Bicycle
Short Description
BICYCLE...
Description
Investment Office ANRS
Project Profile on the Establishment of Bicycle Assembling Plant
Development Studies Associates (DSA)
October 2008 Addis Ababa
Table of Contents 1.Executive Summary..............................................................................................3 2.Product Description and Application.................................................................3 3.Market Study, Plant Capacity and Production Program.................................3 3.1Market Study...........................................................................................................................3 3.1.1Present Demand and Supply............................................................................................3 3.1.2Projected Demand............................................................................................................4 3.1.3Pricing and Distribution...................................................................................................5 3.2Plant Capacity.........................................................................................................................6 3.3Production Program................................................................................................................6
4.Raw Materials and Utilities.................................................................................6 4.1Availability and Source of Raw Materials..............................................................................6 4.2Annual Requirement and Cost of Raw Materials and Utilities...............................................6
5.Location and Site..................................................................................................7 6.Technology and Engineering ..............................................................................7 6.1Production Process..................................................................................................................7 6.2Machinery and Equipment......................................................................................................9 6.3Civil Engineering Cost............................................................................................................9
7.Human Resource and Training Requirement..................................................10 7.1Human Resource...................................................................................................................10 7.2Training Requirement...........................................................................................................10
8.Financial Analysis...............................................................................................11 8.1Underlying Assumption .......................................................................................................11 8.2Investment.............................................................................................................................12 8.3Production Costs...................................................................................................................12 8.4Financial Evaluation.............................................................................................................13
9.Economic and Social Benefit and Justification................................................14 ANNEXES..............................................................................................................16
1. Executive Summary The project envisages assembling of 5000 bicycle per annum. The total investment requirement of the project including the working capital is estimated at about Birr 5.5 million; of which Birr 3 million is for machinery and equipments and around Birr 718 thousand is the cost of the working capital and. Based on the cash flow statement, the calculated internal rate of return (IRR) and simple rate of return (SRS) of the project are 23.5 % and 22.6 %, respectively. The net present value (NPV) at 18 % discounting rate is about Birr 1131 thousand. The plant is expected to create employment opportunities for about 30 persons.
2. Product Description and Application A bicycle is a two wheeled vehicle that is used for human transport. Bicycles are widely used in developing countries in both urban and rural areas.
3. Market Study, Plant Capacity and Production Program 3.1
Market Study 3.1.1 Present Demand and Supply
A bicycle is a very efficient form of personal transport. Some say Ethiopia is not suitable for using bicycles because it is mountainous. But the experience of other countries shows that bicycles can be as popular in mountainous countries as they are in plane countries. The main difference is that bicycles used in mountainous countries can be with different gears. Even in Ethiopia there are many places where bicycles can be used without any difficulty. The ever increasing price of petroleum is a warning sign that using petroleum consuming vehicle is going to be very expensive in the future. This requires substituting cheaper means of transport that are least cost in terms of acquisition and operation. Such type of transport is provided by bicycles which are relatively cheaper to buy and does not require expensive running costs. Bicycle manufacturing would have two basic advantages for the development of an economy. First it facilitates transport of people cheaply as it does not involve high running and acquisition costs. Second, it facilitates the process of industrial development through the creation of backward linkages for the manufacture of parts and components. 3
Until now the demand for bicycle in Ethiopia was met through imports. The import of bicycle has been so little in the first half of 1990’s while it has shown significant growth in the second half of the past decade. The import of bicycles between 1989 E.C and 1999 E.C is provided in Table 3.1. Table 3.1 IMPORT OF BICYCLE Year E.C 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 Total Average Import per Year
Imports of Bicycle 18247 9169 21748 10285 13906 19841 30314 74261 52466 536 76522 327,295 29,754
Source: Compiled From CSA’s Import Data of Different Years As can be observed from the above table, the total import of bicycle between 1989 E.C and 1999 E.C was 327,295; implies, nearly 30,000 bicycles per annum have been imported in the past 11 years. Though this figure is small as compared to the population size of the country, it is an indication for the existence of some demand for bicycle that justifies the establishment of bicycle assembly plant in the country. The ANRS has many places where it is convenient to use bicycles. In fact, compared to other regions of the country, more bicycles are used in the ANRS. BahirDar has more bicycles per capita than any urban center in the country. Considering these factors, establishing a bicycle assembly plant in ANRS will be viable.
