Investment Office ANRS

Project Profile on the Establishment of

PVC Cable Making Producing plant

Development Studies Associates

(DSA)

October 2008
Addis Ababa
 Table of Contents

1. Executive Summary..................................................................................1
2. Product Description and Application....................................................1
3. Market Study, Plant Capacity and Production Program...................2
3.1 Market Study.......................................................................................................2
3.1.1 Present Demand and Supply........................................................................2
3.1.2 Projected Demand........................................................................................2
3.1.3 Pricing and Distribution...............................................................................3
3.2 Plant Capacity......................................................................................................3
3.3 Production Program.............................................................................................4
4. Raw Materials and Utilities....................................................................4
4.1 Availability and Source of Raw materials...........................................................4
4.2 Annual Requirement and Cost of Raw Materials and Utilities...........................4
5 Location and Site.....................................................................................5
6 Technology and Engineering.................................................................5
6.1 Production Process...............................................................................................5
6.2 Machineries and Equipments...............................................................................5
6.3 Civil Engineering Cost........................................................................................7
7 Human Resource and Training Requirement......................................7
7.1 Human Resource..................................................................................................7
7.2 Training Requirement..........................................................................................8
8 Financial Analysis...................................................................................8
8.1 Underlying Assumption.......................................................................................8
8.2 Investment............................................................................................................9
8.3 Production Costs................................................................................................10
8.4 Financial evaluation...........................................................................................10
9 Economic and Social Benefit and Justification..................................11
ANNEXES....................................................................................................13
 1. Executive Summary
This project profile deals with the establishment of PVC cable producing plant in Amhara
National Regional State. The following presents the main findings of the project study.

Demand projection divulges that the domestic demand for PVC Cable is substantial and is
increasing with time. Accordingly, the planned plant is set to produce 432,000m of PVC cable
annually. The total investment cost of the project including working capital is estimated at Birr
2.83 million and creates 70 jobs.

The financial result indicates that the project will generate profit beginning from the first year of
operation. Moreover, the project breaks even at 32.71% of capacity utilization and payback fully
the initial investment less working capital in first operation year. The result further shows that
the calculated IRR of the project is 29.8%.

In addition to this, the proposed project possesses wide range of economic and social benefits
such as increasing the level of investment, tax revenue, employment creation and import
substitution.

Generally, the project is technically feasible, financially and commercially viable as well as
socially and economically acceptable. Hence the project is worth implementing.

2. Product Description and Application

PVC cables are of many types; and they serve different purposes. They include
(a) PVC insulated service drop wire which consists of three PVC
insulated twined wires and is used for service connections;
(b) twin twisted PVC insulated cord consisting of electrical appliances,

(c) flat type PVC insulated cord consisting of two parallel vinyl
insulated wire for electrical appliances;

1
 (d) round type insulated cord with a twin twisted PVC coated wire
sheathed with round PVC sheathing;
(e) PVC insulated overhead wire with 20 to 30 core wires of about 0.5
mm diameter twisted together and covered with PVC;
(f) PVC insulated control cable for electrical appliances, low voltage
distribution, indoor telephone wire, wiring of switch boards and low tension cables for
automobiles.

3. Market Study, Plant Capacity and Production Program

3.1 Market Study

3.1.1 Present Demand and Supply

Domestic production of PVC cable (electric wires) between 2003/4 and 2006/7 was on
average 13.060 million meters per year. Domestic production of PVC cables could not satisfy
the ever increasing demand for this product. As a result, some special types of PVC cables
are being imported. In addition, PVC cables used for electrical appliances are not produced in
the country and they are imported.

The Amhara Region roughly consumes about twenty percent of the PVC cable need of the
country. Its share of consumption from domestic PVC production was about 2.612 million
meters per year between 2003/4 and 2006/7. There is no plant which produces PVC cable in
the Region. The existing level of demand for PVC cables in the Region can absorb the
production of a small PVC cable making plant to be established in the Region.
[

3.1.2 Projected Demand

As it has been presented in the above, the demand projection follows the assumption that the
region consumes 20% of the country’s total production. If we further assume the project will

2
attract some demand from neighboring a 10% annual growth rate is projected. The result is
depicted in Table 1 below.

