Table of Contents

Title Pages

I. Executive Summary......................................................................................................................1
II. Socio Economic and Climatic Condition..........................................................................................3
1. Introduction.......................................................................................................................................4
1.1 Background of the Study.............................................................................................................4
1.2 The Owner...................................................................................................................................5
1.3 Objectives of the Company;........................................................................................................5
1.4 Brief information about the Owners............................................................................................5
1.5 Brief on the project......................................................................................................................6
1.6 Credit relation..............................................................................................................................6
2. Security available for loan purpose...................................................................................................6
3, Technical Assessment.......................................................................................................................6
3.1 Location of the Project................................................................................................................6
3.2 Project Layout.............................................................................................................................7
3.3, Machinery, Equipment, Furniture and Fixtures..........................................................................7
3.4. Office Equipment and Material Supplies....................................................................................7
3.5 Other Utilities..............................................................................................................................7
3.6 Production Description..............................................................................................................8
3.7 Production Process and Engineering...........................................................................................8
3.7.1, Production Process..............................................................................................................8
3.7.2, Engineering.........................................................................................................................9
4. MARKET STUDY............................................................................................................................9
4.1 General (States Of Other Countries in Producing Honey)...........................................................9
4.2. Demand Analysis for honey for honey at national level...........................................................11
4.3. Supply Analysis........................................................................................................................13
4.4 Market Prospect.........................................................................................................................14
4.5 Price Determination...................................................................................................................15
4.6 Capacity Utilization...................................................................................................................16
5. Organization, Management and Manpower.....................................................................................16
5.1. Organization and Management.................................................................................................16
5.2, Man Power...............................................................................................................................16
5.3 Organizational Structure of the company..................................................................................17
6. Financial Analyses.........................................................................................................................17
6.1 Investment Costs and Sources of Finance..................................................................................17
6.2 Results of Financial Forecasts...................................................................................................18
7. Risk Analysis.................................................................................................................................19
7.1 Characteristics (Personal Risk)..................................................................................................20
7.2. Business Risk...........................................................................................................................20
7.3 Collateral Risk...........................................................................................................................20
7.4. Construction Risk....................................................................................................................20
8. Summary, Conclusion....................................................................................................................21
9. Assumptions Employed in the Project Financial Analysis.............................................................23
9.1 Operating Costs.........................................................................................................................23
9 .2 Capacity Utilization..................................................................................................................25
9.3. Revenue....................................................................................................................................25
 9.4 Disbursement.............................................................................................................................25
10. Annexes for financial and economic analysis................................................................................28
10.1 Financial analysis projections..................................................................................................28
10.1.1 Total investment costs......................................................................................................28
10.1.2 Operating costs projection................................................................................................28
10.1.3 Revenue projection...........................................................................................................29
10.1.5 Income Statement Projection............................................................................................30
10.1.6 Cash Flow Projection for Discounting..............................................................................31
10.1.7 Sensitive analysis..............................................................................................................31
10.2 Economic analysis...................................................................................................................32
10.2.1 Initial investment costs.....................................................................................................32
10.2.2 Operating Costs................................................................................................................33
10.2.3 Revenue projection...........................................................................................................34
10.2.4 Operating cost projection..................................................................................................34
10.2.5 Cash Flow Projection for Discounting..............................................................................35
 I. Executive Summary
Ethiopia is endowed with diverse agro-climatic zones that are suitable for beekeeping.
However, the benefit the country gets from honey and beeswax export is insignificant
compared to the huge potential it has for earning foreign exchange as well as generating
income to many smallholder beekeepers and other actors in the subsector. Honey is
traditionally a very precious product and plays an important role in generating cash income
for farmers.

The company establishes for the processing of honey with a capacity of 90 tons per annum.
The present demand for the proposed product in Ethiopia is estimated at 4,340 tons per
annum. The demand is expected to reach at 11,257 by the year 2021.

The plant will create employment opportunities for 19 persons. The total investment
requirement is estimated at about Birr 6.1million, out of which Birr 3 million is for plant and
machinery, 1.5 million for building and civil works.

The project is financially viable with an internal rate of return (IRR) of 30 % and a net
present value (NPV) of birr 7,199,355 birr discounted at 10%.

1
 Brief information about the project

 Name of the Licensee: ………………………………. Nahom honey processing company

 License Type: ……………………………………… medium scale honey production

 License Area: ………………………………………Tigray regional state, Mekele city

 Total area of the project ………………………………600 meter square (20x30)

 Annual Aggregate Production: ………………………………………..……81 tons

 Project Life: …………………………………………………………….……10 years

 Fixed Capital Expenditure: ……………………………..…………... 5,900,000 birr

 Annual Operational Cost: ……………………………………..………. 3,455,523 birr

 Pre-production Cost: …………………………………………………… 200,000 birr

 Depreciation Period: ………………..10 years for vehicles & 20 years for building

 Salvage Value: ……………………………..…...5% of Fixed Capital Expenditures

 Total Sales Revenue for the first year: …………………………… 6,066,900 birr

 Income Tax ………………………………………………………… 35% of the profit

 Net Cumulative Profit, 10 years ……………………………………18,699,524 birr

 Pay Back Period ……………………………………………………………... 4 years

 Net Present Value ………………………………………..………….. 7,199,355 birr

 Financial Internal Rate of Return …………………………………………... 30 %

 Economic Internal rate of return …………………………………………… 62%

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II. Socio Economic and Climatic Condition

Ethiopia is the largest country in East Africa. As a landlocked country, Ethiopia shares
boundaries with Eritrea to the north, Kenya to the south, Somalia and Djibouti to the east and
Sudan to the west. Its growing population of nearly 79 million (2010) makes it the second
most populous country in Africa. The majority of the population (85 percent) is rural and
engaged in agricultural production.

Tigray State is located in the northern part of Ethiopia, with a population of 4.5 million. 80
percent of the population is lived in rural areas and 20 percent is lived in urban areas.
Tigray is one of the 11th Regional States of the Federal Democratic Republic of Ethiopia and
situated in the Northern part of the country. The Region has an area of 50,000 Km Square
divided in to seven zones, Southern, south-eastern, Mekelle, Eastern, Central, South-Western
and Western zones, and sub divided in to 46 woredas/districts. The region has also a total
population of 4.5 million.
Mekelle is the sixth largest city in Ethiopia and the capital of Tigray State. Mekelle enjoys a
mild highland climate with an average temperature of 25°C. The rainy season in the Mekelle
is from June to September, while the dry season is from October to May. The average annual
rainfall is approximately 579mm. The total population in the city of Mekelle is estimated at
215,546. The annual population growth rate is approximately 2.6 percent

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1. Introduction

1.1 Background of the Study

In Ethiopia, honey is traditionally a very precious product and plays an important role in
generating cash income for farmers. It serves as raw material in the production of traditional
alcoholic beverage, Tej. It is also widely used in different traditional medicament and ritual
ceremonies.

