ANRS INVESTMENT COMMISSIN

www.investamhara.gov.et

Project Profile on the

GYPSUM BOARD

Development Studies Associates

(DSA)

July/2016 revised
Bahir Dar
 Table of Contents

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

2. Product Description and Application -----------------------------------------------------------1
3. Market Study and Plant Capacity---------------------------------------------------------------- 2
3.1 Market Study---------------------------------------------------------------------------------- 2
3.1.1 Present Supply and Demand...........................................................................................2
3.1.2 Demand Projection..........................................................................................................3
3.1.3 Pricing and Distribution..................................................................................................3
3.2 Plant Capacity--------------------------------------------------------------------------------------
4
3.3 Production Program------------------------------------------------------------------------------ 4
4. Raw Materials and Utilities 4
4.1 Availability and Sources of Raw Materials 4
4.2 Annual Requirements of Utilities 5
5. Location 5
6. Technology and Engineering --------------- 5
6.1 Production Process 5
6.2 Machinery and Equipment 6
6.3 Building and Civil Engineering Cost 7
7. Manpower and Training Requirements 7
7.1 Human Resource Requirement 7
7.2 Training Requirement 8
8. Financial Analysis 8
8.1 Underlying Assumption 8
8.2 Investment 10
8.3 Production Cost 11
8.4 Financial Evaluation 11
9. Economic and Social Benefit and Justification 13
ANNEXES 15
1. Executive Summary
This project profile deals with the establishment of gypsum board producing plant in Amhara
National Regional State. The following presents the main findings of the study

Demand projection divulges that the domestic demand for gypsum board is substantial and is
increasing with time. Accordingly, the planned plant is set to produce 343,750m 2 or 137,500
(each 2.5m2) units annually. The total investment cost of the project including working capital is
estimated at birr 31.84 million and creates 47 job opportunity and 14.98 million birr of income
annually.

The financial result indicates that the project will generate profit beginning from the first year of
operation. Moreover, the project will break even at 20.74% of capacity utilization and it will
payback fully the initial investment less working capital in second year of operation. The result
further show that the calculated IRR of the project is 38.5%

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

Gypsum board is a widely used construction material mainly for interior finishing like partition
walls, ceiling and acoustic boards. Gypsum is the commercial name for hydrous calcium
sulphate (CaSO4. 2 H2O).

Gypsum board consists of mainly two sections. The core of the board is gypsum and the external
cover is made out of layers of paper adhered to the core on both sides.

1
3. Market Study and Plant Capacity

3.1 Market Study

The market for gypsum board is assessed based on the applications stated below. Although
demand assessment is generally analyzed using the trend of supplies from local production and
imports if any, in this particular case there is no recorded data of both. It is also clear there is no
local production neither any import records.

3.1.1 Present Supply and Demand

There is no local production of properly calcined gypsum board. Import figures for gypsum are
insignificant as the use of low quality plastering and partitioning materials such as impure lime
and chipboard and other products is customary. Therefore, demand estimation cannot be based
on historical supply trends.

Based on the applications of gypsum board described earlier, it is found to be logical to estimate
the demand for gypsum board as follows:-

- Gypsum bard is to be used on buildings made form bricks, stone and mud and blockets.
According to the 1984 CSA survey, these types of houses account for about 20.5% all
urban dwellings.
- Only high income households (above Birr 670/month) afford the above types of houses.
- About 100 m2 of gypsum board per villa on the average and about 500 m 2 of gypsum
board for other buildings will be required for internal partitioning as per civil engineers
rough estimates.
- According to the 1984 CSA survey, about 70% of the houses mentioned above are villa
type or nearly so while 30% are tall buildings of 4 to 11 floors.

Previous studies (PADCO/WAAS, 1995) indicated that about 25,000 houses will be required
yearly between 1994 and the year 2000 in urban centers. If this represents 70%, then 30% of
high buildings (4 to 11 or more floors) will be about 7500/year.

2
Based on the above, the demand for gypsum board during the period 1994-2000 will be:-

Villas: 25,000 x 100 = 2,500,000 m2/year to the year 2,000.

