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 4. Technical Study
4.1. Description of the project Service/ Product mix

The envisioned clothes processing and preparing company will provide different kinds of
clothes to the different customer groups for different purpose. The building will have
basement, ground and four floors. The purpose of the building explained as follows;

 the ground floor and first floor will be designed for different business centers like
stores,selling shop designed place other business activities,
 The second to fourth will be designed as apartments.

Besides, the company will have enough parking facility for its customers and green area in its
compound.

4.2 Construction work and Technology

4.2.1 Construction schedule

The construction project is started on November 2024, and is expected to be finished on

December2025. as seen in the abbreviated construction schedule above, a majority of the
schedule’s time is made up of five major activities; Concrete, building Enclosure, masonry,
mechanical &HVAC and Electrical installations. Concrete activities include processes such
as placing foundations and slab on deck. The Building Enclosure Phase includes erecting the
scaffolding that will allow for exterior sheathing installation and bricklaying and aluminum
works. Mechanical and Electrical install coincide with each other due to the need for
coordination between the two divisions. There are several periods of construction during the
schedule in which there are multiple construction activities occurring at the same time.

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The construction site must be organized accordingly as these processes take place. As with
any construction project, the goal of the schedule was to complete all construction activities
before the required Date of completion.

This date of completion is practical based on the time of year in which the building will be
completed. The team allowed a two week contingency for any setbacks. Typically, winter
construction tends to cause unforeseen delays that negatively impact a construction project.
These conditions can and will almost undoubtedly impact the project schedule by causing
unforeseen delays and project inefficiency.

4.2.2 Architectural Design & Layout

Although functional spaces for the project were laid out in significant detail, the rest of the
building had designated spaces but n set layouts. It was at the discretion of the project
promoter to devise typical layouts for the non-detailed commercial and office spaces. To
make sure that the building’s layouts were practical, the project owner researched typical
architectural layouts for laboratory and executive office spaces.

The walls and partitions throughout the floor were congruent with the structural frame and
column locations.

4.2.3 Structural design

One of principle deliverables of our project is the structural design of the building. The
structural elements were coordinated with the layout of the building adjustments were made
to the columns if specific layouts are necessary. The frame was made up of a grid with
repeating standard structural bays. Included in the structural system are bay sizes, shape and
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size of structural members, floor compositions and curtain walls. These elements were
established to resist gravity ad lateral loads as appropriate.

The gravity load design was completed for two frames; one of structural steel and one of
reinforced concrete. Reinforced concrete frame was chosen for further design based on cost
per square foot, local availability of material and constructability considerations, such as

erection and casting. The concrete system was then designed for lateral loading with
necessary adjustment being made to framing.

4.2.4 Reinforced concrete

The project group prepared hand structural design calculations for a typical bay of a
reinforced concrete frame. In all reinforced concrete designs, a superimposed dead load of
800kN per square meter was assumed for mechanical equipment, floor coverings and
ceilings.

Similarly, the design of the typical bay accounted for the use of different commercial space,
in which a live load of 500 kilos per square meter was assumed. Loads were calculated based
on the requirements of the minimum Design loads for Buildings and other Structures.

4.2.5 Foundation Design

Since foundation design are site and material specific, the promoter is holding off on the
design of the foundations.

4.2.6 Construction Plan and process

The project team developed a coordinated project schedule and construction plans that would
reflect the expectations for an actual construction project. The project schedule was
developed using the preliminary designs given to the project team. Additionally, the group
considered typical construction activities and durations taken from similar construction
projects as well as realistic constraints on building development. For instance, it is necessary
for the structural frame to be completed before concrete can be placed for the slab on deck.
Hand drawn construction plans detailing site entrances and storage areas were coordinated
with the project schedule to give the reader visualizations of the construction site set up
through
XVIII | Pvarious
a periods of the construction process.
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Based on a general program of the project owners the consultant who is going to be hired
makes site studies, develops structural designs, prepares drawings and specifications,
determines quantities involved and estimated the resultants costs. All these activities will be
done in the first phase of the project which is the design stage after the document are
produced by the designers have been received, and the works secured the project is supposed
to enter the tendering stage. At this stage contractors study the project document analyze and
subsequently determine the construction methods, built up their unit rates and submit their
bids for the works. The promoter of this project intends to compare the bids and award the

contract for the lowest responsible bidder. This, is of course, presupposes that the favorable
proposal does not exceed the allocated budget.