There are an estimated 10 million bee colonies in Ethiopia out of which about 7.5 million are
confined in hives and the remaining exist in the forest and crevices.

Ethiopia, having the highest number of bee colonies and surplus honey sources of flora, is the
leading producer of honey and beeswax in Africa. On a world level, Ethiopia is fourth in
beeswax and 9th in honey production. Honey and beeswax also play a big role in the
economic, cultural and religious life of the people. The annual production of Ethiopian honey
is estimated at 45,000 tons per annum and that of beeswax 3600 tons per annum. (MORAD,
Dec. 2008)

With regard to good opportunity to investment the project will be implemented is Mekele
town.
Mekele’s annual population growth rate is approximately 2.6 percent per annum. People
migrate to Mekele for better opportunities like, job, health and education. Tigray honey is
considered to be of superior quality, and it has a moderate climate due to its highland
position, which is favorable for honey production. The Mekelle region has a large bee
population (about 37 thousand bee colonies; 20 percent of the Tigray total). Tigray honey has
a special aroma that would provide a competitive advantage in niche markets

4
1.2 The Owner
 Name of the project; ………………. Nahom honey Processing Company
 Manager (would be); …………………W/ro Abeba mehari
 Address; ……………………… Mekele city administration, Kebele. 18, H.No, 832
 Business; ……………………………..Honey processing company
 Form Of organization; ……………… Private limited company
 Registration; …………………………on progress
 Business license; …………………… on progress
 Investment permit; ……….. by Ethiopian investment Authority on first of May 2011
 Status of project; ……………………. New

1.3 Objectives of the Company;

To maximize profit
To increase market share
To produce quality of honey
To create job opportunities and enable communities improve their income.
To increase the owners capital

1.4 Brief information about the Owners

Mr. Workie Abadi and W/ro Abeba mehari solely owns the business. Both of the
entrepreneurs have an age old experience in the business and can always avail them self on
fulltime basis to properly run the business. W/ro Abeba mehari (wife of Mr.Workie) is the
manager of the company, she has enrolled at Addis Ababa University; she gets her first
degree in public administration. W/ro Abeba mehari as manager of the company; she has a
well experienced and has experienced in managing private business. Mr.Workie Abadi has a
BA degree in Accounting from Addis Ababa University. He has enrolled at the Addis Ababa
University he gets his first Degree. Both W/ro Abeba and Mr.Workie are well known in their
respective field of specialization in their vicinity.

5
1.5 Brief on the project
The project will be located in Mekele city Kebele 18 in the vicinity commonly called
Adishindihun
The project area has suitable infrastructure such as access for transportation, and it is
assumed that necessary utilities like electric power, water, telephone and accessible road are
there. The raw materials like crude honey and other inputs for the production process are
readily available in the Mekele region market.

1.6 Credit relation

The company has no credit commitment with Banks and other financial institutions until this
date of report. Recognizing the importance of having its own building and premises, the
honey processing company has negotiated and deals to finance the acquisitions from bank
loan.

2. Security available for loan purpose

A, Plant building to be constructed & machinery ….……………………….3 million birr

B, Business mortgage…………………………………..……………………. 3.1 million birr

Total Birr …………… 6.1 million birr

3, Technical Assessment

3.1 Location of the Project

The honey processing company is situated at Mekele city administration, Kebele 18 in
vicinity called Adishindihun. According to the resource potential study of the region, the
raw material is identified in most parts of the Tigray region. The honey producers of the
region especially the eastern, southern and south eastern zones are well suited for the
production of quality honey.

The Tigray region is nationally considered high quality producer of honey (white & butter
colour) when compared to other Regions of our country, and also based on the availability of
6
raw material (crude honey). Mekele region Produces 20% of the Tigray region honey
production. According to the availability of infrastructure, based on the utility and market
availability Mekele town is selected and recommended to be the location of the company
(project).

3.2 Project Layout

The plant requires a total area of 600 meter square (20x30) of land out of which 300 meter
square is built-up area which includes Processing area, raw material stock area, offices etc
and the remaining will be parking and other areas. This building has 8 classes which are used
for production process, store house, offices and other purpose.

3.3, Machinery, Equipment, Furniture and Fixtures

Nahom honey processing company will fully equip with the standard that it can serve and
facilitate for production process. Major machineries and equipments would be installed in the
appropriate rooms. The machinery and equipment required by the project will be procured
from foreign sources. Fixture, furniture and other necessary office equipments like;
Liquefier, Filter press, Evaporator, Vacuum pump, Storage/settling tank, Water circulation
pump, Pre heating tank, Processing tank etc will also be fulfilled.

3.4. Office Equipment and Material Supplies

The company would supply processed packed honey and wax for beneficiaries. The
company would also facilitate uniforms masks, gloves and other necessary materials, for the
operational workers per need. Raw materials like crude honey and chemicals are sufficiently
available on time for the purpose of facilitating the production.

3.5 Other Utilities

Electricity, water and telephone are already available in the vicinity and will be easily
installed to the project. The raw materials (inputs) like crude honey and other inputs are
available in the city market.

7
3.6 Production Description
Honey consists essentially of different sugars, predominantly glucose and fructose. Besides,
honey contains protein, amino acids, enzymes, organic acids, mineral substances etc. The
colour of honey varies from nearly colorless to dark brown. The flavor and aroma vary but
are usually derived from its plant origin.
In Ethiopia, honey is used almost everywhere for the preparation of the favorite national
drink called Tej and also for food in the form of bread spread or as sweetener in home baking
and medication.

3.7 Production Process and Engineering

3.7.1, Production Process

Honey contains pollen, dust and air bubbles, which tend to include granulation
(crystallization). Heating the honey to 45 C0 to dissolve the crystals present in honey can
retard the granulation. Filtration then removes part of pollen, foreign particles and wax.
To prevent fermentation and to destroy yeasts, honey is heated to a temperature of 65 C 0-70
C0 for specified time. Proper temperature and control and heating time is a most important
factor in honey processing activity. (Profile of honey Processing Project 2007)
The Process of Honey is Divided in to three Steps
 Filtration to remove wax, foreign particles after heating honey to 45 C 0. It may be
noted that heating up to 45 C 0 (below the melting point of bee wax) is required to
decrease the viscosity of honey.
 Honey is then heated to 60 C0-65 C0 for 10 to 15 min and passed in to a falling film
evaporator. Vacuum is simultaneously applied to boil the water in honey at a lower
temperature so that moisture is separated which can be collected separately. This
procedure also helps in destroying yeasts.
 Cooling the honey to atmospheric temperature and storing in closed vessel for 24-48
hours is the next step. Storing honey for period of 24-28 hours is necessary to allow
air bubbles to go out. Honey is then packed and sealed immediately.

