ASHENAFI MUSEY HOME AND OFFICE FURNITURE

MANUFACTURING UNIT
Feasibility Study

Table Page #
1.     EXECUTIVE SUMMARY 3
 ASHENAFI MUSEY HOME AND OFFICE FURNITURE MANUFACTURING UNIT

2.     PURPOSE OF THE DOCUMENT 5

3.     BRIEF DESCRIPTON OF PROJECT & PRODUCT 5
5.1. Production Process Flow 6
Purchase of Wood 7
Cutting of Wood 7
Seasoning / Drying of Wood 7
Selection of Design 7
Cutting into Slices 7
5.2. Installed & Operational Capacities 8
6. CRITICAL FACTORS 9
7. GEOGRAPHICAL POTENTIAL FOR INVESTMENT 10
8. POTENTIAL TARGET CUSTOMERS / MARKETS 10
9. PROJECT COST SUMMARY 10
9.1. Project Economics 11
9.2. Project Financing 11
9.3. Project Cost 12
9.4. Space Requirement 12
9.5 Machinery and Equipment Requirement 14
9.6. Office Equipment Requirement 14
9.7. Furniture and Fixture Requirement 15
9.8 Raw Material Requirement 16
9.9. Human Resource Requirement 20
9.10. Other Costs 21
9.11. Revenue Generation 22
10 CONTACT DETAILS 23
11. USEFUL LINKS 23
12.1 Income Statement 24
12 ANNEXURES 24

2
 ASHENAFI MUSEY HOME AND OFFICE FURNITURE MANUFACTURING UNIT

1. EXECUTIVE SUMMARY

The proposed project is for setting up a Wooden Furniture Manufacturing Unit. This unit will be
capable of integrated wooden furniture manufacturing from sourcing and cutting of wood, to
retailing of product to the end customer.
The project will cater to the growing needs of domestic wooden furniture market. The housing
and construction industry has seen a steady growth over the past many years due to a number of
factors which include; development of new housing schemes, introduction of housing finance
schemes / loans by different banks, increased urbanization and a growing middle class and
enhanced purchasing power of the public. All these factors have contributed directly and
indirectly towards an increased demand for wooden furniture.
The proposed wooden furniture business venture entails a total investment of about Birr. 110
million. This includes a capital investment of Birr 94 million and a sum of Birr. 16 million as
initial working capital. The project is financed through 70% debt and 30% equity. The Net
Present Value (NPV) of the project is around Birr . 246.57 million with an Internal Rate of
Return (IRR) of 43% and a payback period of 3 years. Higher returns on investment and a steady
growth of business are expected if the entrepreneur has some prior experience / education in the
related field of business. The project will generate direct employment opportunity for 1664
persons. The legal business status of this project is proposed as ‘private limited company ’.

3
 ASHENAFI MUSEY HOME AND OFFICE FURNITURE MANUFACTURING UNIT

1. Executive Summary
KEY INFORMATION HIGHLIGHTS
PROJECT OWNER ASHENAFI MUSEY HOME AND OFFICE
FURNITURE MANUFACTURING UNIT
PROJECT TITLE HOME AND OFFICE FURNITURE
MANUFACTURING UNIT
LAND REQUIREMENT 10,000 M2
PROJECT AREA Ethiopia, Debirebrhan
PRODUCTS TO BE MANUFACTURED HOME AND OFFICE FURNITURE
MARKET Domestic and International
COST OF THE PROJECT 116,469,241.00
PROJECT LIFE 10 YEARS
NUMBER OF WORKING DAYS 312 DAYS
FINANCIAL VIABILITY ( AT 10% DISCOUNT RATE )
NPV (NET PRESENT VALUE) 246,573,335.00
IRR (INTERNAL RATE OF RETURN) 61%
PBP ( PAY BACK PERIOD) 3
ANALYSIS RESULT
THE PROJECT IS TECHNICALLY FEASIBLE, FINANCIALLY AND COMMERCIALLY
VIABLE AS WELL AS SOCIALLY AND ECONOMICALLY ACCEPTABLE. HENCE, THE
PROJECT IS WORTH IMPLEMENTING.

4
 ASHENAFI MUSEY HOME AND OFFICE FURNITURE MANUFACTURING UNIT

2. PURPOSE OF THE DOCUMENT

The objective of the feasibility study is primarily to facilitate potential entrepreneurs in project
identification for investment. The project feasibility may form the basis of an important
investment decision and in order to serve this objective, the document / study covers various
aspects of project concept development, start-up, and production, marketing, finance and
business management.
The purpose of this document is to facilitate potential investors in Wooden Furniture
Manufacturing Unit by providing them with a general understanding of the business with the
intention of supporting potential investors in crucial investment decisions. The need to come up
with feasibility reports for undocumented or minimally documented sectors attains greater
imminence as the research that precedes such reports reveal certain thumb rules; best practices
developed by existing enterprises by trial and error, and certain industrial norms that become a
guiding source regarding various aspects of business set-up and it’s successful management.
Apart from carefully studying the whole document one must consider critical aspects provided
later on, which form basis of any Investment Decision.

3. BRIEF DESCRIPTON OF PROJECT & PRODUCT

This unit is capable of producing different types of wooden furniture i.e. bed sets, dinning sets,
sofa sets, center tables, side tables and office furniture.
The entire finished product depends on the quality of wood. Detailed technical know-how about
the quality of wood and the use of seasoned / dry wood plays a vital role in the manufacturing of
quality furniture. It is recommended that dry wood, from forests is used for manufacturing
quality wooden furniture. Forest reserves like Oromia, Amhara, Sidama, souther nation and
nationality , Gambela and other forests are potential sources of quality wood. Furniture
manufacturing units in Ethiopia mostly use Sheesham wood. Other types of woods used in
manufacturing furniture are; Warka wood, Wanza wood. Tsid this, substitute material like
Australia and MDF are also used in the manufacturing of furniture. Other materials used in
furniture manufacturing process are nails, screws, glue / solution, spirit, lakh, thinner, lacquer,
sealer, hardener etc. These raw materials are easily available in the market.