High buildings: 7,500 x 500 = 3,750,000 m2/year to the year 2,000
Total yearly demand 1996-2,000= 3,750,000+2,500,000 = 6,250,000 m2

3.1.2 Demand Projection

The anticipated demand between 1996 and the year 2000 is given above based on the forecast for
houses. The demand after the year 2,000 is assumed to increase at the rate of 5% per year. The
projected demand for the following periods is given in Table 3.1 based on the above
assumptions.

Table 1: Demand Projection

Year Quantity (Mill./m2

1996-2000 6.25
2001 6.56
2002 6.89
2003 7.24
2004 7.60
2005 7.98
2006 8.38

3.1.3 Pricing and Distribution

Selling prices are determined by general market indicators. The current market price for Gypsum
board is birr 150 for 2.5 m 2 board deducting 20% retailer margin and 10% wholesaler margin
Birr 105 per unit or Birr 42 per meter 2 is adopted for the projections of the plant’s revenue.
Gypsum board is used by many contractors and building maintenance workers and therefore its
sales and distribution system has to be wide. Therefore, the recommended channel is producer-
wholesalers retailer-end user or consumer.

3
 3.2 Plant Capacity

The plant under consideration will have a production capacity of 343,750 m2/year of gypsum
board of standard sizes. The boards could be 7mm, 9mm, 12mm and 15mm thick and will have
an area of 2.5 m x 2.5 m.

3.3 Production Program

The plant will be running in two shifts of 8 hours each. Full capacity production is to be achieved
in three years time as production process is not that complex. In the 1st year of production, the
plant would operate at 75% of its capacity. The second and third year of operations will be at
85% and at 100%, respectively. 275 working days are assumed per annum. By considering the
operators need to acquire experience working with the plant machinery and coordination of
sufficient supplies and inputs as well as penetration of the market is also to be achieved
gradually.

4. Raw Materials and Utilities

4.1 Availability and Sources of Raw Materials

The major portion of the material requirement is gypsum which is 90% by weight and the rest
will be paper, pulp & additives. Gypsum is available locally while sum paper & additive would
be imported from abroad. Table 4.1 shows annual requirement of raw materials and inputs.

Table 2: Annual Raw Material requirement

Quantity
Item (tons)
Gypsum
2240
Paper
180
Pulp 140
Additives 350

4
 4.2 Annual Requirements of Utilities
At full capacity the plant will require the following utilities per annum. This is estimated about
Birr 205,950.
Fuel Oil 1,050,000 litres
Process water 42,000 m3
Industrial Water 140,000 m3
Electric power 2,100 MWhr.

5. Location
A site in the region which very close to the source of gypsum should be considered as gypsum
makes up 90% of the total raw material consumption.

6. Technology and Engineering

6.1 Production Process

Gypsum, which is locally available in abundance, normally contains 10 to 20% moisture by
weight. The wet gypsum is dried in a drier, and calcined to form plaster in a calcinations unit.
The calcined product (plaster) is milled and stored in silos. Fuel oil is used for drying and
calcinations.

In the board forming process; plaster, pulp (filler), water and additives are fed in the right
proportion to a mixer. The slurry coming out of the mixer is sent to a forming unit and is
sandwiched between the top and bottom paper layers that feed continuously through a feeding
machine.

The setting of the plaster in the sandwiched slurry takes place on the belt conveyor of the
gypsum board forming unit. The gypsum board is then cut into the standard size. The cut gypsum
board pieces are passed slowly in a drying unit and then taken out cooled through a cooling
section.

5
 6.2 Machinery and Equipment
The machinery and equipment requirement is presented in Table 4.