8
3.7.2, Engineering
A. Machinery and Equipment
The machinery and equipment required by the project will be procured from foreign sources.
The total cost of machinery and equipment is estimated to be Birr 3,000,000. The plant needs
two vehicles (one pick-up and one minibus) for transportation of raw materials, finished
products and for office activities. The total cost of the vehicles is estimated at Birr 1,000,000.

B. Plant Capacity and Production Program

Plant Capacity; According to the market study, the demand of honey in the year 2012 will be
4,774 tones, whereas this demand will grow to 11,257 Tones by the year 2017. The envisaged
plant will have an annual production capacity of 90 tones of honey will be installed. Production
capacity is based on a schedule of 300 working days per annum.
Production Program; The project is assumed to start operation at 70% of its rated capacity,
which reaches 90% of the capacity production, will be attained in the fourth year and thereafter.

4. MARKET STUDY

4.1 General (States of Other Countries in Producing Honey)

Ethiopia is 1st in Africa and 9th globally in terms of production of honey. It has also the
highest number of bee colonies and surplus honey sources of flora. Likewise, Ethiopia stands
1st in Africa and 4th in the world in beeswax production.

Currently, Ethiopia produces 45,000 tons of honey annually. The country also produces
3,000 tons of beeswax annually that generated only 1.5 million dollar. Over the 97% of the
total honey produced is marketed, of which 85% goes to the preparation of local drink Tej.
(Ministry of rural & agricultural development (MORAD), Dec. 2010)

Ethiopian honey and other bee products have competitive advantage over other country’s
products in the following sense. Ethiopia has a diverse ecology and this makes it suitable to
produce diverse honey plants in different flowering seasons. This, in turn, contributes in the
9
production of fresh honey throughout the year. The honey ranges from dark blue to extra
white, which can meet the demands and preferences of different buyers.

Its scope for diversification is also phenomenal. One can produce bee products such as table
honey, honey for Tej, beeswax, pollen, royal jelly, and cream honey.

The company will buy a total of 63 tons of honey from local honey producers starting from
year 1, and increasing to 81 tons in subsequent year. In the Mekele region the production of
honey estimates about 400 ton and from the eastern and southern zones their production
estimates about 780 tones (Bureau of rural and agricultural development 2010).

In Tigray region there is only one honey processing company. The annual production of the
region Estimated about 2000 tones; i.e 20 % the countries total production (MOARD,
2009), so there is no shortage of supply in that region.

The honey will be processed using internationally accepted modern processing and packing
equipment all of the processed honey will be bottled and labeled for sale in local markets of
the country.

Pro-Poor Potential; - According to information secured from MOARD over 1.5 million
households in the rural community are involved in beekeeping. In other words, 1 out of 10
farmers in Ethiopia are involved in beekeeping which would make promoting the Honey and
other bee products. Records from (MOARD2009 show that, currently, household income
from honey production is estimated at US 66 million/annum.

Productivity of beehives; The average yield of the traditional beehive was 12.6 kg in 2008 It
has increased slightly to 13 kg in 2009 and increased 15 kg in 2010. It was not possible to
compute the productivity of transitional beehive owing to the presence of only one
transitional beehive. The productivity of modern beehive has increased from 30 kg in 2008 to
30.5 kg in 2010.
Socio economic aspects; The main socio-economic benefits the company is going to generate:
 Livelihoods and food security of the area via being source of income/market for the
surrounding farmers and generation of employment,

10
  Enhancing the productivity of apicultural production in the region by way of technology
transfer,

 Contributing to the regions income by way of taxes and other payments,

 Generates profit for the owner of the company

 Avails employment opportunities to about 19 employees

4.2. Demand Analysis for honey for honey at national level

To estimate the current effective demand of natural honey for human consumption the export
potential and the local consumption estimated through per capita has been added.
If we take the existing average price of honey globally which is 9 USD - 10USD/kg and if
Ethiopia could produce its potential which is 500,000 ton per annum (according to MOARD
documents), this would mean that the country has the potential to generate 1.25 - 1.5 billion
USD that would make all the more rational to select the Honey and other bee products for
promotion and development in Ethiopia. And, if we take beeswax the country has the
potential to produce 50,000 tons (according to MOARD documents) and could generate 225
million USD if we compute it using the current average global price of honey; i.e. 4500
USD/ton. This would clearly mean that the beekeepers will have the significant part of the
slice of the pie in terms of increasing household income for the poor farmer.
Demand for processed honey is influenced by population growth, income, and the export
potential. Population is growing at a rate of 3% and GDP in the past five years has increased
by 10%.

Table 4.2 Projected Demands for Honey in Ton at National Level

Year Quantity
2012 4,774
2013 5,251
2014 5,777
2015 6.354
2016 6,990
2017 7,688
2018 8,457
2019 9,303
2020 10,233

11
 2021 11,257
The demand projection shows that a number of plants can be established in various parts of
our country up to absorb the market.
At Regional level
Mekele’s annual population growth rate is approximately 2.6 percent per annum. People
migrate to Mekele for better opportunities like, job, health and education. Tigray honey is
considered to be of superior quality, and it has a moderate climate due to its highland
position, which is favorable for honey production. The Mekelle region has a large bee
population (about 37 thousand bee colonies; 20 percent of the Tigray total). Tigray honey has
a special aroma that would provide a competitive advantage in niche markets. This means the
region have an opportunity to invest in honey processing company.
According to the countries average production of processed honey, currently the region has

the ability to produce processed honey about 2000 tons per annum with increasing 10%
annually. Still now the region has only one honey processing company which is called DIMA
honey processing private limited company with the capacity of producing 120 tons/year.

4.3. Supply Analysis

The past five years some enterprises have been active to introduce table honey to Super
markets in Addis Ababa and other regional states.
The average price of the processed honey was birr 98/k.g. But currently the average price
increases to 130 birr per kilo gram.
In the past five years Productivity of traditional honeybees is very low and only an average of
8-10 kg of honey could be cropped per hive per year. However, in areas where improved
technology and box hives have been introduced, an average of 25 – 30 kg/hive/harvest has
been recorded.
According to CSA (2009), House Hold Income, Consumption and Expenditure survey, the
per capital consumption of processed honey is about 60 grams. This indicates a national
consumption of about 4,340 tons.

12
The past progress of processed honey production in Ethiopia
According to ministry of trade and industry, there are only 25 honey producer companies In
Ethiopia, and only 1 company in Tigray. T the annual productivity in average increases 8%
annually.