5
 ASHENAFI MUSEY HOME AND OFFICE FURNITURE MANUFACTURING UNIT

The demand for wooden furniture in the domestic market is consistent throughout the year;
however, it significantly increases during the period of October to March due to ‘wedding
season’. The demand for furniture almost doubles during this period and is a good time to enter
the market. Since strong competition already exists in the domestic market, manufacturing of
high quality trendy designs and aggressive marketing is essential to get a prominent place in the
market. Despite the introduction of new / alternative materials in furniture manufacturing,
wooden furniture is still preferred in the domestic as well as in the international market due to its
traditional appeal and durability.
Over the years, entry into the global market has also become more competitive, due to
demanding factors like green furniture, multi-functionality, simplicity and neutral colors, Ready-
to-assemble (RTA) and Do-it-yourself (DIY) furniture. Malaysia, Philippines, Indonesia and
China have established strong brand names and have emerged as key market players.

5.1. Production Process Flow

The process of converting wood into furniture mainly involves the following sequence of
operations:

Purchase of Wood Cutting Wood comes in Wood

Wood (Timber at Trolley (Big Factory Seasoning
Market) Saw)

Wood comes at Wood comes to Furniture

Shaper Machine Machine Man Designing on
CAD

Carpenter shape Furniture comes Furniture comes

the wood into to Spindle / to Carver for
Furniture Molding Machine Carving

Furniture goes to Furniture comes Carpenter

Store to Inspection assembles the
or for Polishing before finishing Furniture

6
 ASHENAFI MUSEY HOME AND OFFICE FURNITURE MANUFACTURING UNIT

Purchase of Wood

Wood is purchased after Quality inspection. Following points are to be considered while
inspecting quality:
 Age of wood
 Dryness of wood
 Its surface, which should be plain without holes etc.

Cutting of Wood

Wood of natural form, after purchase is cut into different sizes of blocks and slabs.

Seasoning / Drying of Wood

Season wood is higher in price than the fresh wood, so if the wood purchased is not properly
dried than these blocks / slices are seasoned through different processes, namely:
 Condensation
 Boiler System
 Vacuum System
 Seasoning the wood by putting the wood slices under normal environmental temperature
for considerable duration.

Selection of Design

Before manufacturing any furniture product the desired design is selected. Selection of elegant
design is important to ensure attractive finished product.

Cutting into Slices

The seasoned wood blocks are cut into desired shape and slices according to the requirement of
design.
Molding
The slices of wood are molded into the desired shape according to the design.

7
 ASHENAFI MUSEY HOME AND OFFICE FURNITURE MANUFACTURING UNIT

Carving
Carving means the different elegant patterns carved in the wood. Quality of carving
depends on the skills of the labor.
Assembly / Fitting
Once the different pieces are carved & molded than these parts / pieces are assembled
or fixed together to give the shape to the final product.
Finishing (Paint / Polish)
Assembled product is grinded to make the surface smooth. Once the surface is smooth, finishing
material is applied to make the surface ready for paint or polish. After the base is prepared final
finishing is applied depending on requirement in terms of paint / polish. Upholstery of fabric is
carried out according to the requirement of the design.

5.2. Installed & Operational Capacities

The proposed project is capable of manufacturing a complete range of wooden furniture and
other allied products to meet the demand of domestic market. The Unit will work on an 8 hours
shift for 300 days. Total number of furniture items produced in year 1 would be 233.
Details of proposed production mix offered by the business is provided in the table below:
Table 2 - Proposed Production Mix Capacity
Description Percentage
Bed Set 40%
Dinning Set 10%
Sofa Set 30%
Misc. Furniture 10%
Office Furniture 10%
Total 100%

8
 ASHENAFI MUSEY HOME AND OFFICE FURNITURE MANUFACTURING UNIT

Table 3 - Proposed Production Mix Details

Quality
Standards Bed Set Dinning Set Sofa Set Sofa Set Misc. Furniture Office Furniture
Superior 20% 20% 20% 20% 20%
Fine 30% 30% 30% 30% 30%
Normal 50% 50% 50% 50% 50%
Total 100% 100% 100% 100% 100%

6. CRITICAL FACTORS

Following are the factors critical for the success of this business venture;
 Ensuring availability of seasoned (dry) wood for high quality furniture manufacturing.
Seasoned wood minimizes deforming that may occur due to dampness in wood.
 Selection of skilled labor is an important factor, as it can improve quality of finished
products by better craftsmanship & lower wastage. It is recommended that specialized
labor is hired for this business.
 New designs and styles can build brand equity for the business. Creation of new designs
and styles is vital for setting new trends as the market is quite competitive.
 Aggressive virtual marketing needs to be undertaken in the absence of a physical
showroom.
 Though skilled labor is available in the market, additional manufacturing work load can
be sub-contracted to save time and resources.
 The manufacturing unit will require selling directly to showrooms and direct clients, for
which the owner would need to develop extensive knowledge of the market.
 Higher return on investment and a steady growth of business is expected with the
entrepreneur having some prior experience / education in the related field of business.
 Easy access to raw material should be ensured.