After the award is made and the contract signed between this project owner and the
contractor, the project constructor is expected to prepare and submits a detailed construction
program which includes material schedule, manpower requirement and cash flow forecast.

After the award is made and the contract signed between this project owner and the
contractor, the project constructor is expected to prepare and submits a detailed construction
program which includes material schedule, manpower requirement and cash flow forecast.

4.3. Utilities

A number of utilities world be put in place in order to ensure smooth functioning of the
project. These utilities include:

 Water Supply,
 Solar powered offices
 Supplementary Electricity supply.
 Telephone line Internet Broadband
 Well landscaped areas
 Responsible waste removal
 Well thought about site arrangement

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4.4 Project implementation

The project’s implementation is expected to take 12 months. The major activities include
Bank loan processing, construction of the building, cleaning the area around the building,
Procurement of equipment and start rendering services. The time schedule for the above
matured major activities is presented below:

Table 1 3 project Implementation schedule

SN ACTIVITIES DATE

1 Construction work permit December 2024

processing

2 Construction Bid Processing January ,2025

3 Site Development February ,2025

4 Building and construction work January 2025

Phase I JUn,2026

5 Bank loan processing Feb,2025-

march,2025

6 Building and construction work Apri, 2025-

Phase II MAY,2025

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7 PREPARATION FOR January 2026
SERVICE

4.5 Organizational Structure

4.5.1 Organization and management

The organizational structure should be in a way that the company able to achieve its
objectives as well as the satisfaction of standard requirement. In addition to this, the structure
should fit the dynamics of all customers in the building ranging from small business to large
tenants.

4.5.2 Man Power

The total manpower required for the building will be 59 persons. The manpower list and the
corresponding labor cost are shown in part five of this document.

4.5.3 Organizational Structure

The organizational structure of the project is designed by including all the necessary
personnel under the right division. At the top of the organizational structure, there will be
manager with the responsibility of supervising the overall activity of the building. Depending
up on the nature of the center and the amount of work to be performs; there exist auxiliary
units under the general manager.

Employees under each unit will be supervised by the department head that is accountable for
the general manager. General Manager is appointed by owner.

As clearly shown in the organizational structure, the center organization has one general
manager and three main sections. Under the general manager there are the, marketing
Department, maintenance and building administration department. Under building admin
dept there exist two sections i.e., HRM & finance and general service. Further sub sections
are also organized under technical and maintenance manager. The following section deals
XXI |the
with P aduties
g and responsibilities of each department.
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  The General Manager’s Duties and Responsibilities
 He/she will plan, organize, direct and control the overall activities of the building.
 He/she will devise policies and strategies that will enable the center to be profitable.
 He/she will incorporate modern technological innovation that will facilitate the
service delivery of the building to increase customer’s satisfaction.
 He/she will plan, organize, direct and control the human and non-human resources
of

 the building so as to achieve the short and long run objectives of the organization.