Table 4.1 Number honey processing companies and their volume of production (2007-2010)

Year Number of companies Their volume of Production

2007 23 3587
2008 24 3873
2009 25 4208
2010 25 4300
Source, Ministry of Trade and Industry (MTI) 2010

Export experience of processed honey in Ethiopia

The price of honey in Ethiopia is increasingly becoming less competitive with that of the
international price, especially when compared with those of China, and some Latin American
countries. In the last four years Ethiopia exports an average amount of 321 tons/year.

Table 6: Export of Honey and value generated (2006-2009)

Year Quantity Value in birr
2006 (Tons)
250 7,500,000
2007 280 8,960,000
2008 312 10,606,000
2009 442 14,832,000
Average 321 10,474,000
Source: MOARD 2010

Projected supply for the next 10 Years

Supply for honey currently estimates about 4730 tons/year, then according to MOARD, 2010
production honey processing increases by 10% annually.
Table 4.2 Projected supply of honey in ton
Year Quantity
2012 4350
2013 4,823

13
 2014 5,360
2015 5,949
2016 6,950
2017 7,660
2018 8,360
2019 8,960
2020 9,980
2021 11,213

4.4 Market Prospect

From the above tables, it can be deducted that there is a growing demand and supply gap
national level for honey processing company. Hence there is a room and an urgent need to
open a honey processing company expected to produce 81 tons of honey per year. Thinking
of the minimum situation, the number of honey processing companies (production capacity
needed

Table 4.4 Demand & Supply Gap for Honey Processing Companies
Year Demand Supply Gap
2012 4350 4,774 424
2013 4,823 5,251 428
2014 5,360 5,777 417
2015 5,949 6,354 405
2016 6,950 6,990 40
2017 7,660 7,688 28
2018 8,360 8,457 97
2019 8960 9,303 343
2020 9980 10,233 253
2021 11,213 11,257 44

According to the projection, the number of honey processing company in the country for the
coming 10 consecutive years cannot satisfying the need of consumers.
In general, besides the favorable situation to the existing honey processing company, the
market prospect for honey processing is still wide open for new investors. But the question is
that demand is one thing and purchasing power of the consumers is the other which is the
most important factor to maximize profit. Hence accessing market would be important in this
regard.

14
4.5 Price Determination
It would important to examine the possible level of price based on the purchasing power of
the consumers and competitors’ action. The price of honey varies according to its colour, purity
and season. The price of processed table honey at supermarkets in Ethiopia varies from
Supermarket to supermarket. In this connection, the existing prices of similar hospitals are
assessed for the benefit of comparison. The price level DIMA, Beza, Tadele and Tesfu honey
processing companies are presented here;
Table 4.5 price comparison
Name of the company Average price /kg
Dima 130
Beza 120
Tadele 125
Tesfu 110
Total average price 125/kg

Marketing Strategies
Grading, labeling, quality packaging and advertising will be key elements of the marketing
strategy. The company also wants to have an innovative approach of marketing by displaying
its quality products at the market. And the price of processed honey will be set at 100 birr/kg
in order to be competent.

4.6 Capacity Utilization

The capacity utilization is predictably assumed, in the first year, it is forecasted to be 70% of
the full capacity and then increased by 10% each year until it reaches 95% of attainable
capacity.

5. Organization, Management and Manpower

5.1. Organization and Management

The organizational structure should be in a way that the company able to achieve its
objectives as well as to the satisfaction of standard requirement.
Te project will have the following main functional units:

15
The major functions of the units in the organizational structure are presented in the next
sections. The detailed job descriptions, qualifications shall be worked of out during
implementation of the project
Under the company there will be 3 departments;
The Administrative staff, which deals in general the company shall undertake planning,
coordination, and control of the overall activities of the project.
The Technical staffs will hold responsibilities of running Operations and technique
Assistant: this unit has responsible for the technical activities, purchasing and collection and
processing and logistics operations.
The Finance department is responsible for overall accounting and financial management of
the company.

5.2, Man Power

Nahom’s honey processing PLC is in the category of medium scale manufacturing industry
known in the ministry of trade and industry (TAI) at high standard. Therefore, (TAI) criteria
have been taken to plan man power requirement of the company. Technical workers are
categorized in their area of study (specialties) and assumed to be 6 in number.
Administrative staff are considered as supportive personnel and expected to be 8, finance
staff is also assumed to be 5.Therefore, the total number of workers is assumed to be about
19 persons. In general the organizational and manpower arrangement is expected to provide
good working atmosphere in the company’s day to day activities.

5.3 Organizational Structure of the company

General Manager

Secretary

16
 Technical staff Finance staff Administration staff

6. Financial Analyses
The financial analysis of the honey processing project is based on the data presented in the
previous sections and the following assumptions:-

Construction period 6 month

Source of finance 51 % equity
49 % loan
Bank interest 10%
Discount cash flow 10%
Accounts receivable 30 days 30 days

6.1 Investment Costs and Sources of Finance

TABLE 6.1 Investment Costs and Sources of Finance
Total Cost Own contribution Bank loan
No. Cost Items Amount % Amount %
2 Building and Civil Work 1,500,000 - - 1,500,000 100
3 Plant Machinery and Equipment 3,000,000 1,500,000 50 1,500,000 50
4 Office Furniture and Equipment 200,000 200,000 100 - -
5 Vehicle 1,000,000 1,000,000 100 - -
Total initial fixed investment 5,700,000 2,700,000 47.36 3,000,000 52.63
6 Pre-production Expenditure 200,000 200,000 100 - -
7 Working Capital 215,900 215,900 100 - -
Total Investment cost 6,115,900 3,115,900 51 3,000,000 49

6.2 Results of Financial Forecasts

Profitability
17
The projected income statement revels that the project is profitable all throughout its life. The
annual net profit of about birr 932,556 in the first year will steadily increase through time
and reaches about birr 2,893,231 in year 10.

Financial Position
A project balance sheet of the corporation with bank additional financing shows quite good
financial position. The net worth, birr 1,032556 at the end of first year will increase to about
birr 16,724,543 at the end of project years.

Liquidity
The cash flow projection indicates an overall liquidity of the project. The cumulative cash
balance at the end of the project years would be about birr 18,699,524.

Financial internal rate of return and net present value

This indicator measures the power of the project to generate return by comparing the result
either with opportunity cost of capital or the bank interest rate. The projected discount cash
flow has resulted in 30 % FIRR and the net present value at 10% discount rate is Birr
7,199,355 million.
This result indicates a very attractive rate of return and implies the capacity of the business to
accommodate any adverse situation.

Payback Period
The investment cost and income statement projection are used to project the pay-back period.
The project’s initial investment will be fully recovered within 4 years.