9
 ASHENAFI MUSEY HOME AND OFFICE FURNITURE MANUFACTURING UNIT

7. GEOGRAPHICAL POTENTIAL FOR INVESTMENT

The demand for wooden furniture is higher in densely populated cities of Ethiopia i.e. Amhara
region Debirebhan making city viable for business. However, establishment of the unit in the
vicinity of established wooden furniture clusters i.e. Adds Ababa gives the added advantage of
easy availability of skilled labor.

8. POTENTIAL TARGET CUSTOMERS / MARKETS

Potential markets for wooden furniture can be categorized into the following:
 Newly constructed houses
 Gift on weddings
 Building renovations
 Public / private institutions
Majority of customers in the domestic market belong to first and second category. These
customers require furniture for their newly built houses and usually buy a range of products like
bed sets, dining sets and sofa sets with other decorative material for their entire house. Initially,
entrepreneurs should target these customers to establish the business and increase their customer
base. Flourishing hotel and tourism industry can considerably increase the demand for wooden
furniture whereby; large orders can also be secured to supply wooden furniture to hotels and
resorts. Wooden furniture retail Clusters are found in most areas of all big cities of Ethiopia,
where manufactured furniture can be sold.

9. PROJECT COST SUMMARY

A detailed financial model has been developed to analyze the commercial viability of the
Wooden Furniture Manufacturing Unit. Various costs and revenue related assumptions along
with results of the analysis are outlined in this section. The projected Income Statement, Cash
Flow Statement and Balance Sheet are also attached as annexure.

10
 ASHENAFI MUSEY HOME AND OFFICE FURNITURE MANUFACTURING UNIT

9.1. Project Economics

The unit is capable of producing different types of wooden furniture, as it builds predominantly
upon, craftsmanship of skilled labour. However, this particular feasibility focuses on
manufacturing of bed sets, dinning sets, sofa sets, office furniture and miscellaneous furniture
(centre table & tables for sofa set etc.).
All the assumptions in this financial model are based upon manufacturing of around 254 items
annually. Whereas, during first year around 90,000 items production is targeted. The following
table shows internal rate of return, payback period and Net Present Value.

Table 4: Project Economics

Description Details
Internal Rate of Return (IRR) 43%
Pay Back Period (Years) 3
Net Present Value (NPV) 246,573,335

Returns on investment and profitability depend upon the entrepreneur’s practical knowledge
about furniture manufacturing, quality of wood, skilled labor and design & style of furniture
manufactured.

9.2. Project Financing

Following table provides the details of required equity and variables related to bank loan;
Table 5: Project Financing
percentag Remar
Description Details e k
33,130,08
Total Equity (30%) 3 30%  
77,303,52
Bank Loan (70%) 6 70%  
Annual Markup to the Borrower– Long Term Loan 14%    
Tenure of the Loan (Years) 5    

11
 ASHENAFI MUSEY HOME AND OFFICE FURNITURE MANUFACTURING UNIT

9.3. Project Cost

Following fixed and working capital requirements have been identified for operations of
the proposed business

Table 6: Project Cost

Description Amount
Capital Cost
Vehicle 18,500,000.00 9.4. Space
land and Building Infrastructure 21,000,000.00 Requirement
Machinery & Equipment 50,450,000.00
Furniture & Fixture 3,286,000.00 The proposed Wooden
Office Equipment 817,200.00 Furniture Manufacturing Unit
Pre-Operational Cost 230,000.00 will be established in a
Total Capital Cost 94,283,200.00 purchased
Working Capital Requirements premises. An estimated area
Raw Material Inventory 11,073,753.00 of 10,000 M2 will be
Cash 5,076,656.00 required for the proposed
Total Working Capital 16,150,409.00 business venture. An
Total Investment 110,433,609.00 estimated 10,000 M2 covered
area will be required for the
Unit with an estimated cost of Birr. 100 birr per m2.. There is a provision for Showroom in Year
6 when the project will be sustainable enough and sales will be good.

Table 10: Space Requirment

Description Estimate Unit Total Cost
12
 ASHENAFI MUSEY HOME AND OFFICE FURNITURE MANUFACTURING UNIT

d
Area M2 Cost

Management building 550 2,000.00 1,100,000.00

Production Hall 3,100 2,000.00 6,200,000.00

Crushing & Recycling
Unit 4,000 2,000.00 8,000,000.00

Warehouse 450 2,000.00 900,000.00

Packing Hall 150 2,000.00 300,000.00

Washrooms 100 2,000.00 200,000.00

Cafeteria 120 2,000.00 240,000.00

Electric room 10 2,000.00 20,000.00

Pavement/driveway 1,120 2,000.00 2,240,000.00

Grounds 250 2,000.00 500,000.00

Boundary Wall and Gate 150 2,000.00 300,000.00

Total Construction 20,000,000.0

Cost     0

Total Cost of Land     1,000,000.00

Total Land and 21,000,000.0

Building Cost 10,000   0

13
 ASHENAFI MUSEY HOME AND OFFICE FURNITURE MANUFACTURING UNIT

9.5 Machinery and Equipment Requirement

Following table provides list of machinery and equipment required for an average sized
Wooden Furniture Manufacturing Unit.
Table 7: Machinery and Equipment Required
Quantit
Description y Unit Cost Total Cost

21,050,000.0 21,050,000.0
Wood furnitur machine 1 0 0

11,533,000.0 11,533,000.0
Edge Bonding Machine 1 0 0

Generator 1 5,131,000.00 5,131,000.00

11,200,000.0 11,200,000.0
Hot press Machine 1 0 0
Miscellaneous Tools (Hand Tools, Paint Gun
etc.) 1 3,535,000.00 3,535,000.00

Installation Costs for Machines 1 1,500,000.00 1,500,000.00

53,949,000.0
Total 0

Technically advanced machines are not required in the manufacturing process. Therefore,
machine maintenance cost is also expected to be on the lower side. The major maintenance cost
will be of oiling and greasing of machines.

