Mesfin Cement Based Construction Materials

Business Plan
Owner: Mesfin HaileMariam

Bati, Ethiopia

May, 2022

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Table of Content Contents
Page

2
1. Business Plan Summary

Mesfin HaileMariam Cement Based Construction

Business Name
Materials Manufacturing.

Project owner Mesfin HaileMariam

Type of Establishment Manufacturing company

Nationality Ethiopian

Legal form Sole proprietorship

Project location Amhara regional state, Bati Town

Premises required 10,000M2

Product Type Manufacturing Breaks, Floor tiles and Terrazzo tiles.

Target Market The company is intended to sell the products for

construction companies and individual contractors in Bati
Town.
Demand projection

Investment capital and sources 5.0 million Birr of total investment out of which 30%
of Financial (1,500,000 Birr)from promoter’s equity and 70%
(3,500,000 Birr) from long term bank loan.
Financial viability The project is highly attractive with NPV value of 38.2
million, IRR36.5% both at 15% discount rate and a
payback period of a years and three months.

2. The Future
a. Vision statement
“Being number one choice for contractors in supplying innovative breaks and tiles in Ethiopia”
b. Mission statement
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 Providing quality breaks and tiles for the construction sector at an affordable price
c. Goals/objectives
The business has the following basic goals in the coming five years.
1. Generating ... amount of profit on average each year
2. Having .............market share
d. Action plan
Milestone Date of expected completion Person responsible
Owning land May, 2022 Owner
Building construction June, 2022 Owner & contractor x
Licensing Aug, 2022

3. Business details
a. Location
Location of the proposed unit should preferably in the vicinity of the major sites of
construction as well as sources of raw materials. The plant will be located in Amhara
regional state, Bati Town, close proximity to the capital city of the country where it
constitutes the major sites of construction. Besides, there are a lot of cities around Addis
Ababa so this location will be the ideal place.
b. Products/services
The company will produce the following range of products
i. Cement blocks and hollow blocks
The hollow (open & closed cavity) blocks are made with normal weight aggregate and are
known as normal weight units. The hollow load bearing blocks are made of standard sizes,
standard dimensions, length, breadth and thickness and the weight per unit for solid cement
blocks and hollow cement blocks are as given below:

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Solid Block Specifications: Hollow Block Specifications:
Length 290 mm Length 400 mm
Width 200 mm Width 200 mm
Height 140 mm Height 200 mm
Weight: 16 kg Weight: 16 kg

ii. Paver Blocks

The paving blocks of different sizes and shape find application in pavements, footpaths,
gardens, passengers waiting halls, bus stops, industry and other public places. The Paver
blocks are made both in natural cement color and different bright colors. As per the
application they are made both in plain geometrical designs & interlocking.

iii. Cement tiles and Mosaic flooring tiles

Cement tiles proposed to be manufactured can broadly be classified in the following categories:
Plain Cement Tiles: In the manufacture of plan cement tiles no pigment or stone chips, marble
chips & others are used.

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 Plain Color Tiles: The tiles have a plain color wearing surface.

Terrazzo Tiles (Cheered Tiles): Are also known as Mosaic Flooring Tiles. The wearing
surface is composed of stone chips in a matrix of ordinary or coloured Portland cement mixed
with or without pigments and the surface is mechanically ground to achieve the smoothness.

The tiles are made in various sizes depending upon their use and usage conditions. The details of
the recommended sizes are as under:
Cement Flooring Tiles Cement Terrazzo Tiles
200 x 200 x 20 (mm) 200 x 200 x 22 (mm)
250 x 250 x 22 (mm) 250 x 250 x 22 (mm)
300 x 300 x 25 (mm) 300 x 300 x 25 (mm)
At the beginning of the project the company plans to produce only cement tiles. After five years
of operation the company plans to produce Cement Terrazzo Tiles and Paver tiles. The three
products the company plans to produce at the beginning are Hallow Blocks, Cement floor and
Roof tiles.