IRR Sensitivity Analysis

The sensitivity analysis shows what will happen to the profitability of a project when there
are changes in the most sensitive parameters that have an influence on the results of the
project. Hence, it also shows the risks of the investments that have to be done.
The factors that will cause the highest risks for the profitability of the project are: Reduction
in Sales, Increase in Cost of Production and increase in Investment cost. The sensitivity
18
analysis carried out with the effect of these three parameters on the NPV and the FIRR of the
project is shown below.

(1) Reduction in sales: a 5% reduction in sales will make FIRR 25%

a10% reduction in sales will make FIRR 16%
(2) Increase in operating costs: a 10% increase in production costs the FIRR becomes 26%
a 20% increase in production costs the FIRR becomes 21%
(3) Increase in investment cost: a10% increase in investment costs the IRR becomes 28%
a20% increase in investment costs the IRR becomes 25%

7. Risk Analysis
Based on the type of businesses and the request facility, the following risks are identified and
the corresponding mitigates are given here under. The risks were drawn from the universally
accepted lending policies.

7.1 Characteristics (Personal Risk)

This is the most important risk, which should be seriously considered. As to this company,
the owner and the manager have sufficient years of work experience in both government and
private organizations.

7.2. Business Risk

The fate of the business, which is the company production generally found to be dependable.
The demand-supply analysis exhibits the need of the production of the company. Generally,
competitors and their pricing will have a direct effect on the potential of firm’s trade
opportunities. However, According to the overall demand of honey processing companies in
Tigray, the effect of competitors in the sector would not be an immediate alarming threat for
the coming few years.

7.3 Collateral Risk

Collateral risk is the second way out in case of any failure in loan repayment. In this regard,
the company building and the machineries and the business as a whole are dependable
securities. The debt to register able collateral (building) ratio is found to be above 1:2

19
excluding machineries equipments, other fixed assets and the business mortgage part.
Therefore, there is little risk regarding collateral.

7.4. Construction Risk

The construction work of the honey processing company building will be made by phase
with the owner supervision. Hence, there is no as such serious risk related to construction
work.

All the identified risks which are related to the university accepted lending policies, are to the
acceptable level that keeps the lenders interest in a safe position. In addition, the quality of
the assets of the company is dependable and the projected financial reports imply a good
leverage condition that the company will have a capacity to pay the principal and interest
without any problem.

8. Summary, Conclusion
Nahom honey processing PLC is a business organization at medium scale processing
industry level. The company was established and secured its legal personality on the first
January 2011. It is located in Tigray region in Mekele city, Kebele 18. It is registered with a
capital of birr 6.1 million
The owners of the company are Mr.Workie Abadi and W/ro Abeba Mehari. W/ro Abeba
mehari is the manager of the company. She is well experienced and capable of running the
company without any problem.
The owners the company contributed 3.1 million birr. Now they intended to construct
through external financing. They have agreed to borrow birr 3 million.

The project area has suitable infrastructure such as access for transportation, and it is
assumed that necessary utilities like electric power, water, telephone and accessible road are
there. The raw materials like crude honey and other inputs for the production process are
readily available in the Mekele region market.

According to the resource potential study of the region, the raw material is identified in most
parts of the Tigray region. The Tigray region is nationally considered high quality producer

20
of honey (white & butter colour) when compared to other Regions of our country, and also
based on the availability of raw material (crude honey).
The company would supply processed packed honey and wax for beneficiaries. Raw
materials like crude honey and chemicals are sufficiently available on time for the purpose of
facilitating the production.

One of the Social benefits of the project is creates job opportunities. The planed manpower of
the project amounts to 19.these will create jobs that will contribute to the reducing of
alarming unemployment growth rate in the country. The employees will benefit from salaries
and wages, while the project owner and Gov.ts shall gain revenue from the project.

Cross cutting issues: The project has given high emphasis for the HIV/ADIS, Gender issues
mainstreams. The project gives attention for to protecting the diseases and creates the
awareness of gender mainstreaming by giving the chance to discuss monthly within the
employees.

The company establishes for the processing of honey with a capacity of 90 tons per annum.
The present demand for the proposed product in Ethiopia is estimated at 4,340 tons per
annum. The demand is expected to reach at 11,257 by the year 2020.

The plant will create employment opportunities for 19 persons. The total investment
requirement is estimated at about Birr 6.1million, out of which Birr 3 million is for plant and
machinery, 1.5 million for building and civil works.
The projected income statement reveals that the annual profit that the annual profit will
increase from birr 932,556 in 2004 E.C to birr 2,893,231 at the end in year 2013 E.C. The
average net income will be 1,888,952.The net worth will be about birr 717,556 at the end of
2004 E.C and reaches birr 18,584,524 at the end of projected years. The cash flow for
financial planning indicates that the project will not face any liquidity problem. The project is
financially viable with financial internal rate of return (FIRR) of 30 % & its benefit cost ratio
is1.298.

21
Moreover, the sensitivity analysis for financial analysis exhibited that the business will be
safe to the Extent of more than 20 % decrease of sales or 20 % increase in fixed assets or
operating costs. The initial investment can safely be recovered until the end of 4 th year. In
general, the projected financial results justify the acceptance of the intended business.

The project economic analysis shows that it has a great contribution in generating national
income. The Economic internal rate of return (EIRR) is 62% & its present va lue is birr
18,129,023. the benefit cost ratio is 1.589.This shows high contribution to the national
economy besides its financial viability.

The economic impact of project in terms of The main socio-economic benefits that company
is going to generate Livelihoods and food security of the area via being source of
income/market for the surrounding farmers and generation of employment, enhancing the
productivity of honey production in the region ,can be considered as elements of contribution
as a whole.
Loan Needed
Based on the overall assessments of the project, the medium processing industry requires a
loan of birr 3,000,000 from external sources to half cover for the machineries and fully cover
the building construction that would be located in Tigray region in Mekele city, Kebele 18.
As the detail assessment results shows the Loan will be settled without any problem.
Terms of Loan
 Disbursement: The loan is proposed to be transferred to the account of the
company in three phases (installment).
 Loan repayment
A, principal repayment
The principal amount of birr 3,000,000 shall be repaid in 60 equal monthly installments.
B, interest payment: 10 % of the loan per annum on the outstanding balance is payable on
monthly basis together with the principal repayment amount.
C, other bank charges: 0.5 % of the loan per annum outstanding balance payable on
monthly basis.
D, Grace period: 1 year from the date of loan disbursement.