3.1.2 Projected Demand Basically, the demand for bicycle is a function of population growth, topography and economic growth. Of the three factors, economic growth is the most important variable influencing the demand for bicycle. Consequently, the rate of economic growth of the country forecasted for the 4
coming 5 years has been taken to determine the rate of growth of demand for bicycle. Also, the average volume of import for the last five years is assumed to be the current effective demand for bicycle. The economy of the country is anticipated to grow by 8 % in real terms for the coming 5 years. Accordingly the projected demanded in given in table 3.2. Table 3.2 DEMAND PROJECTION Year 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Projected Demand 46820 50565 54611 58979 63698 68794 74297 80241 86660 93593 101080
As it is given in the above demand projection table, the demand for bicycle is expected to reach 68,794 in the 2005 E.C and 101,080 in 2010. And, this figure is reasonable to establish financially viable bicycle assembly plant in the country.
3.1.3 Pricing and Distribution The retail of bicycles in Addis Ababa ranges from Birr 1100 to Birr 2200 depending on the origin of import and type of brands. To determine the sales revenue of this project an average 5
factory gate price of Birr 900 per bicycle is adopted. The product will find its market outlet through the existing bicycle dealers in Bahir-Dar and Addis Abba and other regional towns.
3.2
Plant Capacity
This profile envisages the production of roadster model bicycles in various adult sizes. The capacity of the plant in one shift operation and 275 working days per annum basis would be 5000 bicycles. The working days are set by deducting all Sundays and public holidays in a year and 25 days for annual maintenance and unexpected interruption of work.
3.3
Production Program
The production program follows gradual capacity utilization due to market and technological reasons. Market reasons refer to the competition that the firm faces from bicycle importers while the technology refers to the speed with which the operators assimilate the process know how. Accordingly, 50 %, 75% and 100 % capacity utilization are assumed for the first and the second years of the operation, respectively. The third year onwards, 100 % capacity utilization is assumed.
4. Raw Materials and Utilities 4.1
Availability and Source of Raw Materials
The raw material requirement of the project has to be met from imports until local ancillary industries are developed and large scale bicycle and tricycle production starts in the country.
4.2
Annual Requirement and Cost of Raw Materials and Utilities
The raw material requirement is provided in Table 4.1 Table 4.1 RAW MATERIAL REQUREMENT
6
Item 1. Bicycle Frame Tubing 2. Rubbing for Bottom 3. Flat Strip and Sheet Steel 4. Lugs and Bottom Bract 5. Components 6. Lugs and Bottom Bract Total
F.C 115038 121275 103950 180180 194040 228690 943,173
Cost Birr L.C 49302 51975 44550 77220 83160 98010 404,217
Total 164340 173250 148500 257400 277200 326700 1,347,390
The total cost of raw material would be Birr 1.3 million of which the foreign currency component is 70 %. The annual cost of utilities amounts Birr 74,600. The annual electrical energy requirement is estimated to be 126,000 KWH and the annual water requirement is estimated to be 2000 cubic meters. The corresponding annual costs will be Birr 69,300 and Birr 5,300, respectively.
5. Location and Site For its convenience for distribution to different parts of the country and ANRS, Combolcha is an appropriate choice for the bicycle assembling plant in ANRS.
6. Technology and Engineering 6.1
Production Process
In general, to assemble bicycle the following process would be required: Cutting, forming and bending of steel tubing and sheet Joining of frame component and forks by welding in jigs 7
Painting Baking Strength testing Assembly of wheels Bicycle Assembly A recent development, has been a legless design using MIG welding techniques and suitable jigs and futures allowing semi-skilled workers to produce high quality frames efficiently. This design would eliminate import of lugs and also allow the bottom bracket to be made from a simple threaded tube. This technique has been adopted for the project under consideration. Alternatively, instead of using a legless design using MIG welding techniques, the traditional bicycle frames have been built using lugs at brazed joints. In this case, the lugs and complex button bracket (which houses the pedai-axle) should be imported.
8
6.2
Machinery and Equipment
The list of machinery and equipment that are required to assemble bicycle is given below: •
Power Press and Diers
2sets
•
Tube Threading Machine
1”
•
Shearing Machine
1”
•
Drilling Machine
1”
•
MIG Welding Equipment
2”
•
Frame and Fork Assembly Jigs
3”
•
Phosphatining and Rinse Tank
3”
•
Painting Both With Dipping Tanks
3”
•
Baking Oven
1”
•
Load Testing Jig
2”
•
Grinder
3”
The cost of machinery and equipment would be Birr 3 million including erection and commissioning fees as well as 20 % local costs. Machinery Suppliers Address: Diversified Machine, Inc. 307-31st Avenue South, Waite Park, MN 56387 USA
6.3
Civil Engineering Cost
The building area required by the plant is estimated to be 750m2, and it costs Birr 1,500,000. This would include cost of land preparation and associated civil works. The total land area of the plant, including the open space, is 2000 m2 and its lease cost equals Birr 109,000. The cost of the land lease is as per ANRS land lease rate for Combolcha which is equal to Birr 54.50 per sq m
9
for industrial purpose. Of the total cost of the lease 5% is paid in the beginning while the rest will be paid in 40years.