9.6. Office Equipment Requirement

Following office equipment will be required for the proposed business venture:
Table 8: Office Equipment Requirement
SN Description Measurement Qty Unit Total cost
cost in in Birr
birr
1 Desktop Computers with Unit 21 27,000.0 567,000.00
UPS 0

14
 ASHENAFI MUSEY HOME AND OFFICE FURNITURE MANUFACTURING UNIT

2 Unit 6 40,000.0 240,000.00

Printer 0
3 Fax & Telephone Unit 1 5,500.00 5,500.00
machine
4 Calculator LS 1 1,200.00 1,200.00
5 Telephone Sets Unit 1 3,500.00 3,500.00
Total 817,200.00

9.7. Furniture and Fixture Requirement

Details of furniture and fixture required for the proposed unit are provided in the following
table:
Table 9: Furniture & Fixture
No Description Quantity Unit Cost Total Cost Remark
1 Executive Table & Chair 4 56,000.00 224,000.00  
2 Computer Table 21 18,000.00 378,000.00  
3 Sofa (Guest chairs ) 4 55,000.00 220,000.00  
4 Office table with chair 8 25,000.00 200,000.00  
5 Fans, Lights & Wiring 8 18,000.00 144,000.00  
6 Carpets, Curtains, etc 8 20,000.00 160,000.00  
7 Filing cabinets 8 25,000.00 200,000.00  
8 Fire extinguisher 10 15,000.00 150,000.00  
9 Tabel for process goods 10 17,000.00 170,000.00  
10 Finishing goods shelf 40 15,000.00 600,000.00  
11 Raw material shelf 40 16,000.00 640,000.00  
12 Air Conditioner 8 25,000.00 200,000.00  
Total 3,286,000.00  

15
 ASHENAFI MUSEY HOME AND OFFICE FURNITURE MANUFACTURING UNIT

9.8 Raw Material Requirement

As different variety of material is used for the manufacturing of each type of furniture; following
tables shows the raw material requirement for each type of furniture:

Table 10 – Bed Set Cost

Costing

Raw Material Cost      

Description No. of Unit Rate/Unit Total Amount

Wood (Cubic ft) 15 2,200.00 33,000.00

Nails/Screws 1 450.00 450.00

Glue/Solution 1 380.00 380.00

Spirit (in Ltr.) 20 60.00 1,200.00

Lakh (in kgs) 1.5 2,400.00 3,600.00

Thinner (in Ltr.) 8 130.00 1,040.00

Lacquer (in Ltr.) 2 300.00 600.00

Wooden Frame for Matress 1 5,500.00 5,500.00

Sealer (in Ltr.) 3 285.00 855.00

Dressing Set Glass 16 175.00 2,800.00

Tapestry Dressing St. (in
Meters) 16 160.00 2,560.00

Foam 1 150.00 150.00

Channels, Handles 1 4,500.00 4,500.00

16
 ASHENAFI MUSEY HOME AND OFFICE FURNITURE MANUFACTURING UNIT

Thinner (Butyl) 1 270.00 270.00

Thinner (imported) 1 180.00 180.00

Total 57,085.00
Costing Bed Set Fine Quality
Raw Material Cost      
Description No. of Unit Rate/Unit Total Amount
Wood (Cubic ft) 12 1,800.00 21,600.00
Nails/Screws 1 425.00 425.00
Glue/Solution 1 300.00 300.00
Spirit (in Ltr.) 15 60.00 900.00
Lakh (in kgs) 1 2,400.00 2,400.00
Thinner (in Ltr.) 4 130.00 520.00
Lacquer (in Ltr.) 2 300.00 600.00
Sealer (in Ltr.) 2 285.00 570.00
Wooden Frame for Matress 1 4,000.00 4,000.00
Dressing Set Glass 16 175.00 2,800.00
Tapestry Dressing St. (inMeters) 8 160.00 1,280.00
Foam 1 150.00 150.00
Channels, Handles 1 3,500.00 3,500.00
Thinner (Butyl) 1 270.00 270.00
Thinner (imported) 1 180.00 180.00
Total 39,495.00

Costing Bed Set Normal Quality

Raw Material Cost      
Description No. of Unit Rate/Unit Total Amount
Wood (Cubic ft) 10 1,600.00 16,000.00
Lasani 5 2,650.00 13,250.00
Nails/Screws 1 350.00 350.00
Glue/Solution 1 300.00 300.00

17
 ASHENAFI MUSEY HOME AND OFFICE FURNITURE MANUFACTURING UNIT

Paint (in Ltr.) 1 1,500.00 1,500.00

Thinner (in Ltr.) 10 130.00 1,300.00
Lacquer (in Ltr.) 1 300.00 300.00
Wooden Frame for Matress 1 4,000.00 4,000.00
Dressing Set Glass 16 150.00 2,400.00
Tapestry Dressing St. (in Meters) 4 160.00 640.00
Foam 1 150.00 150.00
COB (alternate for Hardner) 1 350.00 350.00
Thinner (Butyl) 1 190.00 190.00
Thinner (imported) 1 270.00 270.00
180 Channels, Handles 1 2,500.00 2,500.00
Total 43,500.00