Table 3: Machinery and Equipment Requirement

Item Quantity (pcs)
Gypsum Drying Section
Fuel Oil Tank 1
Furnace 1
Gypsum feeder and conveyor 1 set
Gypsum drier 1
Cyclone 2
Exhaust gas blower 1
Sober 1
Dry gypsum hopper 1
Gypsum Calcining Section
Kettle 2
Furnace 1
Hot Pit 2
Pulverizer 2
Silo 3
Plaster Hopper 1
Electrical dust collector 1
Bag filter 1
Scrubber 1
Exhaust gas blower 1
Feeder & conveyor 1 set
Forming and Drying Section
Mixer 1
Additives preparation unit a few
Paper feed unit 1
Cutter 1

6
 Frying unit 1 set
Conveyor a few
Utility Section
Boiler Unit 1 set
Oil storage tank 1
Others
Instruments 1 set
Electrical equipment 1 set

The total cost of the machines and equipment is estimated about Birr 13 million.
The technology could be secured form Japan suppliers.

6.3 Building and Civil Engineering Cost

The plant requires a production hall of 30 m x 200 m (6000 m2). The site is estimated to be 100
meters by 250 meters (25,000 m2) of land. Cost of civil works will be Birr 460,000. It requires a
lot of open space for the rage of gypsum.

7. Manpower and Training Requirements

7.1 Human Resource Requirement

For the two shifts operation of the plant, the manpower requirement together with the salary will
be as shown in Table 4.

7
 Table 4: Man Power Requirement
Required Salary/Wage (Birr)
  Job Title No. Monthly Annual
1 General Manager 1 10,000 120,000
2 Mechanical Engineer 2 6,000 144,000
3 Foreman 2 4,000 96,000
4 Operators 24 3,000 864,000
5 Inspector 1 3,000 36,000
6 Stores 2 2000 4,000
7 Accountant 2 3,000 72,000
8 Sells Man 1 2000 24,000
9 Casher 1 2000 24,000
10 Secretary 1 2000 24,000
11 Security 4 1500 72,000
12 Clerks 2 1500 36,000
13 Genitor 4 1500 72,000
  Total 47 19,300 1,588,000
Employment Benefits 20% of Annual
  Salary     317,600
        1,905,600

7.2 Training Requirement

As a new plant, the operators as well as the technical staff need to be rained on the job by the
supplier’s experts. A 6 months training will be appropriate to ensure the safe and proper running
of the plant.

8. Financial Analysis

8.1 Underlying Assumption

The financial analysis of gypsum board Producing plant is based on the data provided in the
preceding chapters and the following assumptions.

8
 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%
Pre-production (amortization) 20%

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

9
 8.2 Investment
The total investment cost of the project including working capital is estimated at Birr 15.4
million as shown in table 5 below. The Owner shall contribute 30% of the finance in the form of
equity while the remaining 70% is to be financed by bank loan.

Table 5: Total Initial Investment

Total Initial Investment

Item Cost
Land 3,000.00
Building and civil
works 1,200,000.00
Office equipment 160,000.00
Vehicles 900000
Plant machinery &
equipment 25,928,571.00
Total Fixed Investment 28,191,571.00
Pre production capital
expenditure 1,008,546.00
Total Initial
Investment 29,200,117.00
Working capital at full
capacity 2,641,828.00
Total 31,841,945.00

*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.

The foreign component of the project accounts for Birr 13 million or 85% of the total investment
cost.

10
 8.3 Production Cost
The total production cost at full capacity operation is estimated at Birr 8.1 million as detailed in
table 6 below.

Table 6: Production Cost

Total Production Cost at Full Capacity

Items Cost
1.      Raw materials 14,907,947
2.      Utilities 528,468
3.      Wages and Salaries 1,905,600
4.      Spares and Maintenance 2,170,187
Factory costs 19,512,201
5.      Depreciation 7,089,276
6.      Financial costs 8,753,034
  Total Production Cost
35,354,511

8.4 Financial Evaluation

I. Profitability
According to the projected income statement attached in the annex part (see annex 3) 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 26.48%, 35.41% and
46.43% 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 20.74% of capacity utilization.

III. Payback Period

11
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 year.

12
 IV. Simple Rate of Return

For the envisaged plant the simple rate of return equals to 22.5%.