Table 1: Projected Demand for PVC Cables

Year Projected Demand

(in million meters)
2007/08 2.77
2008/09 3.04
2009/10 3.35
2010/11 3.68
2011/12 4.05
2012/13 4.46
3.1.3 2013/14 4.90 Pricing and
2014/15 5.39 Distribution
2015/16 5.93
The market survey result 2016/17 6.53 indicates that the average
retail price for PVC cable in 2017/18 7.18 major retailer shop differs
based on the type and size of 2018/19 7.90 the product. But assuming
the common dominant three types of PVC cable to be produced by the plant, on average Birr 12
per meter is reported as a market price. Deducting 20% margin for retailer and 10% for
wholesaler and by taking the capacity of the envisaged plant in to account, the selling price of
Birr 8.40 per meter of PVC cable has been estimated for the projection of the revenue of the
plant. The available retail and wholesale network shall be used by the envisaged plant to reach its
customer.

3.2 Plant Capacity

Thus, given the expected demand for PVC cable presented earlier, and the planned technology,
the envisaged plant is set to produce 432,000 meter of PVC cable annually.

3
 3.3 Production Program

The program is scheduled based on the consideration that the envisaged plant will work 275 days
in a year, where the remaining days will be holidays and for maintenance. During the first year
of operation the plant will operate at 70 percent capacity and then it grows to 80 percent in the
2nd year. The capacity will grow to 100 percent starting from the 3 rd year. This consideration is
developed based on the assumption that market and logistics barriers would take place for the
first two years of operation.

4. Raw Materials and Utilities

4.1 Availability and Source of Raw materials

There are basically two main inputs for making PVC cables copper wire and PVC plastic. Both
of these inputs will be imported. Aluminum can also be used instead of copper.

4.2 Annual Requirement and Cost of Raw Materials

and Utilities

The annual raw material and utility requirement and the associated cost for the envisaged plant is
listed in Table 2 hereunder.

Table 2: Material and utility Requirement

Total Cost
(Birr)
Material and Input Quantity L.C. F.C.
Copper wire 367,200m - 127,008
PVC plastic 115.45 tone - 1,270,080
Total Material Cost 1,397,088
Utility    
Electricity 514800kwh 283,140  
Water 6618m3 17,538  
Total Utility Cost   300,678  

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5 Location and Site

The appropriate location for the envisaged project in view of the availability of input,
infrustructure as well as market for the output is Combolcha.

6 Technology and Engineering

6.1 Production Process

Basically the process of making PVC cable involves the coating of the copper wire with PVC
plastic. And the process of coating or covering the wire takes the following stages.

 A wire tensioning and pay off unit carrying the base wire drums releases the wire under
proper tension to the cross head mounted on the extruder.
 The extruder melts and delivers the required quantity of PVC compound to the cross head
carrying suitable size nipples and dies in which the actual coating takes place.
 A long water trough cools the coated wire.
 PVC granules are fed to the extruder as cold granules are heated to the required
temperature.
 A pulling out and winding arrangement takes up the covered wire from the cooling
trough at uniform rate by means of a capstan wheel.

Alternative technology
 The cooper can be substituted by aluminum;
 The processes can be automated

6.2 Machineries and Equipments

Plant and machinery needed include wire standing machine, PVC extruder and wire coating
machine, wire straightening machine and accessories, cable printing machine and accessories,
coated wire twisting machine for twisting together PVC coated wire, cable rewinding machine
complete with reel stand, length measuring unit and coil reminder, insulation testing machine
and equipment, thickness measuring instruments and other miscellaneous equipments. The list
and required quantities are shown in Table 3 below.

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 Table 3: Machinery and Equipment

Machinery and Equipment Quantity

PVC extruder and wire coating machine, 2
Wire straightening machine and accessories, 2
Cable printing machine and accessories, 2
Coated wire twisting machine 1
Cable rewinding machine complete with reel stand, 1
Insulation testing machine and equipment, 1
Thickness measuring instruments 1
Other miscellaneous equipment 3
Total  13

The, total cost of machinery and equipment including freight insurance and bank cost is
estimated to be about Birr 800,000.