Table 11: – Dining Set Cost

Costing Dinning Set Superior Quality
Raw Material Cost      
Total
Description No. of Unit Rate/Unit Amount
Wood (Cubic ft) 8 2,200.00 17,600.00
Poshish/Seat 8 550.00 4,400.00
Nails/Screws 1 400.00 400.00
Glue/Solution 1 400.00 400.00
Spirit (in Ltrs.) 18 60.00 1,080.00
Lakh (in Kgs) 2 2,400.00 4,800.00
Thinner (in Ltrs.) 8 130.00 1,040.00
Lacquer (in Ltrs.) 2 300.00 600.00
Sealer (in Ltrs.) 2 285.00 570.00
Glass Top (12 mm) in sq.ft 32 225.00 7,200.00
Foam 1 8,000.00 8,000.00
Tapestry (in Meters) 5 160.00 800.00
Misc. 1 4,000.00 4,000.00
18
 ASHENAFI MUSEY HOME AND OFFICE FURNITURE MANUFACTURING UNIT

Total     50,890.00

Costing Dinning Set Fine Quality

Raw Material Cost      
Description No. of Unit Rate/Unit Total Amount
Wood (Cubic ft) 8 1,800.00 14,400.00
Poshish/seat 8 410.00 3,280.00
Nails/Screws 1 400.00 400.00
Glue/Solution 1 400.00 400.00
COB 1 350.00 350.00
Paint 1 2,000.00 2,000.00
Thinner (in Ltrs.) 15 130.00 1,950.00
Lacquer 2 300.00 600.00
Glass Top 12mm in (Sq.ft) 32 225.00 7,200.00
Foam 1 5,800.00 5,800.00
Tapestry (in Meters) 3 160.00 480.00
Misc. 1 3,000.00 3,000.00
      39,860.00
Costing Dinning Set Normal Quality
Raw Material Cost      
Total
Description No. of Unit Rate/Unit Amount
Wood (Cubic ft) 6 1,600.00 9,600.00
Poshish/seat 8 370.00 2,960.00
Nails/Screws 1 400.00 400.00
Glue/Solution 1 400.00 400.00
COB 1 350.00 350.00
Lasani 1 2,650.00 2,650.00
Paint 1 2,000.00 2,000.00
Thinner (in Ltrs.) 10 130.00 1,300.00
19
 ASHENAFI MUSEY HOME AND OFFICE FURNITURE MANUFACTURING UNIT

Lacquer 2 300.00 600.00

Glass Top 12mm in (Sq.ft) 32 225.00 7,200.00
Foam 1 5,000.00 5,000.00
Tapestry (in Meters) 3 160.00 480.00
Misc. 1 2,000.00 2,000.00
Total 34,940.00

9.9. Human Resource Requirement

In order to smoothly run operations of the proposed unit, details of recommended human
resource required along with their proposed monthly salaries are as follows:
Table 12: Human Resource Requirment
Monthly Annual
S Month salary in salary in
N Position No Qualification s Birr Birr
1 General manager 1 BA in management 12 8,000.00 96,000.00
2 Secretary 3 10+2 in secretariat 12 4,000.00 144,000.00
science
3 HRM Officer 8 10+2 in 12 5,000.00 480,000.00
HRM/Management
4 Machine Operator 340 TEVT Machine 12 4,000.00 16,320,000.00
OPERATOR
5 Assistance 420 TEVT Machine 12 3,000.00 15,120,000.00
OPERATOR
6 320 TEVT Machine 12 4,000.00 15,360,000.00
Polish Man OPERATOR
7 Packing man 40 TEVT Machine 12 4,000.00 1,920,000.00
OPERATOR

20
 ASHENAFI MUSEY HOME AND OFFICE FURNITURE MANUFACTURING UNIT

8 Technical and 25 Diploma in General 12 5,000.00 1,500,000.00

maintenance mechanic
officer
9 Marketer and sales 360 Diploma in marketing 12 3,000.00 12,960,000.00
10 Accountant 12 Diploma in accounting 12 4,000.00 576,000.00
11 Guards/Security 36 Basic 12 4,000.00 1,728,000.00
12 General Service 2 Diploma in 12 6,000.00 144,000.00
head Management
13 Purchaser 15 Diploma in purchasing 12 4,000.00 720,000.00
&Sup Mgt
14 Casher 8 10+1 in bookkeeping 12 3,500.00 336,000.00
15 Cleaner 60 Unskilled 12 2,500.00 1,800,000.00
16 Driver 14 10 completed grade 3 12 3,500.00 588,000.00
driving
Total 166 67,500.00 69,792,000.00
4
Pension (11%) 13,500.00 7,677,120.00
Grand Total 81,000.00 77,469,120.00

It is assumed that the owner would have prior experience or knowledge about the proposed
business. Salaries of all employees are estimated to increase at 10% annually.

9.10. Other Costs

An essential cost to be borne by the business is the cost of electricity; a three-phase commercial
electricity connection is required. The annual electricity expenses are estimated as Birr. 600,000.
This project also requires marketing activities; for which
Approximately 5% of total revenues (i.e. Birr. 5.16 million) will be spent on marketing annually.
Similarly, during 1st year of operation communication and office expenses are estimated at Birr.
180,000 and 120,000, respectively.
Table 13: Revenue Generation
Product Units Sold Sale Price* Per Sale Price* Per Total
21
 ASHENAFI MUSEY HOME AND OFFICE FURNITURE MANUFACTURING UNIT