7. Human Resource and Training Requirement 7.1
Human Resource
Details of the manpower requirement of the plant is shown in Table 7.1
Table 7.1 MANPOWER REQUIREMENT Description A. Administration 1. Manager 2.Engineers 3. Supervisors 4.Seretary 5.Slaesman 6. Cashier 7. Storekeeper 8.Guards Sub-total B. Production 1. Skilled Workers 2. Semi-skilled Workers
No
Monthly Salary (Birr)
1 2 1 1 2 1 1 3 12
3000 2000 1000 800 800 600 600 400
36000 48000 12000 9600 19200 7200 7200 14400 153,600
6 12
1200 600
7200
Benefits (20%) 30
Annual Salary (Birr)
7200 65,280 391,680
The total annual wages and salary, including 20 % benefits, amount to Birr 391,680.
7.2
Training Requirement
One month on job training is required for the technical personnel. And this can be managed by hiring one expert in the area from the technology suppliers.
10
8. Financial Analysis 8.1
Underlying Assumption
The financial analysis of Bicycle Assembling plant is based on the data provided in the preceding chapters and the following assumptions. A. Construction and Finance Construction Period
2 Years
Source Of Finance
40% Equity and 60% Loan
Tax Holidays
2Years
Bank Interest Rate
12%
Discount For Cash Flow
18%
Value Of Land
Based on Lease Rate of ANRS
Spare Parts, Repair & Maintenance
3% of the Fixed Investment
B. Depreciation Building
5%
Machinery And Equipment
10%
Office Furniture
10%
Vehicles
20%
Pre-Production (Amortization)
20%
C. Working Capital (Minimum Days of Coverage) Raw Material-Local
30 Days
Raw Material-Foreign
120 Days
Factory Supplies In Stock
30 Days
Spare Parts In Stock And Maintenance
30 Days
Work In Progress Finished Products Accounts Receivable Cash In Hand Accounts Payable
10 Days 15 Days 30 Days 30 Days 30 Days
11
8.2
Investment
The total investment cost of the project including working capital is estimated at Birr 5.5 million as shown in Table 8.1 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 8.1 Total Initial Investment Items Land Building and Civil Works Office Equipment Vehicles Plant Machinery & Equipment Total Fixed Investment Cost Pre Production Capital Expenditure* Total Initial Investment Working Capital at Full Capacity Total
L.C
F.C
Total
5,450
5,450
1,500,000
1,500,000
50,000
50,000
0
0
600,000
2,400,000
3,000,000
2,155,450
2,400,000
4,555,450
107,773
227,773
2,263,223
2,400,000
4,783,223
306,855 2,570,077
411,566 2,811,566
718,421 5,501,644
*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 2.8 million or 51.1 % of the total investment cost.
8.3
Production Costs
The total production cost at full capacity operation is estimated at Birr 2.7 (see Table 8.2). Raw materials and utilities account for 52.5 %
12
Table 8.2 PRODUCTION COST AT FULL CAPACITY Raw Material Requirement
Cost
1.Local Raw Materials 2.Foreign Raw Materials
404,217 943,173
Total Production Cost at full Capacity Items Cost 1. Raw materials
1,347,390
2. Utilities
74,600
3. Wages and Salaries
391,680
4. Spares and Maintenance
136,664
Factory costs
1,950,334
5. Depreciation
425,555
6. Financial costs
330,099
Total Production Cost 8.4
2,705,987
Financial Evaluation I.
Profitability
According to the projected income statement (see Annex 4) the project will generate profit beginning from the second year of operation and increases on wards. The income statement and other profitability indicators also show that the project is viable. II.
Breakeven Analysis
The breakeven point of the projects is given by the formula: BEP =
Fixed Cost Sale –Variable Cost
at full capacity.
13
The project will break even at 27.2 % of capacity utilization III. Payback Period Investment cost and income statement projection are used in estimating the project payback period. The project will payback fully the initial investment less working capital in four years. IV.