22
9. Assumptions Employed in the Project Financial Analysis

9.1 Operating Costs

Salaries …………………………. 266,640
No. Cost Items Value in birr Repair and maintenance

1 Building and Civil Work 1,500,000 30,0000

2 Plant Machinery and Equipment 3,000,000 60,000
3 Furniture and fixture 200,000 4,000
4 Vehicles 1,000,000 20,000
Total fixed Investment cost 5,700,000 114,000
Repair and maintenance 2 % of the fixed assets

UTILITIES:
Electric power and water are the two basic utilities required by the plant. When the plant
operates at full capacity, it will require 18,025 kWh of electric power and 10,500 litter
Furnace oil. Likewise, the plant is expected to consume 180 m3 of water per annum.
Estimated annual Utility cost
Annual Cost
No. Description Measure Consumptio Unit Total cost
n cost
1 Electric power kWh 18,025 1 18,025
2 Water M3 1,800 10,800
3 Communication 6,000
4 Furnace oil Liter 10,500 6.5 68,250
Total 103,075

 Fuel and lubricant…………… 450 liters x12x21…………113,400 birr

 Supplies …………………………………………………10,000 birr

 Insurance 1% of the fixed investment ……………………57,000 birr and

2 % of the salaries of the employees ……………………………. 4,848 birr
 Uniform and Gowns 10 gowns x 100 =
100 birr and 4 uniforms for two
guards x 300 = 1200 birr

23
No. Cost Items Original values Depreciation Depreciated
rate value per year
1 Building and Civil Work 1,500,000 5 75,000
2 Plant Machinery and Equipment 3,000,000 5 150,000
3 Office Furniture and fixture 200,000 10 20,000
4 Vehicle 1,000,000 20 50,000
5 Pre-production Expenditure 200,000 20 40,000
Total Investment cost 5,900,000 385,000
Annual Depreciation Straight Line Method

 Interest rate ………………….. 10% the loan

 Sales tax…………………………… 15%
 Corporate tax ……………………. 35% of net income
 Miscellaneous expenses…………… 6,000

9 .2 Capacity Utilization
Production is assumed to be commence at 70 % of installed capacity and increased by 10 %
each year until it reaches the assumed attainable capacity, 90 %

9.3. Revenue
No. Types of goods sold Income at Income at 70 Income at Income at 90
100 % % 80% %

1 Processed honey 8,100,000 5,670,000 6,480,000 7,290,000

2 Wax 567,000 396,900 453,600 510,300

  Total 8,667,000 6,066,900 6,933,600 7,800,300

9.4 Disbursement
At the time of building construction starts = birr 1,500,000
At the purchasing period of the fixed assets = birr 1,500,000
3,000,000
 Equity contribution: .…………………… Birr 3,115,900
24
  Repayment is assumed to begin a year later as it began
 Grace period would be one year after first disbursement.
 Number of repayments 60 equal monthly repayments.
Initial working capital
 1 month salaries …………………………………………………22, 220
 Raw material and inputs……………………………………… 176,610
 Supplies ………………………………………………………….. 830
 Utilities……………………………………………………………5,690
 Fuel and lubricant …….…………………………………………9,450
 Uniforms and gowns…………………………………………….. 1,100
Total………………………………………………. 215,900

Man power requirement

The proposed project will require 16 employees of whom 10 are direct production
workers and 6 are administrative workers. The annual labour cost of the project is
estimated to be 266,640 Birr. The list of employees together with the corresponding
salary cost is presented in
Salary ( Birr)
No. Position No. of persons Monthly Annual
1 Plant manager 1 2500 30,000
2 Personnel 1 1200 14,400
3 Chemist 1 1500 18,000
4 Secretary 1 1000 12,000
5 Purchaser 2 2*1000 24,000
6 Sales man 1 800 9,600
7 Casher 1 1000 12,000
8 Quality controller 1 1200 14,400
9 Accountant 1 1400 16,800
10 Operator-mechanics 1 1400 16,800
11 Production workers 3 3*1000 36,000
12 Guards 2 2*400 9,600
13 Cleaner 1 400 4,800
14 Drivers 2 2*1000 24,000
Sub Total 20,200 242,400
Workers benefit (10% of Basic 19 2,020 24,240
salary)
Grand total - 22,220 266,640
Table 9.1.10 Technical, Administrative accounting and finance staffs salaries
25
 Machinery, office equipments, furniture and medical equipment

A. Machinery & Office Equipments

No. Description
1 Liquefier
2 Filter press
3 Falling film Evaporator
4 Vacuum pump
5 Storage/settling tank
6 Water circulation pump
7 Pre heating tank
8 Processing tank
9 Cooling tank/condenser
10 Moisture condensing tank
11 Honey circulation SS gear pump
12 Insulation (Optional)
13 Control panel, Level indicators, pressure gauges, temperature
gauges, SS pipes and fittings.
14 Computers and printers

B, furniture and Fixture

No. Description
1 Furniture
2 Chairs and table tables

C, Annual raw material and input requirement

No. Description Unit of Qty Unit Cost in Total Cost in Birr

measure Birr

1 Crude honey kg 45,000 50 2,250,000

2 Sanitary chemicals kg 1,200 9 10,800
4 Glass jars pc 63,000 1 63,000
5 Plastic containers pc 50 200 10,000
8 Cartons pc 4,340 5 21,700
10 Labels pc 45,000 0.1 4,500
Total 2,344,400

D. Building and Civil Works

26
The plant requires a total of 600 m2 area of land out of which 300 m2 is built-up area which
includes Processing area, raw material stock area, offices etc. The total cost of construction is
estimated to be Birr 1,452,000. The total cost, for a period of 80 years with cost of Birr 1 per
m2, is estimated at Birr 48,000. The total investment cost for land, building and civil works is
estimated at Birr 1,500,000.

27
10. Annexes for financial and economic analysis

10.1 Financial analysis projections

Description/year 0 1 2 3 4 5 6 7 8 9 10
Total fixed investment costs 5,700,000 0 0 0 0 0 0 0 0 0 0
Total pre production expenditures 200,000 0 0 0 0 0 0 0 0 0 0
Increase in net working capital 0 215,900 21,590 23,749 26,124 28,736 31,610 34,771 38,248 42,073 46,280
Total investment costs 5,900,000 215,900 21,590 23,749 26,124 28,736 31,610 34,771 38,248 42,073 46,280