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
38.5% and the net present value at 18 % discount is Birr 12.9 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 is resulted in declining, a total project life profit to Birr 41.06 million with
payback period of same 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 14.98 million
per year and birr 149.84 million within the project life. Such result induces the project promoters
to reinvest the profit which, therefore, increases the investment magnitude in the region.

B. Tax Revenue

In the project life under consideration, the region will collect about birr 45.59 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

13
 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
13.8 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 47 professionals as well as support
stuffs. Consequently the project creates income of Birr 1.90 million per year. This would be one
of the commendable accomplishments of the project.
E. Pro Environment Project

The proposed production process is environment friendly.

14
ANNEXES

15
 Annex 1: Total Net Working Capital Requirements (in Birr)
CONSTRUCTION PRODUCTION
  Year 1 Year 2 1 2 3 4
Capacity Utilization (%) 0 0 75% 85% 100% 100%
4,492,88
1. Total Inventory 0 0 3,369,664 3,818,952 4,492,886 6
1,448,67
Raw Materials in Stock- Total 0 0 1,086,509 1,231,377 1,448,679 9
962,72
Raw Material-Local 0 0 722,044 818,318 962,725 5
485,95
Raw Material-Foreign 0 0 364,464 413,062 485,954 4
19,50
Factory Supplies in Stock 0 0 14,631 16,581 19,507 7
112,92
Spare Parts in Stock and Maintenance 0 0 84,696 95,989 112,927 7
487,69
Work in Progress 0 0 365,773 414,542 487,697 7
975,39
Finished Products 0 0 731,546 829,085 975,393 3
4,041,45
2. Accounts Receivable 0 0 3,031,088 3,435,233 4,041,450 0
345,26
3. Cash in Hand 0 0 258,945 293,471 345,260 0
7,430,91
CURRENT ASSETS 0 0 5,573,188 6,316,278 7,430,915 5
4,041,45
4. Current Liabilities 0 0 3,031,088 3,435,233 4,041,450 0
4,041,45
Accounts Payable 0 0 3,031,088 3,435,233 4,041,450 0
3,389,46
TOTAL NET WORKING CAPITAL REQUIREMENTS 0 0 2,542,100 2,881,046 3,389,465 5

INCREASE IN NET WORKING CAPITAL 0 0 2,542,100 338,946 508,420 -

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

  5 6 7 8 9 10

Capacity Utilization (%) 1 1 1 1 1 1

4,492,8 4,492,8 4,492,88 4,492,88 4,492,88 4,492,88
1. Total Inventory 86 86 6 6 6 6
1,448,6 1,448,6 1,448,67 1,448,67 1,448,67 1,448,67
Raw Materials in Stock-Total 79 79 9 9 9 9
962,7 962,7 962,72 962,72 962,72 962,72
Raw Material-Local 25 25 5 5 5 5
485,9 485,9 485,95 485,95 485,95 485,95
Raw Material-Foreign 54 54 4 4 4 4
19,5 19,50 19,50 19,50 19,50 19,50
Factory Supplies in Stock 07 7 7 7 7 7
112,9 112,9 112,92 112,92 112,92 112,92
Spare Parts in Stock and Maintenance 27 27 7 7 7 7
487,6 487,6 487,69 487,69 487,69 487,69
Work in Progress 97 97 7 7 7 7
975,3 975,3 975,39 975,39 975,39 975,39
Finished Products 93 93 3 3 3 3
4,041,4 4,041,4 4,041,45 4,041,45 4,041,45 4,041,45
2. Accounts Receivable 50 50 0 0 0 0
345,2 345,2 345,26 345,26 345,26 345,26
3. Cash in Hand 60 60 0 0 0 0
7,430,9 7,430,9 7,430,91 7,430,91 7,430,91 7,430,91
CURRENT ASSETS 15 15 5 5 5 5
4,041,4 4,041,4 4,041,45 4,041,45 4,041,45 4,041,45
4. Current Liabilities 50 50 0 0 0 0
4,041,4 4,041,4 4,041,45 4,041,45 4,041,45 4,041,45
Accounts Payable 50 50 0 0 0 0
3,389,4 3,389,4 3,389,46 3,389,46 3,389,46 3,389,46
TOTAL NET WORKING CAPITAL REQUIREMENTS 65 65 5 5 5 5
INCREASE IN NET WORKING CAPITAL - - - - - -