Unit Unit
(Birr.)– Other (Birr.)– Own
in Year 1 Showrooms Customers
Bed Set
Superior 600 2,217,000.00 1,248,000.00 3,465,000.00
Fine 130 2,145,000.00 2,165,500.00 4,310,500.00
Normal 290 4,108,500.00 2,124,000.00 6,232,500.00
Dining Set -
Superior 200 8,158,500.00 7,181,000.00 15,339,500.00
Fine 400 9,126,750.00 5,145,000.00 14,271,750.00
Normal 700 7,105,500.00 5,120,750.00 12,226,250.00
Sofa Set -
Superior 700 13,123,000.00 2,140,500.00 15,263,500.00
Fine 150 6,687,750.00 5,100,000.00 11,787,750.00
Normal 320 15,868,250.00 1,878,000.00 17,746,250.00
Misc. -
Superior 110 5,257,500.00 1,465,500.00 6,723,000.00
Fine 220 6,243,000.00 5,149,000.00 11,392,000.00
Normal 450 8,234,500.00 2,139,500.00 10,374,000.00
Office
Furniture -
Superior 400 25,157,500.00 3,180,000.00 28,337,500.00
Fine 110 1,294,500.00 4,108,000.00 5,402,500.00
Normal 250 67,500.00 9,108,000.00 9,175,500.00
172,047,500.0
0
*Prices Have Been Rounded Off.

9.11. Revenue Generation

Following table provides revenue assumptions of the proposed Wooden Furniture Manufacturing
Unit during first year of operation:
Table 14: Total Revenue Generation
Revenue from selling to other Showrooms in (Birr.) 40%
Bed Sets 3,465,000
Dinning Sets 4,310,500
Sofa Sets 6,232,500
Misc. furniture 2,015,616
Office furniture 2,212,987
Total Revenue 18,236,603

22
 ASHENAFI MUSEY HOME AND OFFICE FURNITURE MANUFACTURING UNIT

Revenue from selling to own Customers in (Birr.) 60%

Bed Sets 2,502,900
Dinning Sets 608,593
Sofa Sets 1,769,205
Misc. furniture 1,240,379
Office furniture 1,361,838
Total Revenue 7,482,915
Total Revenue (Birr.)
Bed Sets 6,570,113
Dinning Sets 1,597,556
Sofa Sets 4,644,164
Misc. furniture 3,255,996
Office furniture 3,574,825
Total Revenue 19,642,654

10 CONTACT DETAILS

In order to facilitate potential investors, contact details of private sector Service Providers
relevant to the proposed project are given as under:

11. USEFUL LINKS

23
 ASHENAFI MUSEY HOME AND OFFICE FURNITURE MANUFACTURING UNIT

24
 12 ANNEXURES

12.1 Income Statement

  Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10
Revenue 172,047,500 206,457,000 247,748,400 297,298,080 356,757,696 428,109,235 513,731,082 616,477,299 739,772,758 887,727,310
Cost of goods sold 60,216,625 72,259,950 86,711,940 104,054,328 124,865,194 149,838,232 179,805,879 215,767,055 258,920,465 310,704,559
Gross Profit 111,830,875 134,197,050 161,036,460 193,243,752 231,892,502 278,271,003 333,925,203 400,710,244 480,852,293 577,022,752
General administration & selling
expenses
HR Expense 77,469,120 89,089,488 102,452,911 117,820,848 135,493,975 155,818,071 179,190,782 206,069,399 236,979,809 272,526,781
Administration expense 780,000 795,600 819,468 844,052 869,374 895,455 922,318 949,988 978,488 1,007,842
land lease 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000
Utilities expense 240,000 247,200 254,616 262,254 270,122 278,226 286,573 295,170 304,025 313,146
Communications expense (phone, fax,
etc.) 180,000 185,400 190,962 196,691 202,592 208,669 214,929 221,377 228,019 234,859
Office vehicles running expense 6,371,117 6,562,251 6,759,118 6,961,892 7,170,748 7,385,871 7,607,447 7,835,670 8,070,740 8,312,863
Office expenses (stationary, etc.) 1,120,000 1,153,600 1,188,208 1,223,854 1,260,570 1,298,387 1,337,339 1,377,459 1,418,782 1,461,346
Promotional expense 5,161,425 6,193,710 7,432,452 8,918,942 10,702,731 12,843,277 15,411,932 18,494,319 22,193,183 26,631,819
Insurance expense 977,822 1,007,157 1,037,371 1,068,493 1,100,547 1,133,564 1,167,571 1,202,598 1,238,676 1,275,836
Professional fees (legal, audit, etc.) 40,000 41,200 42,436 43,709 45,020 46,371 47,762 49,195 50,671 52,191
Depreciation expense 9,778,220 9,428,320 9,428,320 9,428,320 9,428,320 9,428,320 9,428,320 9,428,320 9,428,320 9,428,320
Amortization expense 46,000 47,380 48,801 50,265 51,773 53,327 54,926 56,574 58,271 60,020
Subtotal 102,213,704 114,801,305 129,704,664 146,869,320 166,645,772 189,439,537 215,719,899 246,030,069 280,998,984 321,355,022
Operating Income 9,617,171 19,395,745 31,331,796 46,374,432 65,246,730 88,831,466 118,205,304 154,680,175 199,853,309 255,667,730
Other income
Gain / (loss) on sale of assets
Earnings Before Interest & Taxes 9,617,171 19,395,745 31,331,796 46,374,432 65,246,730 88,831,466 118,205,304 154,680,175 199,853,309 255,667,730
Interest expense 7,552,860 6,042,288 4,629,688 3,217,088 1,804,488
Earnings Before Tax 2,064,311 13,353,457 26,702,108 43,157,344 63,442,242 88,831,466 118,205,304 154,680,175 199,853,309 255,667,730
Taxable earnings for the year 2,064,311 13,353,457 26,702,108 43,157,344 63,442,242 88,831,466 118,205,304 154,680,175 199,853,309 255,667,730
Tax 619,293 4,006,037 8,010,632 12,947,203 19,032,673 26,649,440 35,461,591 46,404,052 59,955,993 76,700,319
NET PROFIT/(LOSS) AFTER TAX 1,445,018 9,347,420 18,691,476 30,210,140 44,409,569 62,182,026 82,743,713 108,276,122 139,897,316 178,967,411
 ASHENAFI MUSEY HOME AND OFFICE FURNITURE MANUFACTURING UNIT