Suppliers Addresses

Smart Sourcing, Inc. - Shanghai

1465 Beijing Xi Lu
Guo Li Building, # 1201
Shanghai, PRC 200040
Tel: 86-21-5212-1200
Fax: 86-21-5212-1210

Yongtong Machinery
Tel: 0574-88087505
0574-88087506
Fax: 0574-88087106
P.C.:315175
Add:No.48
LingFeng Road,
ChangLe Industrial Area,
YinZhou District, NingBo,
China
Website: www.yongtong-machinery.com
E-mail:[email protected]
[email protected]
[email protected]

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 6.3 Civil Engineering Cost

The total site area for the envisaged plant is estimated to be 1,500m 2 where 300m2 is allocated to
the building place. The cost of which is estimated at Birr 90,000 and 600,000 respectively. The
estimated space is assumed to be sufficient to allow movement of operators and future
expansion.
[

7 Human Resource and Training Requirement

7.1 Human Resource
[

The list of required human resource for the foreseeable plant is stated in Table 4 below
Table 4: Human Resource Requirement
Total
Monthly Annual
No. Salary Salary
Position Required (Birr) (Birr)
General Manager 1 3500 42,000.00
Mechanical Engineer 1 2500 30,000.00
Administration 1 2000 24,000.00
Accountant 2 1200 28,800.00
Secretary 2 850 20,400.00
Sales Clerk 4 700 33,600.00
Electrical Engineer 3 2500 90,000.00
Store Keeper 2 700 16,800.00
Mechanic and Electrician 4 750 36,000.00
Supervisor 2 1200 28,800.00
Operators 12 800 115,200.00
Daily Laborers 10 400 48,000.00
Cleaners 3 350 12,600.00
Messengers 2 300 7,200.00
Driver 2 750 18,000.00
Guards 3 400 14,400.00
Total     565,800.00
Employment Benefits 20% of Annual Salary 113,160.00
Grand Total 70   678,960.00

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 7.2 Training Requirement

Training of key personnel shall be conducted on the first quarter of the first operation year. This
can be arranged with the suppliers of the plant machineries. The training should primarily
focuses on the production technology and machinery maintenance and trouble shooting. Birr
65,000 will be allocated as training expense.

8 Financial Analysis
8.1 Underlying Assumption
The financial analysis of PVC cable producing plant is based on the data provided in the
preceding chapters and the following assumptions.

A. Construction and Finance

Construction period 2 year

Source of finance 40% equity and 60% loan
Tax holidays 2 years
Bank interest rate 12%
Discount for cash flow 18%
Value of land Based on lease rate of ANRS
Spare Parts, Repair & Maintenance 3% of fixed investment

B. Depreciation

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

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 C. Working Capital (Minimum Days of Coverage)

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

8.2 Investment
The total investment cost of the project including working capital is estimated at Birr 2.8 million
as shown in Table 5 below. The Owner shall contribute 40% of the finance in the form of equity
while the remaining 60% is to be financed by bank loan.

Table 5: Total Initial Investment

Total Initial Investment

Item Cost
Land 4,500.00
Building and civil works 600,000.00
Office equipment 100,000.00
Vehicles 300,000.00
Plant machinery & equipment 800,000.00
Total Fixed Investment 1,804,500.00
Pre production capital expenditure 90,225.00
Total Initial Investment 1,894,725.00
Working capital at full capacity 940,373.79
Total 2,835,098.79
*Pre-production capital expenditure includes - all expenses for pre-investment
studies, consultancy fee during construction and expenses for company‘s
establishment, project administration expenses, commission expenses,
preproduction marketing and interest expenses during construction.

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 8.3 Production Costs

The total production cost at full capacity operation is estimated at Birr 2.83 million as detailed in
Table 6 below.

Table 6: Production Cost

Total Production Cost at Full Capacity

Items Cost
1.      Raw materials 1,397,088.00
2.      Utilities 300,677.70
3.      Wages and Salaries 678,960.00
4.      Spares and Maintenance 54,135.00
Factory costs 2,430,860.70
5.      Depreciation 198,045.00
6.      Financial costs
204,127.11
  Total Production Cost 2,833,032.81

8.4 Financial evaluation

I. Profitability

According to the projected income statement attached in the annex part the project will generate
profit beginning from the first year of operation. Ratios such as the percentage of net profit to
total sales, return on equity and return on total investment are 8%, 25.06% and 17.92% in the
first year and are gradually rising. Furthermore, the income statement and other profitability
indicators show that the project is viable.