Simple Rate of Return
The project’s simple rate of return (SRR) is given by the formula: SRR= (Net Profit + Interest)/ (Total Investment Outlay) at full capacity utilization. The SRR would be 22.6 % at full capacity utilization. V.
Internal Rate of Return and Net Present Value
Based on cash flow statement (See Annex 2) the calculated internal rate of return (IRR) of the project is 23.5 % and the net present value (NPV) at 18 % discount is Birr 1131 thousands. VI.
Sensitivity Analysis
The sensitivity test result which undertaken by increasing the cost of production by 10 % still indicates that the project would be viable.
9. Economic and Social Benefit and Justification Based on the foregoing presentation and analysis, we can learn that the proposed project possesses wide range of benefits that complement the financial feasibility obtained earlier. In general, the envisaged project 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 941 thousand per year and Birr 9.4 million within the project life. Such result induces the project promoters to reinvest the profit which, therefore, increases the investment magnitude in the region. 14
B. Tax Revenue In the project life under consideration, the region will collect about Birr 3.8 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 As there is Bicycle Assembling Plant in the country, the commencement of this project relieves a portion of the import burden. That is, based on the projected figure we learn that in the project life an estimated amount of US Dollar 3.7 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 country. That is, it will provide permanent employment to 30 professionals as well as support stuffs. Consequently the project creates income of Birr 392 thousands per year. This would be one of the commendable accomplishments of the project. E. Pro Environment Project The proposed production process is environment friendly.
15
ANNEXES
16
Annex 1: Total Net Working Capital Requirements (in Birr) CONSTRUCTION
PRODUCTION
Year 1
Year 2
1
2
3
4
0
0
50%
75%
100%
100%
0.00
0.00
561608.53
842412.79
1123217.06
1123217.06
0.00
0.00
227831.40
341747.10
455662.80
455662.80
Raw Material-Local
0.00
0.00
22048.20
33072.30
44096.40
44096.40
Raw Material-Foreign
0.00
0.00
205783.20
308674.80
411566.40
411566.40
Factory Supplies in Stock
0.00
0.00
1295.94
1943.91
2591.88
2591.88
Spare Parts in Stock and Maintenance
0.00
0.00
7454.37
11181.56
14908.75
14908.75
Work in Progress
0.00
0.00
32398.47
48597.71
64796.95
64796.95
Finished Products
0.00
0.00
64796.95
97195.42
129593.89
129593.89
2. Accounts Receivable
0.00
0.00
218181.82
327272.73
436363.64
436363.64
3. Cash in Hand
0.00
0.00
25433.45
38150.18
50866.91
50866.91
0.00
0.00
577392.40
866088.60
1154784.81
1154784.81
4. Current Liabilities
0.00
0.00
218181.82
327272.73
436363.64
436363.64
Accounts Payable
0.00
0.00
218181.82
327272.73
436363.64
436363.64
TOTAL NET WORKING CAPITAL REQUIRMENTS
0.00
0.00
359210.58
538815.88
718421.17
718421.17
INCREASE IN NET WORKING CAPITAL
0.00
0.00
359210.58
179605.29
179605.29
0.00
Capacity Utilization (%) 1. Total Inventory Raw Materials in Stock- Total
CURRENT ASSETS
Annex 1: Total Net Working Capital Requirements (in Birr)
(continued)
1
PRODUCTION 5
6
7
8
9
10
100%
100%
100%
100%
100%
100%
1123217.06
1123217.06
1123217.06
1123217.06
1123217.06
1123217.06
455662.80
455662.80
455662.80
455662.80
455662.80
455662.80
Raw Material-Local
44096.40