10.1.1 Total investment costs

10.1.2 Operating costs projection

Description/year 1 2 3 4 5 6 7 8 9 10
Salary and wages 266,640 293,304 322,634 354,898 390,388 409,907 430,402 451,922 474,519 498,245
Cost of Goods sold 2,250,000 2,475,000 2,722,500 2,994,750 3,294,225 3,623,648 3,986,012 4,384,613 4,823,075 5,305,382
Supplies 10,000 11,000 12,100 13,310 14,641 16,105 17,716 19,487 21,436 23,579
Repair and maintenance 114,000 125,400 137,940 151,734 166,907 166,907 166,907 166,907 166,907 166,907
Utilities 103,075 113,383 124,721 137,193 150,912 150,912 150,912 150,912 150,912 150,912
Fuel and lubricant 113,400 124,740 137,214 150,935 166,029 166,029 166,029 166,029 166,029 166,029
Insurance 61,848 61,848 61,848 61,848 61,848 61,848 61,848 61,848 61,848 61,848
Gowns and uniforms 2,200 2,420 2,662 2,928 3,221 3,221 3,221 3,221 3,221 3,221
Miscellaneous 6,000 6,300 6,615 6,946 7,293 7,293 7,293 7,293 7,293 7,293
Depreciation 385,000 385,000 385,000 385,000 385,000 345,000 345,000 345,000 345,000 345,000
Financial costs 300,000 240,000 180,000 120,000 60,000 0 0 0 0 0
Package costs 110,000 121,000 133,100 146,410 161,051 161,051 161,051 161,051 161,051 161,051
Total operating costs 3,455,523 3,666,091 3,903,700 4,171,054 4,471,128 4,702,014 5,065,989 5,466,362 5,906,772 6,391,223

28
 10.1.3 Revenue projection
Description/Year 1 2 3 4 5 6 7 8 9 10
6,066,900 6,933,600 7,800,300 8,190,315 8,599,831 9,029,822 9,481,313 9,955,379 10,453,148 10,975,805
Gross Revenue
Less Sales Tax (15%) 910,035 1,040,040 1,170,045 1,228,547 1,289,975 1,354,473 1,422,197 1,493,307 1,567,972 1,646,371
Net Revenue 5,156,865 5,893,560 6,630,255 6,961,768 7,309,856 7,675,349 8,059,116 8,462,072 8,885,176 9,329,435

10.1.4 Cash flow for financial planning

Description/Year
0 1 2 3 4 5 6 7 8 9 10 Scrap 11
Total cash inflow 6,115,900 5,372,765 5,915,150 6,654,004 6,987,892 7,338,592 7,706,959 8,093,887 8,500,320 8,927,249 9,375,715 2,250,000
Inflow funds 6,115,900 215,900 21,590 23,749 26,124 28,736 31,610 34,771 38,248 42,073 46,280  
Inflow operation   5,156,865 5,893,560 6,630,255 6,961,768 7,309,856 7,675,349 8,059,116 8,462,072 8,885,176 9,329,435  
salvage value                       2,250,000
Total cash outflow 6,115,900 4,655,209 4,872,943 5,306,455 5,619,612 5,962,170 6,081,606 6,233,454 6,393,106 6,560,970 6,737,484 0
Increased in fixed assets 5,900,000                      
Increased in current assets 215,900 215,900 21,590 23,749 26,124 28,736 31,610 34,771 38,248 42,073 46,280  
Operating costs   3,037,163 3,334,395 3,661,334 4,020,952 4,416,515 4,437,498 4,459,604 4,482,896 4,507,440 4,533,310  
Income corporate tax   502,146 676,958 841,372 852,536 856,919 1,012,498 1,139,079 1,271,962 1,411,457 1,557,894  
financial costs   300,000 240,000 180,000 120,000 60,000 0 0 0 0 0  
loan repayment   600,000 600,000 600,000 600,000 600,000 600,000 600,000 600,000 600,000 600,000  
Surplus   717,556 1,042,208 1,347,549 1,368,280 1,376,422 1,625,353 1,860,433 2,107,215 2,366,278 2,638,231 2,250,000
Cumulative cash balance   717,556 1,759,764 3,107,312 4,475,592 5,852,014 7,477,367 9,337,800 11,445,015 13,811,293 16,449,524 18,699,524

29
10.1.5 Income Statement Projection
Description/Year 1 2 3 4 5 6 7 8 9 10
Revenue 5,156,865 5,893,560 6,630,255 6,961,768 7,309,856 7,675,349 8,059,116 8,462,072 8,885,176 9,329,435
Less Operating costs 3,422,163 3,719,395 4,046,334 4,405,952 4,801,515 4,782,498 4,804,604 4,827,896 4,852,440 4,878,310
Operational margin 1,734,702 2,174,166 2,583,921 2,555,816 2,508,341 2,892,851 3,254,512 3,634,177 4,032,735 4,451,125
In % of Revenue 34 37 39 37 34 38 40 43 45 48
Financial Cost 300,000 240,000 180,000 120,000 60,000 0 0 0 0 0
Gross Profit from Operation 1,434,702 1,934,166 2,403,921 2,435,816 2,448,341 2,892,851 3,254,512 3,634,177 4,032,735 4,451,125
In % of Revenue 28 33 36 35 33 38 40 43 45 48
Income (Corporate Tax) 502,146 676,958 841,372 852,536 856,919 1,012,498 1,139,079 1,271,962 1,411,457 1,557,894
Net Profit 932,556 1,257,208 1,562,549 1,583,280 1,591,422 1,880,353 2,115,433 2,362,215 2,621,278 2,893,231
Net worth 717,556 1,974,764 3,537,312 5,120,592 6,712,014 8,592,367 10,707,800 13,070,015 15,691,293 18,584,524
In % of Revenue 18 21 24 23 22 24 26 28 30 31
Ratios (%):                    
Net Profit to equity 30 31 36 34 34 40 42 45 48 50
Net profit to Net Worth 130 64 44 31 24 22 20 18 17 16
Net Profit + Interest to Investment 20 24 28 28 27 30 34 37 41 45

30
 10.1.6 Cash Flow Projection for Discounting
Description/Year 0 1 2 3 4 5 6 7 8 9 10 Scrap 11
Total cash inflow 0 5,156,865 5,893,560 6,630,255 6,961,768 7,309,856 7,675,349 8,059,116 8,462,072 8,885,176 9,329,435 2,250,000
Inflow operation 0 5,156,865 5,893,560 6,630,255 6,961,768 7,309,856 7,675,349 8,059,116 8,462,072 8,885,176 9,329,435 0
salvage value 0 0 0 0 0 0 0 0 0 0 0 2,250,000
Total cash outflow 6,115,900 3,755,209 4,032,943 4,526,455 4,899,612 5,302,170 5,481,606 5,633,454 5,793,106 5,960,970 6,137,484 0
Increased in fixed assets 6,115,900 0 0 0 0 0 0 0 0 0 0 0
  215,900
Increased in net work capital 21,590 23,749 26,124 28,736 31,610 34,771 38,248 42,073 46,280 0
Operating costs 0 3,037,163 3,334,395 3,661,334 4,020,952 4,416,515 4,437,498 4,459,604 4,482,896 4,507,440 4,533,310 0
Income (corporate) tax 0 502,146 676,958 841,372 852,536 856,919 1,012,498 1,139,079 1,271,962 1,411,457 1,557,894 0
Net Cash Flow 6,115,900 1,401,656 1,860,618 2,103,800 2,062,156 2,007,686 2,193,743 2,425,663 2,668,967 2,924,206 3,191,951 2,250,000
cumulative net cash flow 6,115,900 4,714,244 2,853,627 -749,827 1,312,329 3,320,015 5,513,758 7,939,421 10,608,387 13,532,593 16,724,543 18,974,543
Net Present Value At
10%   7,199,355                    
Internal Rate Of return   30%
Pay Back Period   4 years