12.2 Balance Sheet

  Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10

Assets

Current assets                      

1,828,503.9 1,883,359.0 1,939,859.7

Cash & Bank 8,762,472.40 1,486,741.00 1,531,343.23 1,577,283.53 1,624,602.03 1,673,340.09 1,723,540.30 1,775,246.51 0 2 9

Accounts receivable

Finished goods inventory 278,382.00 286,733.46 295,335.46 304,195.53 313,321.39 322,721.04 332,402.67 342,374.75 352,645.99 363,225.37

Equipment spare part 13,619,319. 14,027,898. 14,448,735.

inventory 11,073,753.00 11,405,965.59 11,748,144.56 12,100,588.89 12,463,606.56 12,837,514.76 13,222,640.20 41 99 96

1,893,788.0 1,950,601.7 2,009,119.7

Raw material inventory 1,073,753.00 1,539,823.00 1,586,017.69 1,633,598.22 1,682,606.17 1,733,084.35 1,785,076.88 1,838,629.19 7 1 6

Pre-paid annual land lease - - - - - - - - -

Pre-paid building rent - - - - - - - - -

Pre-paid lease interest - - - - - - - - -

Pre-paid insurance - - - - - - - - -

17,683,986. 18,214,505. 18,760,940.

Total Current Assets 9,836,225.40 14,378,699.00 14,810,059.97 15,254,361.77 15,711,992.62 16,183,352.40 16,668,852.97 17,168,918.56 12 70 87

Fixed assets

3,700,000.0 1,850,000.0
vehicle 18,500,000.00 16,650,000.00 14,800,000.00 12,950,000.00 11,100,000.00 9,250,000.00 7,400,000.00 5,550,000.00 0 0 -

4,200,000.0 2,100,000.0
Building 21,000,000.00 18,900,000.00 16,800,000.00 14,700,000.00 12,600,000.00 10,500,000.00 8,400,000.00 6,300,000.00 0 0 -

114,210,38 154,685,52 (22,930,597

Machinery & equipment 53,949,000.00 13,924,526.87 14,713,526.48 17,660,183.43 23,270,144.19 32,160,826.96 54,186,538.09 81,163,892.73 0.01 6.49 .12)

26
 ASHENAFI MUSEY HOME AND OFFICE FURNITURE MANUFACTURING UNIT

Furniture & fixtures 18,000.00 18,540.00 19,096.20 19,669.09 20,259.16 20,866.93 21,492.94 22,137.73 22,801.86 23,485.92 24,190.49

4,162,606.4 4,287,484.6 4,416,109.2

Office vehicles 3,286,000.00 3,384,580.00 3,486,117.40 3,590,700.92 3,698,421.95 3,809,374.61 3,923,655.85 4,041,365.52 9 8 2

1,035,204.5 1,066,260.6 1,098,248.4

Office equipment 817,200.00 841,716.00 866,967.48 892,976.50 919,765.80 947,358.77 975,779.54 1,005,052.92 1 5 7

127,330,99 164,012,75 (17,392,048

Total Fixed Assets 97,570,200.00 53,719,362.87 50,685,707.56 49,813,529.94 51,608,591.10 56,688,427.28 74,907,466.42 98,082,448.91 2.87 7.73 .94)

Intangible assets - - - - - - - - - -

Pre-operation costs 230,000.00 236,900.00 244,007.00 251,327.21 258,867.03 266,633.04 274,632.03 282,870.99 291,357.12 300,097.83 309,100.77

Training costs - - - - - - - - - -

Total Intangible Assets 230,000.00 236,900.00 244,007.00 251,327.21 258,867.03 266,633.04 274,632.03 282,870.99 291,357.12 300,097.83 309,100.77

145,306,33 182,527,36 1,677,992.7

TOTAL ASSETS 107,636,425.40 68,334,961.87 65,739,774.53 65,319,218.92 67,579,450.75 73,138,412.71 91,850,951.42 115,534,238.46 6.10 1.27 0

Liability

2,799,200.0 2,799,200.0 2,799,200.0

Long Tearm Loan 53,949,000.00 43,159,200.00 33,069,200.00 22,979,200.00 12,889,200.00 2,799,200.00 2,799,200.00 2,799,200.00 0 0 0

2,799,200.0 2,799,200.0 2,799,200.0

Total Liability 53,949,000.00 43,159,200.00 33,069,200.00 22,979,200.00 12,889,200.00 2,799,200.00 2,799,200.00 2,799,200.00 0 0 0

Capital

5,377,992.7 3,527,992.7 1,677,992.7

equity 51,630,082.70 18,327,992.70 16,477,992.70 14,627,992.70 12,777,992.70 10,927,992.70 9,077,992.70 7,227,992.70 0 0 0

139,897,31 178,967,41
Net Income 1,445,017.70 9,347,419.78 18,691,475.61 30,210,140.46 44,409,569.36 62,182,025.91 82,743,712.79 108,276,122.46 6.40 0.76 -

145,275,30 182,495,40 1,677,992.7

Total Capital 53,075,100.40 27,675,412.48 35,169,468.31 44,838,133.16 57,187,562.06 73,110,018.61 91,821,705.49 115,504,115.16 9.10 3.46 0