II. Breakeven Analysis

The breakeven point of the project is estimated by using income statement projection.
Accordingly, the project will break even at 32.71% of capacity utilization.

III. Payback Period

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Investment cost and income statement projection are used in estimating the project payback
period. The projects will payback fully the initial investment less working capital in second
operation year.

IV. Simple Rate of Return

For the envisaged plant the simple rate of return equals to 26%

V. Internal Rate of Return and Net Present Value

Based on cash flow statement described in the annex part, the calculated IRR of the project is
29.8% and the net present value at 18 % discount is Birr 1.1 million.

VI. Sensitivity Analysis

The envisaged plant is profitable even with considerable cost increment. That is the plant
maintains to be profitable starting from the first year when 10 % cost increment takes place in
the sector. This result is accompanied by IRR value of 31.18% with payback period of third
operational year.

9 Economic and Social Benefit and Justification

The envisaged project possesses wide range of benefits where it promotes the socio-economic
goals and objectives stated in the strategic plan of the Amhara National Regional State. These
benefits are listed as follows

A. Profit Generation

The project is found to be financially viable and earns on average a profit of Birr 631,977.33 per
year and Birr 6.32 million within the project life. Such result induces the project promoters to
reinvest the profit which, therefore, increases the investment magnitude in the region.

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 B. Tax Revenue

In the project life under consideration, the region will collect about Birr 2.4 million from
corporate tax payment alone (i.e. excluding income tax, sales tax and VAT). Such result create
additional fund for the regional government that will be used in expanding social and other basic
services in the region

C. Import Substitution and Foreign Exchange Saving

Based on the projected figure we learn that in the project life an estimated amount of US Dollar
3.4 million will be saved as a result of the proposed project. This will create room for the saved
hard currency to be allocated on other vital and strategic sectors

D. Employment and Income Generation

The proposed project is expected to create employment opportunity to several citizens of the
region. That is, it will provide permanent employment to 70 professionals as well as support
stuffs. Consequently the project creates income of Birr 678,960 per year. This would be one of
the commendable accomplishments of the project.

E. Pro Environment Project

The proposed production process is environment friendly.

F. Diversification and InterSectoral linkage.

The proposed project helps to diversify ANRS’ and Ethiopian economy. It contributes to
industrialization of the region’s as well as the county’s economy. It has a potential to strengthen
the linkage between the manufacturing and the trade sub-sectors.

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ANNEXES

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 Annex 1: Total Net Working Capital Requirements (in Birr)
CONSTRUCTION PRODUCTION
  Year 1 Year 2 1 2 3 4