2
 Annex 2: Cash Flow Statement (in Birr)
CONSTRUCTION PRODUCTION
  Year 1 Year 2 1 2 3 4
TOTAL CASH INFLOW 18,115,511 21,504,976 30,816,056 31,893,776 37,652,843 37,046,625
1. Inflow Funds 18,115,511 21,504,976 3,031,088 404,145 606,218 -
Total Equity 7,246,204 8,601,992 - - - -
Total Long Term Loan 10,869,307 12,902,985 - - - -
Total Short Term Finances - - 3,031,088 404,145 606,218 -
2. Inflow Operation - - 27,784,969 31,489,631 37,046,625 37,046,625
Sales Revenue - - 27,784,969 31,489,631 37,046,625 37,046,625
Interest on Securities - - - - - -
3. Other Income   - - - - -
TOTAL CASH OUTFLOW 18,115,511 18,115,511 22,256,742 19,196,510 26,273,405 24,825,955
4. Increase In Fixed Assets 18,115,511 18,115,511 - - - -
Fixed Investments 17,252,868 17,252,868 - - - -
Pre-production Expenditures 862,643 862,643 - - - -
5. Increase in Current Assets - - 5,573,188 743,091 1,114,637 -
6. Operating Costs - - 10,310,463 11,638,696 13,631,046 13,631,046
7. Corporate Tax Paid - - - - 5,188,442 5,331,075
8. Interest Paid - - 6,373,092 2,852,676 2,377,230 1,901,783
9.Loan Repayments - - - 3,962,048 3,962,048 3,962,048
10.Dividends Paid - - - - - -
Surplus (Deficit) - 3,389,465 8,559,314 12,697,266 11,379,438 12,220,670
Cumulative Cash Balance - 3,389,465 11,948,779 24,646,045 36,025,483 48,246,155

3
 Annex 2: Cash Flow Statement (in Birr): Continued
PRODUCTION
  5 6 7 8 9 10
TOTAL CASH INFLOW 37,046,625 37,046,625 37,046,625 37,046,625 37,046,625 37,046,625
1. Inflow Funds - - - - - -
Total Equity - - - - - -
Total Long Term Loan - - - - - -
Total Short Term Finances - - - - - -
Sales Revenue 37,046,625 37,046,625 37,046,625 37,046,625 37,046,625 37,046,625
Interest on Securities            
3. Other Income            
TOTAL CASH OUTFLOW 24,493,142 24,263,847 23,931,034 19,636,174 19,636,174 19,636,174
4. Increase In Fixed Assets            
Fixed Investments            
Pre-production Expenditures            
5. Increase in Current Assets            
6. Operating Costs 13,631,046 13,631,046 13,631,046 13,631,046 13,631,046 13,631,046
7. Corporate Tax Paid 5,473,709 5,719,860 5,862,494 6,005,128 6,005,128 6,005,128
8. Interest Paid 1,426,337 950,893 475,446 - - -
9. Loan Repayments 3,962,048 3,962,048 3,962,048 - - -
10.Dividends Paid            
Surplus (Deficit) 12,553,483 12,782,778 13,115,591 17,410,451 17,410,451 17,410,451

Cumulative Cash Balance 60,799,638 73,582,413 86,698,004 104,108,455 121,518,904 138,929,355