 Building Administration Department: - The building Administration Department of the

multipurpose building has two main sections (HRM and Finance and General Service
section). It has responsible for undertaking the following activities;
o Manage the human resources and control employee’s activity
o Well non-human resources of the project, which include; effective handling of the
different resources of the building, and devise strategies of controlling against fraud
and damage.
o Will provide the right material or inventory to the center with right price at the right
time.
o Will plan, organize direct and control the financial transaction of the building by
using all the necessary documents.
o Accountant and casher that will collect money from the customers.
o Will develop sound financial control system by developing modern financial
control systems.
o Will prepare the annual financial statements and prepare condensed reports for both
the General Manager and other concerned government body.
o Follow the overall status of the business and provide maintenance and repair services
 The marketing Department
o Will handle the overall marketing activities of the organization which include
XXII | P aplanning,
g organizing, directing, and controlling.
e
 o Will develop the marketing strategies for future multipurpose building development
o Will develop effective customer handling strategies.
o Execute the promotion methods.
 Technical and maintenance manager
o Will handle the overall physical maintenance and related issues
o Will make sure electricity and back up is organized.
o Follow up security issues and educate tenants
o Works in collaboration with general service to make sure tenants are well served

5. Financial Requirement and Analysis

The financial resource is a prime resource for undertaking any activities. Hence for
implementing this business center and Construction machinery and equipment’s a total of
9.47 million ETB is required. From this 30% 1.3 million birr will be covered by the promoter
of the project while the rest 70% 3.7 million will be covered through loan from bank at the
prevailing interest rate.

Therefore the said amount of finance is needed for undertaking the following.

5.1 Fixed Investment

 Land, Building & Construction

Table 1. 4 L a n d , Building & Construction

S.N Description of works Total Cost in birr

1 Building construction 4000,000

2 Site Development 15000

3 Design and supervision 350000

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 Total 7,500,000

 Office Equipment Table 1. 5 Office Equipment

SN Description Measurem Qty Unit cost Total cost

ent in in

birr Birr

1 Executive table Unit 1.00 25,000.00 25000

2 Managerial Table Unit 2.00 17,500.00 35000

3 Working Table Unit 2.00 12,000.00 24000

4 Document shelf Unit 4.00 7,100.00 28400

5 File cabinet Unit 3.00 2,430.00 7290

6 Desktop computer Unit 4.00 6,100.00 24400

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7 Laptop Unit 1.00 24,000.00 24000

8 Printer Unit 1.00 15,000.00 15000

9 Fax & Telephone machine Unit 2.00 1,300.00 2600

10 Carpet and Curtain LS 1.00 21,000.00 21,000.00

Total 306,690.0
0

5.2 Working Capital

5.2.1 Operating Expense at full Capacity

A. s a l a r y Expense Table 1. 6 salary Expense

SN Position No Qualification Monthly Annual

salary in salary in
Birr Birr

1 General manager 1 BA in management 3000 36,000

2 Building admin 1 BA in Acct/Mgt 2500 30,000

3 Secretary 1 10+2 in secretariat science 900 10,800

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4 Custodians 1 Basic 950 11,400

5 Technical and 1 Diploma in building maintenance 1500 18,000

maintenance
manager

6 Guards/Security 4 Basic 500 24,000

Total 9 130,200

Benefit (20%) 26,040

Grand Total 156,240

5.2.2 Operating Expenses

The annual operating cost at full operation capacity is estimated at Birr 1.9 million (see Table
10). The cost of Office stationary account for 0.5% of the operating cost. The other major
components of the operating cost are financial cost (82 %). For detail production cost see
Appendix A.2..

Table 1. 7 Annual Operating Cost At Full Capacity

Items Cost %

Office
XXVI | stationary
Pa 10,000 0.5%
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Utilities 54,000 2.7%

Maintenance and repair 78,000 4.0%

Labor direct 156,240 7.9%

Administration Costs 25,000 1.3%

Land lease cost 20000 1.0%

Cost of marketing 0.0%

Total Operating Costs 343,240 17.4%

Depreciation 0.0%

Cost of Finance 1,625,277.0 82.6%

Total Production Cost 1,968,517 100.0%

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5.3 Total initial investment cost

The total investment cost of the project including working capital is estimated at Birr 1.5
million (See Table 11). From the total investment cost the highest share (Birr 1.3 million or
91 %) is accounted by Building and civil work cost.