Capacity Utilization (%) 0 0 70% 80% 100% 100%

1. Total Inventory 0 0 1,010,200 1,154,514 1,443,143 1,443,143

Raw Materials in Stock- Total 0 0 426,747 487,711 609,638 609,638

Raw Material-Local 0 0 0 0 0 0

Raw Material-Foreign 0 0 426,747 487,711 609,638 609,638

Factory Supplies in Stock 0 0 2,008 2,294 2,868 2,868

Spare Parts in Stock and Maintenance 0 0 4,134 4,725 5,906 5,906

Work in Progress 0 0 50,188 57,358 71,697 71,697

Finished Products 0 0 100,376 114,716 143,395 143,395

2. Accounts Receivable 0 0 277,108 316,695 395,869 395,869

3. Cash in Hand 0 0 74,809 85,496 106,870 106,870

CURRENT ASSETS 0 0 935,370 1,068,994 1,336,243 1,336,243

4. Current Liabilities 0 0 277,108 316,695 395,869 395,869

Accounts Payable 0 0 277,108 316,695 395,869 395,869

TOTAL NET WORKING CAPITAL REQUIREMENTS 0 0 658,262 752,299 940,374 940,374

INCREASE IN NET WORKING CAPITAL 0 0 658,262 94,037 188,075 0

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

Capacity Utilization (%) 100% 100% 100% 100% 100% 100%

1. Total Inventory 1,443,143 1,443,143 1,443,143 1,443,143 1,443,143 1,443,143

Raw Materials in Stock-Total 609,638 609,638 609,638 609,638 609,638 609,638

Raw Material-Local 0 0 0 0 0 0

Raw Material-Foreign 609,638 609,638 609,638 609,638 609,638 609,638

Factory Supplies in Stock 2,868 2,868 2,868 2,868 2,868 2,868

Spare Parts in Stock and Maintenance 5,906 5,906 5,906 5,906 5,906 5,906

Work in Progress 71,697 71,697 71,697 71,697 71,697 71,697

Finished Products 143,395 143,395 143,395 143,395 143,395 143,395

2. Accounts Receivable 395,869 395,869 395,869 395,869 395,869 395,869

3. Cash in Hand 106,870 106,870 106,870 106,870 106,870 106,870

CURRENT ASSETS 1,336,243 1,336,243 1,336,243 1,336,243 1,336,243 1,336,243

4. Current Liabilities 395,869 395,869 395,869 395,869 395,869 395,869

Accounts Payable 395,869 395,869 395,869 395,869 395,869 395,869

TOTAL NET WORKING CAPITAL REQUIREMENTS 940,374 940,374 940,374 940,374 940,374 940,374

INCREASE IN NET WORKING CAPITAL 0 0 0 0 0 0

2
 Annex 2: Cash Flow Statement (in Birr)
CONSTRUCTION PRODUCTION
  Year 1 Year 2 1 2 3 4
TOTAL CASH INFLOW 947,363 1,887,736 2,817,268 2,942,627 3,707,974 3,628,800
1. Inflow Funds 947,363 1,887,736 277,108 39,587 79,174 0
Total Equity 378,945 755,095 0 0 0 0
Total Long Term Loan 568,418 1,132,642 0 0 0 0
Total Short Term Finances 0 0 277,108 39,587 79,174 0
2. Inflow Operation 0 0 2,540,160 2,903,040 3,628,800 3,628,800
Sales Revenue 0 0 2,540,160 2,903,040 3,628,800 3,628,800
Interest on Securities 0 0 0 0 0 0
3. Other Income 0 0 0 0 0 0
TOTAL CASH OUTFLOW 947,363 947,363 3,074,244 2,563,856 3,395,297 3,104,234
4. Increase In Fixed Assets 947,363 947,363 0 0 0 0
Fixed Investments 902,250 902,250 0 0 0 0
Pre-production Expenditures 45,113 45,113 0 0 0 0
5. Increase in Current Assets 0 0 935,370 133,624 267,249 0
6. Operating Costs 0 0 1,702,293 1,942,594 2,423,197 2,423,197
7. Corporate Tax Paid 0 0 0 0 251,236 261,442
8. Interest Paid 0 0 436,581 204,127 170,106 136,085
9.Loan Repayments 0 0 0 283,510 283,510 283,510
10.Dividends Paid 0 0 0 0 0 0
Surplus (Deficit) 0 940,374 -256,975 378,771 312,677 524,566
Cumulative Cash Balance 0 940,374 683,398 1,062,170 1,374,846 1,899,413

3
 Annex 2: Cash Flow Statement (in Birr): Continued
PRODUCTION
  5 6 7 8 9 10
TOTAL CASH INFLOW 3,628,800 3,628,800 3,628,800 3,628,800 3,628,800 3,628,800
1. Inflow Funds 0 0 0 0 0 0
Total Equity 0 0 0 0 0 0
Total Long Term Loan 0 0 0 0 0 0
Total Short Term Finances 0 0 0 0 0 0
2. Inflow Operation 3,628,800 3,628,800 3,628,800 3,628,800 3,628,800 3,628,800
Sales Revenue 3,628,800 3,628,800 3,628,800 3,628,800 3,628,800 3,628,800
Interest on Securities 0 0 0 0 0 0
3. Other Income 0 0 0 0 0 0
TOTAL CASH OUTFLOW 3,080,419 3,080,018 3,056,203 2,748,878 2,748,878 2,748,878
4. Increase In Fixed Assets 0 0 0 0 0 0
Fixed Investments 0 0 0 0 0 0
Pre-production Expenditures 0 0 0 0 0 0
5. Increase in Current Assets 0 0 0 0 0 0
6. Operating Costs 2,423,197 2,423,197 2,423,197 2,423,197 2,423,197 2,423,197
7. Corporate Tax Paid 271,648 305,268 315,474 325,681 325,681 325,681
8. Interest Paid 102,064 68,042 34,021 0 0 0
9. Loan Repayments 283,510 283,510 283,510 0 0 0
10.Dividends Paid 0 0 0 0 0 0
Surplus (Deficit) 548,381 548,782 572,597 879,922 879,922 879,922
Cumulative Cash Balance 2,447,794 2,996,576 3,569,173 4,449,095 5,329,017 6,208,939