4
 Annex 3: DISCOUNTED CASH FLOW-TOTAL CAPITAL INVESTED
CONSTRUCTION PRODUCTION
  Year 1 Year 2 1 2 3 4
37,046,62
TOTAL CASH INFLOW - - 27,784,969 31,489,631 5 37,046,625
37,046,62
1. Inflow Operation - - 27,784,969 31,489,631 5 37,046,625
37,046,62
Sales Revenue - - 27,784,969 31,489,631 5 37,046,625
Interest on Securities - - - - - -
2. Other Income            
18,115,51 19,327,90
TOTAL CASH OUTFLOW 18,115,511 1 12,852,563 11,977,644 7 18,962,122
18,115,51
3. Increase in Fixed Assets 18,115,511 1 - - - -
17,252,86
Fixed Investments 17,252,868 8 - - - -
Pre-production Expenditures 862,643 862,643 - - - -
508,42
4. Increase in Net Working Capital - - 2,542,100 338,946 0 -
13,631,04
5. Operating Costs - - 10,310,463 11,638,696 6 13,631,046
6. Corporate Tax Paid            
(18,115,511 (18,115,51 17,718,71
NET CASH FLOW ) 1) 14,932,406 19,511,987 8 18,084,503
(18,115,511 (36,231,02 (21,298,61 (1,786,626 15,932,09
CUMULATIVE NET CASH FLOW ) 2) 3) ) 1 34,016,592
(18,115,511 (15,352,12 9,139,11
Net Present Value (at 18%) ) 7) 10,724,222 11,875,599 7 7,904,902

Cumulative Net present Value (18,115,511) (33,467,637) (22,743,415) (10,867,818) (1,728,701) 6,176,203

5
 Annex 3: DISCOUNTED CASH FLOW-TOTAL CAPITAL INVESTED (Continued)
PRODUCTION
  5 6 7 8 9 10
37,046,62 37,046,62 37,046,62 37,046,62 37,046,62
TOTAL CASH INFLOW 5 37,046,625 5 5 5 5
37,046,62 37,046,62 37,046,62 37,046,62 37,046,62
1. Inflow Operation 5 37,046,625 5 5 5 5
37,046,62 37,046,62 37,046,62 37,046,62 37,046,62
Sales Revenue 5 37,046,625 5 5 5 5
Interest on Securities            
2. Other Income            
19,104,75 19,493,54 19,636,17 19,636,17 19,636,17
TOTAL CASH OUTFLOW 5 19,350,907 0 4 4 4
3. Increase in Fixed Assets            
Fixed Investments            
Pre-production Expenditures            
4. Increase in Net Working Capital            
13,631,04 13,631,04 13,631,04 13,631,04 13,631,04
5. Operating Costs 6 13,631,046 6 6 6 6
6. Corporate Tax Paid            
17,941,87 17,553,08 17,410,45 17,410,45 17,410,45
NET CASH FLOW 0 17,695,718 5 1 1 1
51,958,46 87,207,26 104,617,71 122,028,16 139,438,61
CUMULATIVE NET CASH FLOW 2 69,654,180 3 4 5 6
6,646,23 4,669,78 3,925,29 3,326,51 2,819,08
Net Present Value (at 18%) 5 5,555,128 9 2 9 5
12,822,43 23,047,35 26,972,64 30,299,16 33,118,24
Cumulative Net present Value 5 18,377,564 5 8 6 8
Net Present Value (at 18%)    33,118,248        
Internal Rate of Return 38.50%

6
 Annex 4: NET INCOME STATEMENT ( in Birr)
PRODUCTION
  1 2 3 4 5
Capacity Utilization (%) 75% 85% 100% 100% 100%
1. Total Income 16,956,844 19,217,756 22,609,125 22,609,125 22,609,125
Sales Revenue 27,784,969 31,489,631 37,046,625 37,046,625 37,046,625
Other Income - - - - -
2. Less Variable Cost 9,170,825 10,393,604 12,227,767 12,227,767 12,227,767
VARIABLE MARGIN 18,614,144 21,096,028 24,818,858 24,818,858 24,818,858
(In % of Total Income) 67 67 67 67 67
3. Less Fixed Costs 4,883,178 4,988,635 5,146,819 5,146,819 5,146,819
OPERATIONAL MARGIN 13,730,964 16,107,395 19,672,039 19,672,039 19,672,039
(In % of Total Income) 49 51 53 53 53
4. Less Cost of Finance 6,373,092 2,852,675 2,377,229 1,901,783 1,426,338
5. GROSS PROFIT 7,357,873 13,254,719 17,294,809 17,770,255 18,245,700
6. Income (Corporate) Tax - - 5,188,443 5,331,076 5,473,710
7. NET PROFIT 3,641,027 16,837,661 17,763,299 21,011,669 21,531,472
RATIOS (%)  
Gross Profit/Sales 0 0 0 0 0
Net Profit After Tax/Sales 0 0 0 0 0
Return on Investment 0 0 0 0 0
Return on Equity 0 1 1 1 1