4. The market
1. Target Market

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The target market for our business are all construction projects like building construction in both
in public and private sector, road construction, bridges. The unit will do to replacement of red
bricks by cement bricks both on cost considerations as well as on advantages associated with the
use of cement bricks i.e. less consumption of cement in the construction for wall construction
and plastering.
2. Demand projection
The demand for concrete blocks and pipes is derived from building construction. The
demand the country's requirement for concrete blocks is met through domestic production.
The quantity of production of the products during the period 1998 - 2005 is shown in the
following Table. During the period under reference, the supply of concrete blocks which
constitutes only domestic production, exhibited considerable fluctuations and averaged at
10.48 million. With an average increment rate of 8.1%/year
Supply of Concrete Blocks and Pipes ('000 Pcs)

Domestic Production

Year Concrete & Hallow Blocks

1998 9,044
1999 9,568
2000 9,763
2001 10,039
2002 9,639
2003 9,810
2004 10,400
2005 15,639
Average 10,488
Source: CSA, Statistical Abstract, various years

Since the consumption of the products is associated with the construction sector, a rate of growth
of 10%, which corresponds to the estimated growth rate of the sector.

Based on this fact the projected demand for the product is presented in the following table.

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 Table Projected Demand for Concrete Blocks ('000 PCS)
Year Projected Demand Concrete Blocks
2016 29,922.8
2017 32,915.1
2018 36,206.6
2019 39,827.2
2020 43,809.9
Mosaic tiles
The country’s requirement of mosaic tiles is supplied through import. The quantity of the product
imported annually during the period 2002 - 2011 is presented in the following Table

Table IMPORT OF MOSAIC TILES (TONS)

Year Import
2002 2
2003 26
2004 95
2005 239
2006 62
2007 372
2008 131
2009 427
2010 771
2011 509
Source: Ethiopian Revenue and Customs Authority.

As can be seen from the above Table import of mosaic tiles fluctuates from year to year.
However, a general growth trend can be observed. The yearly average quantity
imported during the period 2003-2005 was around 120 tons. But during the period
2006 - 2008 and 2009 - 2011 the average amount annually supplied to the market has
increased to about 188 tones and 569 tons, respectively. So the increment trend is very
high.

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 In estimating the present demand for the product it is assumed that the recent three years
average (2008 – 2011) is a reasonable approximate of current level of demand.
Accordingly, current (2015) demand for mosaic tiles is estimated at about 757 tons.

Accordingly, based on the above discussion and in order to be conservative a growth

rate of 10% which is slightly lower than the expected growth rate of the country’s GDP
during the GTP period (2011 – 2015) is used. Based on the above assumption and using
the estimated present demand as a base the projected demand for mosaic tiles is shown
in the following Table.

Table FORECASTED DEMAND (TONS)

Year Projected Demand

2015 757
2016 833
2017 916
2018 1,008
2019 1,109
2020 1,220
2021 1,342
2022 1,476
2023 1,623
2024 1,786
2025 1,964

1. Competitors analysis
The cement products proposed to be manufacture by the unit constituent the basic building
blocks for any construction activity. The main competition will be from the red clay bricks
or the cement products produced at different of locations. And there are also a lot of small
scale hollow block manufacturers. The main competitors’ strength and weakness is stated
below.
It is envisaged that the proposed project shall be able to supply the hollow blocks and tiles for the
construction activities related to different government construction project and other construction

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projects at economical prices due to lower cost of transport of finished goods from the
manufacturing unit to the construction sites.
Competitor Strengths Weaknesses
XYZ Production of tailor made goods Weak financial capacity
ABC [What are your competitor's main [What are your competitor's main
strengths?] weaknesses?]

2. S.W.O.T. Analysis
The following table stipulates the SWOT analysis, i.e. strength, weakness, Opportunity and
Threats in the context of Mesfin.
Strengths Weaknesses
1. Competent management 1. Shortage of capital
2. Clear Business Strategy 2. New experience
3. Strategic Marketing and Sells plan
4. Strong Financial systems

Opportunities Threats
1. Conducive government policy  Unorganized youth laborer
2. Country development
3. Availability bank loan

4. Advertising & sales

The main marketing strategy begins as a provide quality, unique and full package services;
deliver to the needs of potential customers, that will fill the needs of them. We are planning our
marketing strategy so that we ensure excellence product with affordable price.
Our promotion channels include print ads in the form of business card, brochures, fliers and
banners that keep the Mesfin name, phone and address of the company in front of the customer.
We will give advertising in different newspaper and magazine in our country. In addition, we
intend to participate in business workshop and related exhibition.