10.1.7 Sensitive analysis

Description IRR
Sales Decreased by 5% 25
Sales Decreased by 10% 16
Operating Costs increased by 10 % 26
Operating Costs increased by 20% 21
Fixed Assets Increased by 10 % 28
Fixed Assets Increased by 20 % 25

31
10.2 Economic analysis

10.2.1 Initial investment costs

Description financial costs Conversion factor economic price

Building and Civil Work 1,500,000 0.610 915,000
Plant Machinery and Equipment 3,000,000 1.019 3,057,000
Office Furniture and Equipment 200,000 1.000 200,000
Vehicle 1,000,000 0.824 824,000
Total fixed investment costs 5,700,000   4,996,000
Pre-production Expenditure 200,000 1.000 200,000
Working Capital    
Salaries      
For skilled labour 20,900 0.810 16,929
For unskilled labour 1,320 0.390 515
Raw material and inputs 176,610 1.000 176,610
Supplies 830 0.880 730
Utilities 1,897 1.430 2,713
Fuel oil 3,793 0.866 3,285
Fuel and lubricant 9,450 1.050 9,923
Uniforms and gowns 1,100 0.698 768
Total working capital 215,900   211,472
Grand total investment costs 6,115,900   5,407,472

32
10.2.2 Operating Costs
Conversion
Description Financial costs factor economic price
Salaries      
For skilled labour 250,800 0.810 203,148
For unskilled labour 15,840 0.390 6,178
Cost of Goods sold(crude honey) 2,250,000 1.00 2,250,00
Supplies 10,000 1.00 10,000
Repair and maintenance 114,000 1.000 114,000
Utility 34,825 1.430 49,800
Fuel oil 68,250 0.866 59,105
Fuel and lubricant 113,400 1.050 119,070
Uniform and Gowns 2,200 0.698 1,536
Miscellaneous 6,000 1.000 6,000
Sanitary Chemicals 10,800 0.88 9,504
Plastic & Glass jars 63,000 0.863 54,369
Plastic Containers 10,000 0.863 8,630
Cartons 21,700 0.883 19,161
Labels 4,500 0.883 3,974
Total operating costs 2,975,315 2,914,473

33
 10.2.3 Revenue projection
Types of goods sold 4 5 6 7 8 9 10
1 2 3
Processed honey and
bee wax 6,066,900 6,673,590 7,340,949 8,075,044 8,478,796.10 8,902,735.90 9,347,872.69 9,815,266.33 10,306,029.65 10,821,331.13

10.2.4 Operating cost projection

Salaries 1 2 3 4 5 6 7 8 9 10
For skilled labour 203,148 223,463 245,809 270,390 283,909 298,105 313,010 328,661 345,094 362,348
For unskilled labour 6,178 6,796 7,475 8,223 8,634 9,066 9,519 9,995 10,495 11,019
Cost of Goods sold 2,250,000 2,475,000 2,722,500 2,994,750 3,144,488 3,301,712 3,466,797 3,640,137 3,822,144 4,013,251
Supplies 10,000 10,000 10,000 10,000 10,500 11,025 11,576 12,155 12,763 13,401
Repair and maintenance 114,000 125,400 137,940 151,734 159,321 167,287 175,651 184,434 193,655 203,338
Utility 49,800 49,800 54,780 60,258 63,271 66,434 69,756 73,244 76,906 80,751
Fuel oil 59,105 65,016 71,517 78,669 82,602 86,732 91,069 95,622 100,403 105,424
Fuel and lubricant 119,070 130,977 144,075 158,482 166,406 174,727 183,463 192,636 202,268 212,381
Uniform and Gowns 1,534 1,687 1,856 2,042 2,144 2,251 2,364 2,482 2,606 2,736
Miscellaneous 6,000 6,600 7,260 7,986 8,385 8,805 9,245 9,707 10,192 10,702
Sanitary chemicals 9,504 10,454 11,500 12,650 13,282 13,946 14,644 15,376 16,145 16,952
Plastic & glass jars 54,369 59,806 65,786 72,365 75,983 79,783 83,772 87,960 92,358 96,976
Plastic containers 8,630 9,493 10,442 11,487 12,061 12,664 13,297 13,962 14,660 15,393
Cartons 19,161 21,077 23,185 25,503 26,778 28,117 29,523 30,999 32,549 34,177
Labels 3,974 4,371 4,809 5,289 5,554 5,832 6,123 6,429 6,751 7,088
Total operating costs 2,914,473 3,199,940 3,518,934 3,869,828 4,063,319 4,266,485 4,479,809 4,703,800 4,938,990 5,185,939

34
 10.2.5 Cash Flow Projection for Discounting
Description/Year
0 1 2 3 4 5 6 7 8 9 10 11
Total cash inflow 0 6,066,900 6,673,590 7,340,949 8,075,044 8,478,796 8,902,736 9,347,873 9,815,266 10,306,030 10,821,33 2,250,000
1
Inflow operation 0 6,066,900 6,673,590 7,340,949 8,075,044 8,478,796 8,902,736 9,347,873 9,815,266 10,306,030 10,821,33
1
Salvage value 0 0 0 0 0 0 0 0 0 0 0 2,250,000

Total cash outflow 5,407,472 3,125,945 3,497,368 3,847,104 4,231,815 4,267,080 4,480,434 4,704,456 4,939,678 5,186,662 5,445,996
Increased in fixed 5,407,472 0 0 0 0 0 0 0 0 0 0 0
assets
Increased in net 0 211,472 291,447 320,592 352,651 193,958 203,656 213,839 224,531 235,757 247,545
working capital
Operating costs 0 2,914,473 3,205,920 3,526,512 3,879,164 4,073,122 4,276,778 4,490,617 4,715,148 4,950,905 5,185,939

Net Cash Flow (5,407,472) 2,940,955 3,176,222 3,493,845 3,843,229 4,211,716 4,422,302 4,643,417 4,875,588 5,119,367 5,375,336 2,250,000

cumulative net (5,407,472) (2,466,517) 709,705 4,203,550 8,046,779 12,258,495 16,680,797 21,324,214 26,199,802 31,319,169 36,694,505 38,944,505
cash flow
Net Present Value 18,129,023
At 10%
Internal Rate Of 62%                    
return
Pay Back Period                      

35
36