5.4 Financial analysis and Statements

5.4.1 Underlying Assumption

The financial analysis of the Garment processing is based on the data provided in the
preceding sections and the following assumptions.

 construction and finance Construction period2 Years

Source of finance30% equity and 70 loan

Bank interest rate16%

 depreciation

Building no depreciation

5.5 Sources of Fund

The source of fund to finance the project is planned to be from two sources. These are
promoter’s equity and bank loan. The loan is expected to be obtained from one of the local
lending institutions. Since the project is expected to take some times to repay all its debts, the
bank loan is assumed to obtain on long term credit basis. Taking the financial position of
the Promoters into account, equity contribution and bank loan to finance the total investment
outlays of the project are assumed to be 30% and 70% respectively. Accordingly, the total
financial requirement from the two sources will be;

Table 1. 8 Source of fund

SN Description Percentage share Amount

Owners Share 30% 3000,000

Bank Loan 70% 7000,000

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 Total 100% 10,000,000

5.6 Financial evaluation

5.6.1 Profitability

Based on the projected profit and loss statement, the project will generate a profit throughout
its operation life. Annual net profit after tax will grow from Birr 448,533 to 1.9 million
during the life of the project. Moreover, at the end of the project life the accumulated net cash
flow amounts to Birr 12.8 million. For profit and loss statement and cash flow projection see
Appendix A.3 and A.4, respectively.

5.6.2 Ratios

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

5.6.2 Break-even Analysis

The break-even analysis establishes a relationship between operation costs and revenues. It
indicates the level at which costs and revenue are in equilibrium. To this end, the break-even
point for capacity utilization and sales value estimated by using income statement projection
are computed as followed.

Variable Margin ratio (%)

Break- Even Sales Value = F i x e d Cost + Financial Cost = B i r r 1,835,469.18

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Sales revenue
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Break- Even Capacity utilization = B r e a k -even Sales Value X 100 = 5 6 %

5.6.3 Pay-back Period

The pay-back period, also called pay – off period is defined as the period required for
recovering the original investment outlay through the accumulated net cash flows earned by
the project. Accordingly, based on the projected cash flow it is estimated that the project’s
initial investment will be fully recovered within 5 years.

5.6.4 Internal Rate of Return

The internal rate of return (IRR) is the annualized effective compounded return rate that can
be earned on the invested capital, i.e., the yield on the investment. Put another way, the
internal rate of return for an investment is the discount rate that makes the net
present value of the investment’s income stream total to zero. It is an indicator of the
efficiency or quality of an investment. A project is a good investment proposition if its IRR is
greater than the rate of return that could be earned by alternate investments or putting the
money in a bank account. Accordingly, the IRR of this project is computed to be 12 %
indicating the viability of the project.

1. Environmental impact of the project

The EIA of the project activities was determined by identifying the environmental aspects
and then undertaking an environmental risk assessment to determine the significant
environmental aspects. The environmental impact assessment has included all phases of
the project namely construction phase and operational phase. The building has both positive
and negative impact The positive impact of the project is:-

 Generation of employment opportunity

 Source income for the government through business income tax
 Income generation for the promoter
 Being exemplary for other investors who want to engage in the same business line.
Negative impact of the project

The project has the following negative impacts:

1. noise
XXX | P a and
g Dust emission during Construction
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There are some noises during the construction due to the construction operation and the
company will use construct the construction during the day time. Again there is the emission
of dust which will be mitigated by sprinkling water on the service.

1. problem on workers on construction

During construction there are some problems that will materialize on workers. These are:
damage on operation by using machines, construction materials and others. To mitigate such
impact the company will provide safety insurance and safety equipment.

1. swages during operation

During operation there are some wastes emitting from the Retail Trade of Industrial
Agricultural and Construction machinery and equipment’s. These are wastes from the latrine
and will be mitigated by using modern waste treatment technology

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