Annex 3: DISCOUNTED CASH FLOW-TOTAL CAPITAL INVESTED

4
 CONSTRUCTION PRODUCTION
  Year 1 Year 2 1 2 3 4
TOTAL CASH INFLOW 0 0 2,540,160 2,903,040 3,628,800 3,628,800

1. Inflow Operation 0 0 2,540,160 2,903,040 3,628,800 3,628,800

Sales Revenue 0 0 2,540,160 2,903,040 3,628,800 3,628,800

Interest on Securities 0 0 0 0 0 0

2. Other Income 0 0 0 0 0 0

TOTAL CASH OUTFLOW 947,363 947,363 2,360,554 2,036,632 2,862,508 2,684,639

3. Increase in Fixed Assets 947,363 947,363 0 0 0 0

Fixed Investments 902,250 902,250 0 0 0 0

Pre-production Expenditures 45,113 45,113 0 0 0 0

4. Increase in Net Working Capital 0 0 658,262 94,037 188,075 0

5. Operating Costs 0 0 1,702,293 1,942,594 2,423,197 2,423,197

6. Corporate Tax Paid 0 0 0 0 251,236 261,442

NET CASH FLOW -947,363 -947,363 179,606 866,408 766,292 944,161

CUMULATIVE NET CASH FLOW -947,363 -1,894,725 -1,715,119 -848,711 -82,419 861,742

Net Present Value (at 18%) -947,363 -802,850 128,990 527,323 395,245 412,701

Cumulative Net present Value -947,363 -1,750,212 -1,621,222 -1,093,899 -698,654 -285,953

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 Annex 3: DISCOUNTED CASH FLOW-TOTAL CAPITAL INVESTED (Continued)
PRODUCTION
  5 6 7 8 9 10
TOTAL CASH INFLOW 3,628,800 3,628,800 3,628,800 3,628,800 3,628,800 3,628,800

1. Inflow Operation 3,628,800 3,628,800 3,628,800 3,628,800 3,628,800 3,628,800

Sales Revenue 3,628,800 3,628,800 3,628,800 3,628,800 3,628,800 3,628,800

Interest on Securities 0 0 0 0 0 0

2. Other Income 0 0 0 0 0 0

TOTAL CASH OUTFLOW 2,694,846 2,728,465 2,738,672 2,748,878 2,748,878 2,748,878

3. Increase in Fixed Assets 0 0 0 0 0 0

Fixed Investments 0 0 0 0 0 0

Pre-production Expenditures 0 0 0 0 0 0

4. Increase in Net Working Capital 0 0 0 0 0 0

5. Operating Costs 2,423,197 2,423,197 2,423,197 2,423,197 2,423,197 2,423,197

6. Corporate Tax Paid 271,648 305,268 315,474 325,681 325,681 325,681

NET CASH FLOW 933,954 900,335 890,128 879,922 879,922 879,922

CUMULATIVE NET CASH FLOW 1,795,697 2,696,031 3,586,160 4,466,081 5,346,003 6,225,925

Net Present Value (at 18%) 345,966 282,638 236,808 198,384 168,122 142,476

Cumulative Net present Value 60,013 342,651 579,459 777,843 945,965 1,088,441

Net Present Value (at 18%) 1,088,440.72

Internal Rate of Return 29.8%

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 Annex 4: NET INCOME STATEMENT ( in Birr)
PRODUCTION
  1 2 3 4 5
Capacity Utilization (%) 70% 80% 100% 100% 100%