44096.40
44096.40
44096.40
44096.40
44096.40
Raw Material-Foreign
411566.40
411566.40
411566.40
411566.40
411566.40
411566.40
Factory Supplies in Stock
2591.88
2591.88
2591.88
2591.88
2591.88
2591.88
Spare Parts in Stock and Maintenance
14908.75
14908.75
14908.75
14908.75
14908.75
14908.75
Work in Progress
64796.95
64796.95
64796.95
64796.95
64796.95
64796.95
Finished Products
129593.89
129593.89
129593.89
129593.89
129593.89
129593.89
2. Accounts Receivable
436363.64
436363.64
436363.64
436363.64
436363.64
436363.64
3. Cash in Hand
50866.91
50866.91
50866.91
50866.91
50866.91
50866.91
1154784.81
1154784.81
1154784.81
1154784.81
1154784.81
1154784.81
4. Current Liabilities
436363.64
436363.64
436363.64
436363.64
436363.64
436363.64
Accounts Payable
436363.64
436363.64
436363.64
436363.64
436363.64
436363.64
TOTAL NET WORKING CAPITAL REQUIRMENTS
718421.17
718421.17
718421.17
718421.17
718421.17
718421.17
0.00
0.00
0.00
0.00
0.00
0.00
Capacity Utilization (%) 1. Total Inventory Raw Materials in Stock-Total
CURRENT ASSETS
INCREASE IN NET WORKING CAPITAL
Annex 2: Cash Flow Statement (in Birr) CONSTRUCTION
PRODUCTION
2
Year 1
Year 2
1
2
3
4
2391611.25
3110032.42
2218181.82
3109090.91
4109090.91
4000000.00
2391611.25
3110032.42
218181.82
109090.91
109090.91
0.00
Total Equity
956644.50
1244012.97
0.00
0.00
0.00
0.00
Total Long Term Loan
1434966.75
1866019.45
0.00
0.00
0.00
0.00
0.00
0.00
218181.82
109090.91
109090.91
0.00
2. Inflow Operation
0.00
0.00
2000000.00
3000000.00
4000000.00
4000000.00
Sales Revenue
0.00
0.00
2000000.00
3000000.00
4000000.00
4000000.00
Interest on Securities
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
TOTAL CASH OUTFLOW
2391611.25
2391611.25
2422301.17
2661193.82
3462163.74
3127253.74
4. Increase In Fixed Assets
2391611.25
2391611.25
0.00
0.00
0.00
0.00
Fixed Investments Pre-production Expenditures
2277725.00
2277725.00
0.00
0.00
0.00
0.00
113886.25
113886.25
0.00
0.00
0.00
0.00
5. Increase in Current Assets
0.00
0.00
577392.40
288696.20
288696.20
0.00
6. Operating Costs
0.00
0.00
966857.69
1426214.91
1885572.13
1885572.13
7. Corporate Tax Paid
0.00
0.00
0.00
0.00
407632.42
427438.34
8. Interest Paid
0.00
0.00
878051.08
396118.34
330098.62
264078.90
9.Loan Repayments
0.00
0.00
0.00
550164.37
550164.37
550164.37
10.Dividends Paid
0.00
0.00
0.00
0.00
0.00
0.00
Surplus(Deficit)
0.00
718421.17
-204119.35
447897.09
646927.17
872746.26
Cumulative Cash Balance
0.00
718421.17
514301.82
962198.90
1609126.07
2481872.33
TOTAL CASH INFLOW 1. Inflow Funds
Total Short Term Finances
3. Other Income
3
Annex 2: Cash Flow Statement (in Birr): Continued PRODUCTION 5 4000000.00
6 4000000.00
7 4000000.00
8 4000000.00
9 4000000.00
10 4000000.00
0.00
0.00
0.00
0.00
0.00
0.00
Total Equity
0.00
0.00
0.00
0.00
0.00
0.00
Total Long Term Loan
0.00
0.00
0.00
0.00
0.00
0.00
Total Short Term Finances
0.00
0.00
0.00
0.00
0.00
0.00
2. Inflow Operation
4000000.00
4000000.00
4000000.00
4000000.00
4000000.00
4000000.00
Sales Revenue
4000000.00
4000000.00
4000000.00
4000000.00
4000000.00
4000000.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
3081039.93
3048492.47
3002278.66
2405900.49
2405900.49
2405900.49
0.00
0.00
0.00
0.00
0.00
0.00
Fixed Investments
0.00
0.00
0.00
0.00
0.00
0.00
Pre-production Expenditures
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
6. Operating Costs
1885572.13
1885572.13
1885572.13
1885572.13
1885572.13
1885572.13
7. Corporate Tax Paid
447244.26