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 On the other hand, Word of Mouth - By giving first-time customers great service and a fair price,
the word is sure to spread.
All marketing decisions with regard to specific media choices, frequency, size, and
expenditures will be conducted on an on-going basis with careful considerations of returns
generated.
5. Technical Analysis
a. Main Resources
The main resources for the production of cement-based products include the following:
1. Land and building
The location of our plant will be in BATI and the owner have in 10,000m 2 the first grade of
urban areas. For manufacturing company the land lease price is presented in the following table.
Area of activity Grade of Town Plot grade Price (Birr/m2/year)
1St 2 6.50
Manufacturing 3 6.53
2nd 2 6.53
3 4.70
3rd 2 4.70
3 4.00
So, the lease prices four this project will be 6.53 birr/m 2/year. A).
Plot and built up area
Total land requirement 10,000m2
Constructed area for Shade 1500 m2
External shade for work in process inventory 3500 m2
Parking, green area, recreational place, waste disposal, road 5000m2

Land Lease Cost: Land on lease @ Birr. 6.53 /m2 per annum

2. Plant and machinery

o Hydraulically operated stationary block making machine with o Molds
1. Hydraulic press (Cap. 150 kg/ sq. cm) with pressure gauge
2. Hydraulic double piston pump with 5 HP motor combined with safety valve, capable
of feeding 4 to 5 presses, ram vibrator 1.5 HP, mold vibrator 2 HP
3. Leveling (grinding) machine complete with all attachments grinding
Capacity 4 tiles at a time (5 HP)

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 4. Semi polishing machine with 2 HP motor for sample polishing for testing o Mold
with 1 set of extra mold o Pallets o Tipping borrows

1. Raw materials like o Portland cement o Stone aggregates

o Natural sand o Stone crush o Synthetic and natural
pigments
2. Supplies
It is estimated that 30,000 KWH power connections will be required for the production unit
including the power requirement for production machines and general purpose lighting. The
cost of the power has been calculated on the basis of birr 0.65/kwh.
Utilities
S.n Description Consumption/year Measurement Cost(Birr) Total Cost
1 Electricity (kWh) 30,000 kWh 0.65 19,500
2 Water (M3) 50,000 m³ 11 550,000
3 Fuel Oil (litters) 16,250 Litter 20 325,000
4 Lubricating oil (kg) As reqd. As reqd. - 100,000
Total Annual Cost 994,500

 Skilled and unskilled manpower

1. Production Capacity
For the purpose of financial analysis product mix has been taken into consideration on the basis
of single shift working for 300 days in a year. 300 days of production has been taken for the
manufacture of each item mentioned below. 90% of installed machine capacity has been taken as
the production capacity or feasible normal capacity of the plant. The capacity of the machine is
producing 10,000 units/ day i.e. 3,000,000 unites/year. So 90% will be the normal capacity of the
company i.e. 9,000 unites/day and 27000, 000 unites/ year for the three products. Depends on
the market demand of the three products the percentage usage of this capacity will be 60, 25 and
15 percent for Blocks, Floor tiles and cement tiles respectively. The product mix along with
quantity of each item of production per annum is given below.
Sno Product Deamination Number of unites per annum
1 Hollow blocks 390 x 190 x 140 0.7*3,000,000=1,890,000
2 Floor tiles 390 x 190x 190 0.2*3,000,000=540,000

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 3 Terrazzo Tiles 300 x 300 x 22 .15*3,000,000=270,000

2. Process of manufacture
i. Cement blocks
The manufacturing process of cement blocks mainly involves mixing and casting of blocks.
The mix in respect of cement aggregate and sand should be suitably proportioned to gain
required strength of block conforming to the standards. The coarse, fine & medium grade
materials should preferably be mixed in the ratio of 40:20:40 for obtaining better
interlocking of grains. Vibration & pressing action together helps in better dispersion of
mixture and compaction. The amount of water required for the mixture varies depending
upon the grading of aggregated & capacity of press machine.

PAN MIXER SKIP LOADER

VIBRO-HYDRAULIC PRESS

Batching equipment is used for proportioning the ingredient accurately. Mixer is used for
homogenous mixing and blocks are shaped in a vibrio compactor. Material handling is
carried out with the help of shovel loader, screw & belt conveyer and forklift etc. The blocks
after formation are stacked on pallets and carefully shifted to shed in a humid atmosphere to
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develop initial strength in 24-36 hours. The blocks are stacked & sprayed with the water.
The spraying of water must be continued intermittently for a period of three weeks for
complete curing. The blocks are then allowed to dry for four week before dispatch.

As stated above, keeping in view the size of the demand for these products in the market, a semi-
automatic process has been recommended in the project.