1. Total Income 2,540,160 2,903,040 3,628,800 3,628,800 3,628,800

Sales Revenue 2,540,160 2,903,040 3,628,800 3,628,800 3,628,800
Other Income 0 0 0 0 0
2. Less Variable Cost 1,492,002 1,705,145 2,131,431 2,131,431 2,131,431
VARIABLE MARGIN 1,048,158 1,197,895 1,497,369 1,497,369 1,497,369
(In % of Total Income) 41.26 41.26 41.26 41.26 41.26
3. Less Fixed Costs 408,336 435,495 489,812 489,812 489,812
OPERATIONAL MARGIN 639,822 762,401 1,007,558 1,007,558 1,007,558
(In % of Total Income) 25.19 26.26 27.77 27.77 27.77
4. Less Cost of Finance 436,580.87 204,127.11 170,105.93 136,084.74 102,063.56
5. GROSS PROFIT 203,241.30 558,273.58 837,451.82 871,473.00 905,494.19
6. Income (Corporate) Tax 0.00 0.00 251,235.54 261,441.90 271,648.26
7. NET PROFIT 203,241.30 558,273.58 586,216.27 610,031.10 633,845.93
RATIOS (%)  
Gross Profit/Sales 8.00% 19.23% 23.08% 24.02% 24.95%
Net Profit After Tax/Sales 8.00% 19.23% 16.15% 16.81% 17.47%
Return on Investment 25.06% 28.80% 26.68% 26.32% 25.96%
Return on Equity 17.92% 49.23% 51.69% 53.79% 55.89%

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

1. Total Income 3,628,800 3,628,800 3,628,800 3,628,800 3,628,800

Sales Revenue 3,628,800 3,628,800 3,628,800 3,628,800 3,628,800
Other Income 0 0 0 0 0
2. Less Variable Cost 2,131,431 2,131,431 2,131,431 2,131,431 2,131,431
VARIABLE MARGIN 1,497,369 1,497,369 1,497,369 1,497,369 1,497,369
(In % of Total Income) 41.26 41.26 41.26 41.26 41.26
3. Less Fixed Costs 411,767 411,767 411,767 411,767 411,767
OPERATIONAL MARGIN 1,085,603 1,085,603 1,085,603 1,085,603 1,085,603
(In % of Total Income) 29.92 29.92 29.92 29.92 29.92
4. Less Cost of Finance 68,042 34,021 0 0 0
5. GROSS PROFIT 1,017,560 1,051,582 1,085,603 1,085,603 1,085,603
6. Income (Corporate) Tax 305,268 315,474 325,681 325,681 325,681
7. NET PROFIT 712,292 736,107 759,922 759,922 759,922
RATIOS (%)  
Gross Profit/Sales 28.04% 28.98% 29.92% 29.92% 29.92%
Net Profit After Tax/Sales 19.63% 20.29% 20.94% 20.94% 20.94%
Return on Investment 27.52% 27.16% 26.80% 26.80% 26.80%
Return on Equity 62.81% 64.91% 67.01% 67.01% 67.01%