480716.53
500522.44
520328.36
520328.36
520328.36
8. Interest Paid
198059.17
132039.45
66019.72
0.00
0.00
0.00
9. Loan Repayments
550164.37
550164.37
550164.37
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
Surplus(Deficit)
918960.07
951507.53
997721.34
1594099.51
1594099.51
1594099.51
Cumulative Cash Balance
3400832.41
4352339.93
5350061.27
6944160.78
8538260.29
10132359.80
TOTAL CASH INFLOW 1. Inflow Funds
Interest on Securities 3. Other Income TOTAL CASH OUTFLOW 4. Increase In Fixed Assets
5. Increase in Current Assets
10.Dividends Paid
4
Annex 3: DISCOUNTED CASH FLOW-TOTAL CAPITAL INVESTED
5
CONSTRUCTION
PRODUCTION
Year 1
Year 2
1
2
3
4
TOTAL CASH INFLOW
0.00
0.00
2000000.00
3000000.00
4000000.00
4000000.00
1. Inflow Operation
0.00
0.00
2000000.00
3000000.00
4000000.00
4000000.00
Sales Revenue
0.00
0.00
2000000.00
3000000.00
4000000.00
4000000.00
Interest on Securities
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
TOTAL CASH OUTFLOW
2391611.25
2391611.25
1326068.27
1605820.20
2065177.42
2313010.47
3. Increase in Fixed Assets
2391611.25
2391611.25
0.00
0.00
0.00
0.00
Fixed Investments
2277725.00
2277725.00
0.00
0.00
0.00
0.00
Pre-production Expenditures
113886.25
113886.25
0.00
0.00
0.00
0.00
4. Increase in Net Working Capital
0.00
0.00
359210.58
179605.29
179605.29
0.00
5. Operating Costs
0.00
0.00
966857.69
1426214.91
1885572.13
1885572.13
6. Corporate Tax Paid
0.00
0.00
0.00
0.00
0.00
427438.34
NET CASH FLOW
-2391611.25
-2391611.25
673931.73
1394179.80
1934822.58
1686989.53
CUMMULATIVE NET CASH FLOW
-2391611.25
-4783222.50
-4109290.77
-2715110.98
-780288.40
906701.13
Net Present Value (at 18%)
-2391611.25
-2026789.19
484007.27
848540.87
997959.96
737398.67
Cumulative Net present Value
-2391611.25
-4418400.44
-3934393.17
-3085852.31
-2087892.34
-1350493.67
2. Other Income
Annex 3: DISCOUNTED CASH FLOW-TOTAL CAPITAL INVESTED
(Continued)
6
PRODUCTION 5
6
7
8
9
10
TOTAL CASH INFLOW
4000000.00
4000000.00
4000000.00
4000000.00
4000000.00
4000000.00
1. Inflow Operation
4000000.00
4000000.00
4000000.00
4000000.00
4000000.00
4000000.00
Sales Revenue
4000000.00
4000000.00
4000000.00
4000000.00
4000000.00
4000000.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
2332816.39
2366288.66
2386094.57
2405900.49
2405900.49
2405900.49
3. Increase in Fixed Assets
0.00
0.00
0.00
0.00
0.00
0.00
Fixed Investments
0.00
0.00
0.00
0.00
0.00
0.00
Pre-production Expenditures
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
5. Operating Costs
1885572.13
1885572.13
1885572.13
1885572.13
1885572.13
1885572.13
6. Corporate Tax Paid
447244.26
480716.53
500522.44
520328.36
520328.36
520328.36
NET CASH FLOW
1667183.61
1633711.34
1613905.43
1594099.51
1594099.51
1594099.51
CUMMULATIVE NET CASH FLOW
2573884.74
4207596.08
5821501.51
7415601.02
9009700.53
10603800.04
Net Present Value (at 18%)
617577.39
512862.89
429360.44
359399.41
304575.77
258115.06
Cumulative Net present Value
-732916.28
-220053.40
209307.04
568706.45
873282.23
1131397.29
Interest on Securities 2. Other Income TOTAL CASH OUTFLOW
4. Increase in Net Working Capital
Net Present Value (at 18%) Internal Rate of Return
1,131,397.29
23.5%
Annex 4: NET INCOME STATEMENT ( in Birr) PRODUCTION
7
1
2
3
4
5
50%
75%
100%
100%
100%
2000000.00
3000000.00
4000000.00
4000000.00
4000000.00
2000000.00
3000000.00
4000000.00
4000000.00
4000000.00
Other Income
0.00
0.00
0.00
0.00
0.00
2. Less Variable Cost
840378.44
1260567.66
1680756.88