7
 Annex 4: NET INCOME STATEMENT (in Birr): Continued
PRODUCTION
  6 7 8 9 10
Capacity Utilization (%) 100% 100% 100% 100% 100%
1. Total Income 37,046,625 37,046,625 37,046,625 37,046,625 37,046,625
Sales Revenue 37,046,625 37,046,625 37,046,625 37,046,625 37,046,625
Other Income - - - - -
2. Less Variable Cost 12,227,767 12,227,767 12,227,767 12,227,767 12,227,767
VARIABLE MARGIN 24,818,858 24,818,858 24,818,858 24,818,858 24,818,858
(In % of Total Income) 67 67 67 67 67
3. Less Fixed Costs 4,801,761 4,801,761 4,801,761 4,801,761 4,801,761
OPERATIONAL MARGIN 20,017,097 20,017,097 20,017,097 20,017,097 20,017,097
(In % of Total Income) 54 54 54 54 54
4. Less Cost of Finance 950,893 475,446 - - -
5. GROSS PROFIT 19,066,204 19,541,650 20,017,097 20,017,097 20,017,097
6. Income (Corporate) Tax 5,719,860 5,862,494 6,005,128 6,005,128 6,005,128
7. NET PROFIT 13,346,343 13,679,154 14,011,966 14,011,966 14,011,966
RATIOS (%)  
Gross Profit/Sales 51.47% 52.75% 54.03% 54.03% 54.03%
Net Profit After Tax/Sales 36.03% 36.92% 37.82% 37.82% 37.82%
Return on Investment 36.09% 35.73% 35.37% 35.37% 35.37%
Return on Equity 84.21% 86.31% 88.41% 88.41% 88.41%

Annex 5: Projected Balance Sheet (in Birr)

  CONSTRUCTION PRODUCTION

8
 Year 1 Year 2 1 2 3 4
18,115,51 39,620,48 50,009,44 59,706,26 68,456,79 76,933,92
TOTAL ASSETS 1 7 6 3 7 7
3,389,46 17,521,96 30,962,32 43,456,40 55,677,07
1. Total Current Assets - 5 7 3 1 1
1,185,83 1,343,94 1,581,11 1,581,11
Inventory on Materials and Supplies - - 6 8 5 5
365,77 414,54 487,69 487,69
Work in Progress - - 3 2 7 7
731,54 829,08 975,39 975,39
Finished Products in Stock - - 6 5 3 3
3,031,08 3,435,23 4,041,45 4,041,45
Accounts Receivable - - 8 3 0 0
258,94 293,47 345,26 345,26
Cash in Hand - - 5 1 0 0
3,389,46 11,948,77 24,646,04 36,025,48 48,246,15
Cash Surplus, Finance Available - 5 9 5 3 5

Securities - - - - - -
18,115,51 36,231,02 32,487,47 28,743,93 25,000,39 21,256,85
2. Total Fixed Assets, Net of Depreciation 1 2 9 9 7 7
17,252,86 34,505,73 34,505,73 34,505,73 34,505,73
Fixed Investment - 8 3 3 3 3
17,252,86 17,252,86
Construction in Progress 8 8 - - - -
862,64 1,725,28 1,725,28 1,725,28 1,725,28 1,725,28
Pre-Production Expenditure 3 6 6 6 6 6
3,743,54 7,487,08 11,230,62 14,974,16
Less Accumulated Depreciation - - 0 2 2 5