1. Paver Blocks
The process flowchart for the manufacture of cement blocks and paver blocks is as given below:

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 PROCESS FLOW CHART

SAND AGGREGATE PORTLAND CEMENT

PROPORTIONING AN D BATCHING

WATER MIXER

MIXER FOR
VIBRO -PRESSING
COLOUR

STACKING OF GREEN MATERIAL

CURING

DRYING FINISHED PRODUCT

2. Cement floor and roof tiles

The process flowchart for the manufacturing of plain and coloured mosaic tiles is given below:

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 SAND AGGREGATE CEMENT MARBLE CHIPS,
POWDER

PROPORTIONING AND BATCHING

WHITE
WATER MIXER COLOURS
CEMENT

MIXER FOR
V IBRO -PRESSING TOP LAYER MIX
TOP LAYER

SETTING

CURING

TOP -LAYER GRINDING

POLISHING
FILLING & REPAIR

FINISHED PRODUCT

d. Plant Layout
The following diagram shows the layout arrangement of the factory.

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6. Organization and Management
1. Organization chart

The Organization structure below shows the working relationship in Mesfin Factory. The CEO of
the factory will be the owner Mr. Mesfin Hailemariam. The General Manager will be accounted
to the owner. Under each division heads there are employees who will undertake day to day
activities.

General
Manager

Admin & Production Marketing &

Finance head head sales head

2. Management & ownership

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 Mesfin Cement Based Construction materials Factory is formed as a sole proprietorship owned
by Ato Mesfin Hailemariam. The general manager of the company is Ato Mesfin Hailemariam.
The overall profile of the owner and the general manager of the company are summarized in the
following table.

 Owner
Mesfin Hailemariam  Has worked as business man for the past 20 years

 Has completed 12 grade

th

• Key personnel

7. The Finance
1. Assumptions
The following assumptions are taken in to consideration throughout the financial analysis. All
finance are expressed in terms of Birr, and fractions are rounded to the next digit.
Particulars Measure
Rate of Interest (Bank) 8.5%

70% Loan
Source of finance
30% Equity

Discount rate 15%

Accounts receivable 30 days

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Account payable 30 days

Raw material local 30 days

Raw material abroad 90 days

Work in process inventory 35 days

Cash on hand 5 days

Depreciation (Building) SLM* 20 years

Depreciation (Machinery) SLM 10 years

Depreciation(furniture & fixtures) SLM 20 years

Tax 30%

Tax holidays 3 years

Repayment period of Debt 8 years

Construction period 1 year.

Capacity Utilization 90%

Working Capital Cycle 1 month

Spare Parts and Maintenance 5% of plant & machinery

2. Start-up costs for [YEAR]

Sno Description Amount

1 Machinery 2,338,771

2 Land & Construction Cost 700,000

3 Miscellaneous Fixed Assets 100,000.

4 Pre-operating Expenses 105,000

5 Training Expense 34553

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 6 Working Capital 1,721,676

Total 5,000,000

c. Profit and loss forecast

The income prepared based on the company’s revenue and cost. The detail for each part and the
summary of income statement is stated below
Operating Revenue
The company plans to produce and sell three types of products. The demands for these services
are forecasted based on detail analysis of the construction sector and the future of the country.
The price and the number of units produced and considered to be constant in the normal
operation of the company. The detail of this part is presented in the following table.

Operating Revenue

Unit
Sn Type of Measureme Production/ye selling Total
o Product Specification nt ar Price sales/year
390 x 190 x
Solid blocks 1,890,000 17,955,000
1 140 No 9.5
390 x 190x
Floor tiles 540,000 20,250,000
2 190 No 37.50
225 x 112 x
Terrazzo Tiles 270,000 10,125,000
3 80 No 37.50
Total Operating Revenue 2,700,000 48,330,000
Les Wastage 2% Operating Revenue 966,600

Total Annual Revenue 47,363,400

Production Cost
The operation requires different inputs, like raw material, manpower, utilities e.t.c. and the cost
of materials are assumed to be the same throughout the project life. The main reason is that we
neglect the impact of inflation during operation, by assuming that, if the price of the inputs
increase the company will increase the output price and this two will offset one another. The

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current costs are set by collecting data from different market sources and by taking the current
market price of inputs.