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 Annex 5: Projected Balance Sheet (in Birr)
CONSTRUCTION PRODUCTION
  Year 1 Year 2 1 2 3 4
TOTAL ASSETS 947,363 2,835,099 3,315,448 3,629,799 4,011,679 4,338,200
1. Total Current Assets 0 940,374 1,618,768 2,131,164 2,711,089 3,235,655
Inventory on Materials and Supplies 0 0 432,888 494,730 618,412 618,412
Work in Progress 0 0 50,188 57,358 71,697 71,697
Finished Products in Stock 0 0 100,376 114,716 143,395 143,395
Accounts Receivable 0 0 277,108 316,695 395,869 395,869
Cash in Hand 0 0 74,809 85,496 106,870 106,870
Cash Surplus, Finance Available 0 940,374 683,398 1,062,170 1,374,846 1,899,413
Securities 0 0 0 0 0 0
2. Total Fixed Assets, Net of Depreciation 947,363 1,894,725 1,696,680 1,498,635 1,300,590 1,102,545
Fixed Investment 0 902,250 1,804,500 1,804,500 1,804,500 1,804,500
Construction in Progress 902,250 902,250 0 0 0 0
Pre-Production Expenditure 45,113 90,225 90,225 90,225 90,225 90,225
Less Accumulated Depreciation 0 0 198,045 396,090 594,135 792,180
3. Accumulated Losses Brought Forward 0 0 0 0 0 0
4. Loss in Current Year 0 0 0 0 0 0
TOTAL LIABILITIES 947,363 2,835,099 3,315,448 3,629,799 4,011,679 4,338,200
5. Total Current Liabilities 0 0 277,108 316,695 395,869 395,869
Accounts Payable 0 0 277,108 316,695 395,869 395,869
Bank Overdraft 0 0 0 0 0 0
6. Total Long-term Debt 568,418 1,701,059 1,701,059 1,417,549 1,134,040 850,530
Loan A 568,418 1,701,059 1,701,059 1,417,549 1,134,040 850,530
Loan B 0 0 0 0 0 0
7. Total Equity Capital 378,945 1,134,040 1,134,040 1,134,040 1,134,040 1,134,040
Ordinary Capital 378,945 1,134,040 1,134,040 1,134,040 1,134,040 1,134,040
Preference Capital 0 0 0 0 0 0
Subsidies 0 0 0 0 0 0
8. Reserves, Retained Profits Brought Forward 0 0 0 203,241 761,515 1,347,731
9.Net Profit After Tax 0 0 203,241 558,274 586,216 610,031
Dividends Payable 0 0 0 0 0 0
Retained Profits 0 0 203,241 558,274 586,216 610,031

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 Annex 5: Projected Balance Sheet (in Birr): Continued
PRODUCTION
  5 6 7 8 9 10
TOTAL ASSETS 4,688,537 5,117,319 5,569,916 6,329,838 7,089,760 7,849,682
1. Total Current Assets 3,784,037 4,332,819 4,905,416 5,785,338 6,665,260 7,545,182
Inventory on Materials and Supplies 618,412 618,412 618,412 618,412 618,412 618,412
Work in Progress 71,697 71,697 71,697 71,697 71,697 71,697
Finished Products in Stock 143,395 143,395 143,395 143,395 143,395 143,395
Accounts Receivable 395,869 395,869 395,869 395,869 395,869 395,869
Cash in Hand 106,870 106,870 106,870 106,870 106,870 106,870
Cash Surplus, Finance Available 2,447,794 2,996,576 3,569,173 4,449,095 5,329,017 6,208,939
Securities 0 0 0 0 0 0
2. Total Fixed Assets, Net of Depreciation 904,500 784,500 664,500 544,500 424,500 304,500
Fixed Investment 1,804,500 1,804,500 1,804,500 1,804,500 1,804,500 1,804,500
Construction in Progress 0 0 0 0 0 0
Pre-Production Expenditure 90,225 90,225 90,225 90,225 90,225 90,225
Less Accumulated Depreciation 990,225 1,110,225 1,230,225 1,350,225 1,470,225 1,590,225
3. Accumulated Losses Brought Forward 0 0 0 0 0 0
4. Loss in Current Year 0 0 0 0 0 0
TOTAL LIABILITIES 4,688,537 5,117,319 5,569,916 6,329,838 7,089,760 7,849,682
5. Total Current Liabilities 395,869 395,869 395,869 395,869 395,869 395,869
Accounts Payable 395,869 395,869 395,869 395,869 395,869 395,869
Bank Overdraft 0 0 0 0 0 0
6. Total Long-term Debt 567,020 283,510 0 0 0 0
Loan A 567,020 283,510 0 0 0 0
Loan B 0 0 0 0 0 0
7. Total Equity Capital 1,134,040 1,134,040 1,134,040 1,134,040 1,134,040 1,134,040
Ordinary Capital 1,134,040 1,134,040 1,134,040 1,134,040 1,134,040 1,134,040
Preference Capital 0 0 0 0 0 0
Subsidies 0 0 0 0 0 0
8. Reserves, Retained Profits Brought Forward 1,957,762 2,591,608 3,303,900 4,040,008 4,799,929 5,559,851
9. Net Profit After Tax 633,846 712,292 736,107 759,922 759,922 759,922
Dividends Payable 0 0 0 0 0 0
Retained Profits 633,846 712,292 736,107 759,922 759,922 759,922

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