148,074,50 185,294,60 4,477,192.7

Total Liablity and Capital 107,024,100.40 70,834,612.48 68,238,668.31 67,817,333.16 70,076,762.06 75,909,218.61 94,620,905.49 118,303,315.16 9.10 3.46 0

27
 ASHENAFI MUSEY HOME AND OFFICE FURNITURE MANUFACTURING UNIT

12.3 Cash Flow Statement

  Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10
Operating activities                      
82,743,712. 108,276,12 139,897,31 178,967,41
Net profit 1,445,017.70 9,347,419.78 18,691,475.61 30,210,140.46 44,409,569.36 62,182,025.91 79 2.46 6.40 0.76
9,428,320.0 9,428,320.0 9,428,320.0 9,428,320.0
Add: depreciation expense 9,778,220.00 9,428,320.00 9,428,320.00 9,428,320.00 9,428,320.00 9,428,320.00 0 0 0 0
amortization expense 46,000.00 47,380.00 48,801.40 50,265.44 51,773.41 53,326.61 54,926.41 56,574.20 58,271.42 60,019.57
Deferred income tax
Accounts receivable - - - - - - - - - - -
Finished good inventory
Equipment inventory
(1,838,629.1 (1,893,788. (1,950,601. (2,009,119.
Raw material inventory (1,073,753.00) (1,539,823.00) (1,586,017.69) (1,633,598.22) (1,682,606.17) (1,733,084.35) (1,785,076.88) 9) 07) 71) 76)
Pre-paid building rent
Pre-paid lease interest
Advance insurance premium
Advance insurance premium
Accounts payable
Other liabilities
90,388,330. 115,867,22 147,433,30 186,446,63
Cash provided by operations (1,073,753.00) 9,729,414.70 17,237,102.09 26,534,998.79 38,006,119.73 52,156,578.41 69,878,595.64 01 8.59 6.12 0.57
Financing activities
Change in long term debt 53,949,000.00 43,159,200.00 33,069,200.00 22,979,200.00 12,889,200.00 2,799,200.00
Change in short term debt
Change in export re-finance facility
Add: land lease expense
Land lease payment
Lease principal repayment
Issuance of shares
Purchase of (treasury) shares
Cash provided by / (used for) financing
activities 53,949,000.00 43,159,200.00 33,069,200.00 22,979,200.00 12,889,200.00 2,799,200.00 - - - - -
Investing activities
Capital expenditure 113,932,609.00
Acquisitions
Cash (used for) / provided by investing
activities 113,932,609.00 - - - - - - - - - -
NET CASH 166,807,856.00 52,888,614.70 50,306,302.09 49,514,198.79 50,895,319.73 54,955,778.41 69,878,595.64 90,388,330. 115,867,22 147,433,30 186,446,63

28
 ASHENAFI MUSEY HOME AND OFFICE FURNITURE MANUFACTURING UNIT

01 8.59 6.12 0.57

4. loan disturbance
Installment Periods (in years )
Year Year
Item Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 6 7
Loan disbursed
Machine lease 53,949,000.00              
Principal    
10,789,800.0 10,789,800.00 10,789,800.00 10,789,800.00 10,789,800.00
  0
Interest (14%)      
7,552,860.00 6,042,288.00 4,531,716.00 3,021,144.00 1,510,572.00
Total      
18,342,660.0 16,832,088.00 15,321,516.00 13,810,944.00 12,300,372.00
0
Outstanding
Balance 53,949,000.00 43,159,200.00 32,369,400.00 21,579,600.00 10,789,800.00 - - -

29
 ASHENAFI MUSEY HOME AND OFFICE FURNITURE MANUFACTURING UNIT

13 KEY ASSUMPTIONS

13.1 Operating Cost Assumptions  

Description Details

Communication Expenses 15,000 per Month

Office Expenses 1200 per Month

5% of material procurement
Transportation Cost cost

Marketing Expenses 5% of revenue

Depreciation Method Straight Line

10% on Furniture & Fixtures
Depreciation Rate 10% on Office Equipment

Operating Cost Growth Rate 10%

   

13.2 Production Cost Assumptions

30
 ASHENAFI MUSEY HOME AND OFFICE FURNITURE MANUFACTURING UNIT

Accounts Receivable Cycle (In Days) 30

Accounts Payable Cycle (In Days) 10

Raw Material Inventory Other Than Wood 1 Month

Raw Material Inventory Of Wood 3 Months

Finished Goods Inventory 0.25 Month

Raw Material Price Growth Rate Other Than Wood 10%

Raw Material Price Growth Rate Of Wood 40%

   

13.3 Revenue Assumptions

Description Details

Growth In Sales Price 3%

Days Operational / Year 300

13.4 Financial Assumptions  

Description Details

Debt : Equity 30% : 70%

Internal Rate on Debt 16%

Debt Tenure 5 Years

31
 ASHENAFI MUSEY HOME AND OFFICE FURNITURE MANUFACTURING UNIT

4 loan disturbance
Installment
Periods (in
years )                    

Yea Yea Yea Yea Year

Item Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 r6 r7 r8 r9 10
Loan 3,000,000.
disbursed 00
Machine

32
 ASHENAFI MUSEY HOME AND OFFICE FURNITURE MANUFACTURING UNIT

lease
Principal 600,000.00 600,000.00 600,000.00 600,000.0 600,000.0
0 0
Interest 420,000.00 336,000.00 252,000.00 168,000.0 84,000.00
(14%) 0
Total 1,020,000. 936,000.00 852,000.00 768,000.0 684,000.0
00 0 0
Outstandin 3,000,000. 2,400,000. 1,800,000. 1,200,000. 600,000.0
g Balance 00 00 00 00 0 - - - - - -

33