1680756.88
1680756.88
1159621.56
1739432.34
2319243.12
2319243.12
2319243.12
57.98
57.98
57.98
57.98
57.98
552033.75
591201.75
630369.75
630369.75
630369.75
607587.81
1148230.59
1688873.37
1688873.37
1688873.37
30.38
38.27
42.22
42.22
42.22
4. Less Cost of Finance
878051.08
396118.34
330098.62
264078.90
198059.17
5. GROSS PROFIT
-270463.27
752112.25
1358774.75
1424794.47
1490814.20
0.00
0.00
407632.42
427438.34
447244.26
-270463.27
752112.25
951142.32
997356.13
1043569.94
Gross Profit/Sales
-13.52%
25.07%
33.97%
35.62%
37.27%
Net Profit After Tax/Sales
-13.52%
25.07%
23.78%
24.93%
26.09%
Return on Investment
11.82%
21.58%
23.29%
22.93%
22.57%
Return on Equity
-12.29%
34.18%
43.22%
45.32%
47.42%
Capacity Utilization (%) 1. Total Income Sales Revenue
VARIABLE MARGIN (In % of Total Income) 3. Less Fixed Costs OPERATIONAL MARGIN (In % of Total Income)
6. Income (Corporate) Tax 7. NET PROFIT RATIOS (%)
Annex 4: NET INCOME STATEMENT (in Birr): Continued PRODUCTION 6
7
8
9
10
8
Capacity Utilization (%)
100%
100%
100%
100%
100%
4000000.00
4000000.00
4000000.00
4000000.00
4000000.00
4000000.00
4000000.00
4000000.00
4000000.00
4000000.00
Other Income
0.00
0.00
0.00
0.00
0.00
2. Less Variable Cost
1680756.88
1680756.88
1680756.88
1680756.88
1680756.88
2319243.12
2319243.12
2319243.12
2319243.12
2319243.12
57.98
57.98
57.98
57.98
57.98
584815.25
584815.25
584815.25
584815.25
584815.25
1734427.87
1734427.87
1734427.87
1734427.87
1734427.87
43.36
43.36
43.36
43.36
43.36
4. Less Cost of Finance
132039.45
66019.72
0.00
0.00
0.00
5. GROSS PROFIT
1602388.42
1668408.15
1734427.87
1734427.87
1734427.87
6. Income (Corporate) Tax
480716.53
500522.44
520328.36
520328.36
520328.36
7. NET PROFIT
1121671.90
1167885.70
1214099.51
1214099.51
1214099.51
Gross Profit/Sales
40.06%
41.71%
43.36%
43.36%
43.36%
Net Profit After Tax/Sales
28.04%
29.20%
30.35%
30.35%
30.35%
Return on Investment
22.79%
22.43%
22.07%
22.07%
22.07%
Return on Equity
50.97%
53.07%
55.17%
55.17%
55.17%
1. Total Income Sales Revenue
VARIABLE MARGIN (In % of Total Income) 3. Less Fixed Costs OPERATIONAL MARGIN (In % of Total Income)
RATIOS (%)
Annex 5: Projected Balance Sheet (in Birr) 9
CONSTRUCTION TOTAL ASSETS 1. Total Current Assets Inventory on Materials and Supplies Work in Progress Finished Products in Stock Accounts Receivable Cash in Hand Cash Surplus, Finance Available Securities 2. Total Fixed Assets, Net of Depreciation Fixed Investment Construction in Progress Pre-Production Expenditure Less Accumulated Depreciation 3. Accumulated Losses Brought Forward 4. Loss in Current Year TOTAL LIABILITIES 5. Total Current Liabilities Accounts Payable Bank Overdraft 6. Total Long-term Debt Loan A Loan B 7. Total Equity Capital Ordinary Capital Preference Capital Subsidies 8. Reserves, Retained Profits Brought Forward 9.Net Profit After Tax Dividends Payable Retained Profits
PRODUCTION
Year 1 2391611.25 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 2391611.25 0.00 2277725.00 113886.25 0.00 0.00 0.00 2391611.25 0.00 0.00 0.00 1434966.75 1434966.75 0.00 956644.50 956644.50 0.00 0.00
Year 2 5501643.67 718421.17 0.00 0.00 0.00 0.00 0.00 718421.17 0.00 4783222.50 2277725.00 2277725.00 227772.50 0.00 0.00 0.00 5501643.67 0.00 0.00 0.00 3300986.20 3300986.20 0.00 2200657.47 2200657.47 0.00 0.00
1 5719825.49 1091694.22 236581.71 32398.47 64796.95 218181.82 25433.45 514301.82 0.00 4357668.00 4555450.00 0.00 227772.50 425554.50 0.00 270463.27 5719825.49 218181.82 218181.82 0.00 3300986.20 3300986.20 0.00 2200657.47 2200657.47 0.00 0.00