3. Accumulated Losses Brought Forward - - - - - -

4. Loss in Current Year - - - - - -

18,115,51 39,620,48 50,009,44 59,706,26 68,456,79 76,933,92
TOTAL LIABILITIES 1 7 6 3 7 7
3,031,08 3,435,23 4,041,45 4,041,45
5. Total Current Liabilities - - 8 3 0 0
3,031,08 3,435,23 4,041,45 4,041,45
Accounts Payable - - 8 3 0 0

Bank Overdraft - - - - - -

9
6. Total Long-term Debt 10,869,307 23,772,291 23,772,291 19,810,244 15,848,193 11,886,146

Loan A 10,869,307 23,772,291 23,772,291 19,810,244 15,848,193 11,886,146

Loan B - - - - - -

7. Total Equity Capital 7,246,204 15,848,193 15,848,193 15,848,193 15,848,193 15,848,193

Ordinary Capital 7,246,204 15,848,193 15,848,193 15,848,193 15,848,193 15,848,193

Preference Capital - - - - - -

Subsidies - - - - - -

8. Reserves, Retained Profits Brought Forward - - - 7,357,872 20,612,591 32,718,958

9.Net Profit After Tax - - 7,357,872 13,254,719 12,106,365 12,439,178

Dividends Payable - - - - - -

Retained Profits - - 7,357,872 13,254,719 12,106,365 12,439,178

10
11
 Annex 5: Projected Balance Sheet (in Birr): Continued

PRODUCTION

  5 6 7 8 9 10

TOTAL ASSETS 85,743,868 95,128,163 104,845,269 118,857,235 132,869,202 146,881,168

1. Total Current Assets 68,230,553 81,013,331 94,128,919 111,539,370 128,949,822 146,360,270

Inventory on Materials and Supplies 1,581,115 1,581,115 1,581,115 1,581,115 1,581,115 1,581,115

Work in Progress 487,697 487,697 487,697 487,697 487,697 487,697

Finished Products in Stock 975,393 975,393 975,393 975,393 975,393 975,393

Accounts Receivable 4,041,450 4,041,450 4,041,450 4,041,450 4,041,450 4,041,450

Cash in Hand 345,260 345,260 345,260 345,260 345,260 345,260

Cash Surplus, Finance Available 60,799,638 73,582,413 86,698,004 104,108,455 121,518,904 138,929,355

Securities - - - - - -

2. Total Fixed Assets, Net of Depreciation 17,513,317 14,114,832 10,716,350 7,317,865 3,919,383 520,898

12
 Fixed Investment 34,505,733 34,505,733 34,505,733 34,505,733 34,505,733 34,505,733

Construction in Progress - - - - - -

Pre-Production Expenditure 1,725,286 1,725,286 1,725,286 1,725,286 1,725,286 1,725,286

Less Accumulated Depreciation 18,717,705 22,116,187 25,514,672 28,913,154 32,311,639 35,710,124

3. Accumulated Losses Brought Forward - - - - - -

4. Loss in Current Year - - - - - -

TOTAL LIABILITIES 85,743,868 95,128,163 104,845,269 118,857,235 132,869,202 146,881,168

5. Total Current Liabilities 4,041,450 4,041,450 4,041,450 4,041,450 4,041,450 4,041,450

Accounts
Payable

Bank Overdraft - - - - - -

6. Total Long-term Debt 7,924,098 3,962,048 - - - -

Loan A 7,924,098 3,962,048 - - - -

13
 Loan B - - - - - -

7. Total Equity Capital 15,848,193 15,848,193 15,848,193 15,848,193 15,848,193 15,848,193

Ordinary Capital 15,848,193 15,848,193 15,848,193 15,848,193 15,848,193 15,848,193

Preference Capital - - - - - -

Subsidies - - - - - -

8. Reserves, Retained Profits Brought Forward 45,158,136 57,930,126 71,276,470 84,955,623 98,967,590 112,979,558

9. Net Profit After Tax 12,771,990 13,346,343 13,679,154 14,011,966 14,011,966 14,011,966

Dividends Payable - - - - - -

Retained Profits 12,771,990 13,346,343 13,679,154 14,011,966 14,011,966 14,011,966

14
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