2 5760401.01 1828287.51 354872.57 48597.71 97195.42 327272.73 38150.18 962198.90 0.00 3932113.50 4555450.00 0.00 227772.50 851109.00 0.00 0.00 5760401.01 327272.73 327272.73 0.00 2750821.83 2750821.83 0.00 2200657.47 2200657.47 0.00 0.00
3 6270469.87 2763910.87 473163.42 64796.95 129593.89 436363.64 50866.91 1609126.07 0.00 3506559.00 4555450.00 0.00 227772.50 1276663.50 0.00 0.00 6270469.87 436363.64 436363.64 0.00 2200657.47 2200657.47 0.00 2200657.47 2200657.47 0.00 0.00
4 6717661.64 3636657.14 473163.42 64796.95 129593.89 436363.64 50866.91 2481872.33 0.00 3081004.50 4555450.00 0.00 227772.50 1702218.00 0.00 0.00 6717661.64 436363.64 436363.64 0.00 1650493.10 1650493.10 0.00 2200657.47 2200657.47 0.00 0.00
0.00 0.00 0.00 0.00
0.00 0.00 0.00 0.00
0.00 0.00 0.00 0.00
-270463.27 752112.25 0.00 752112.25
481648.98 951142.32 0.00 951142.32
1432791.30 997356.13 0.00 997356.13
Annex 5: Projected Balance Sheet (in Birr):
Continued
PRODUCTION 5
6
7
8
9
10
10
TOTAL ASSETS 1. Total Current Assets Inventory on Materials and Supplies Work in Progress Finished Products in Stock Accounts Receivable Cash in Hand Cash Surplus, Finance Available Securities 2. Total Fixed Assets, Net of Depreciation Fixed Investment Construction in Progress Pre-Production Expenditure Less Accumulated Depreciation 3. Accumulated Losses Brought Forward 4. Loss in Current Year TOTAL LIABILITIES 5. Total Current Liabilities Accounts Payable Bank Overdraft 6. Total Long-term Debt Loan A Loan B 7. Total Equity Capital Ordinary Capital Preference Capital Subsidies 8. Reserves, Retained Profits Brought Forward 9. Net Profit After Tax Dividends Payable Retained Profits
7211067.21 4555617.21 473163.42 64796.95 129593.89 436363.64 50866.91 3400832.41 0.00 2655450.00 4555450.00 0.00 227772.50 2127772.50 0.00 0.00 7211067.21 436363.64 436363.64 0.00 1100328.73 1100328.73 0.00 2200657.47 2200657.47 0.00 0.00
7782574.74 5507124.74 473163.42 64796.95 129593.89 436363.64 50866.91 4352339.93 0.00 2275450.00 4555450.00 0.00 227772.50 2507772.50 0.00 0.00 7782574.74 436363.64 436363.64 0.00 550164.37 550164.37 0.00 2200657.47 2200657.47 0.00 0.00
8400296.08 6504846.08 473163.42 64796.95 129593.89 436363.64 50866.91 5350061.27 0.00 1895450.00 4555450.00 0.00 227772.50 2887772.50 0.00 0.00 8400296.08 436363.64 436363.64 0.00 0.00 0.00 0.00 2200657.47 2200657.47 0.00 0.00
9614395.58 8098945.58 473163.42 64796.95 129593.89 436363.64 50866.91 6944160.78 0.00 1515450.00 4555450.00 0.00 227772.50 3267772.50 0.00 0.00 9614395.58 436363.64 436363.64 0.00 0.00 0.00 0.00 2200657.47 2200657.47 0.00 0.00
10828495.09 9693045.09 473163.42 64796.95 129593.89 436363.64 50866.91 8538260.29 0.00 1135450.00 4555450.00 0.00 227772.50 3647772.50 0.00 0.00 10828495.09 436363.64 436363.64 0.00 0.00 0.00 0.00 2200657.47 2200657.47 0.00 0.00
12042594.60 11287144.60 473163.42 64796.95 129593.89 436363.64 50866.91 10132359.80 0.00 755450.00 4555450.00 0.00 227772.50 4027772.50 0.00 0.00 12042594.60 436363.64 436363.64 0.00 0.00 0.00 0.00 2200657.47 2200657.47 0.00 0.00
2430147.44 1043569.94 0.00 1043569.94
3473717.37 1121671.90 0.00 1121671.90
4595389.27 1167885.70 0.00 1167885.70
5763274.97 1214099.51 0.00 1214099.51
6977374.48 1214099.51 0.00 1214099.51
8191473.99 1214099.51 0.00 1214099.51
11
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