Cost of raw materials

Raw material requirement for All products

Sn Description Measurement Amount Unit Price Total price

o

1 Cement Quintal 54,000 289.00 15,606,000.00

2 Kimchee Tones 36,000 175.00 6,300,000.00
Stone
Tones 5,424 1,330.00 7,213,920.00
3 aggregate
Marble chips Tones 252 1,870.00 471,240.00
4
Mineral
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5 colors Lump-Sum 2,100.00 37,800.00
6 Sub Total 29,628,960.00

7 Handling loss@5% 1,481,448.00

Total Material Cost 31,110,408.00

Salary and Wages

Salary per
Sno Position Number of W Monthly Salary annum
1 Manager 1 6,750 81,000

2 Plant Supervisor 1 4,560 54,720

Marketing Executive &

3 Accountant 1 2,200 26,400
4 Office's Manager 1 1,500 18,000

5 Machine Operators 1 3,580 42,960

6 Laboratory Technician 1 3,100 37,200

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 9 Unskilled Labor 15 1,200 216,000

Total salary 21 476,280

Utilities

Consumption/ Total
S.n Description Measurement Cost(Birr)
year Cost
19,500
1 Electricity (kWh) 30,000 kWh 0.65

550,00
2 Water (M3) 50,000 m³ 11
0
3 Other Lump sum 425,000

Total Annual Cost 994,500

Interest cost

Year Outstanding loan Interest Repayment Balance

1 7970595 677501 996324.4143 6974271
2 6974271 592813 996324.4143 5977946
3 5977946 508125 996324.4143 4981622
4 4981622 423438 996324.4143 3985298
5 3985298 338750 996324.4143 2988973
6 2988973 254063 996324.4143 1992649
7 1992649 169375 996324.4143 996324
8 996324 84688 996324.4143 0

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 Depreciation cost
The calculation of depreciation is based on the straight line method. In order to calculate the
residual value of the project at the end of the period we calculate the remaining life of the plant
building and machineries. The calculation shown below,

Depreciation=
year Plant& Office Building Total
Machinery@10% Equipment @5% Depreciation
@20%
1 345533 5000 187500 538033
2 345533 5000 187500 538033
3 345533 5000 187500 538033
4 345533 5000 187500 538033
5 345533 5000 187500 538033
6 345533 5000 187500 538033
7 345533 5000 187500 538033
8 345533 5000 187500 538033
9 345533 5000 187500 538033
10 345533 5000 187500 538033

Income Statement
Income Statement

Operating
years 1 2 3 4 5 6 7 8 9 10
Installed 3,000, 3,000 3,000, 3,000, 3,000 3,000 3,000 3,000, 3,000, 3,000
Capacity 000 ,000 000 000 ,000 ,000 ,000 000 000 ,000
Capacity 90% 90% 90% 90% 90% 90% 90% 90% 90% 90%
Utilization
PRODUCTI 2,700, 2700 27000 27000 2700 2700 2700 27000 27000 2700
ON 000 000 00 00 000 000 000 00 00 000

Sales 47,363 47,36 47,363 47,363 47,36 47,36 47,36 47,36 47,363 47,36
Revenue(S ,400 3,400 ,400 ,400 3,400 3,400 3,400 3,400 ,400 3,400
R)
31,110 31,11 31,110 31,110 31,11 31,11 31,11 31,11 31,110 31,11
Utilities ,408 0,408 ,408 ,408 0,408 0,408 0,408 0,408 ,408 0,408

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 1,220, 1220 12200 12200 1220 1220 1220 12200 12200 1220
Sub Total 000 000 00 00 000 000 000 00 00 000

Wages & 32,330 32,33 32,330 32,330 32,33 32,33 32,33 32,33 32,330 32,33
Salaries ,408 0,408 ,408 ,408 0,408 0,408 0,408 0,408 ,408 0,408

Factory 55724 5572 55724 55724 5572 5572 5572 55724 55724 5572
Overheads 7.6 47.6 7.6 7.6 47.6 47.6 47.6 7.6 7.6 47.6

General 205,00 2050 20500 20500 2050 2050 2050 20500 20500 2050
Overheads 0 00 0 0 00 00 00 0 0 00
250,00 2500 25000 25000 2500 2500 2500 25000 25000 2500
Land Lease 0.00 00 0 0 00 00 00 0 0 00
Estimated 720,00 2350 23508 23508 2350 2350 2350 23508 23508 2350
Cost of 0 80 0 0 80 80 80 0 0 80
Production
34,062 33,57 33,577 33577 3357 3357 3357 33577 33577 3357
Selling ,656 7,736 ,736 735.6 7735. 7735. 7735. 735.6 735.6 7735.
Expenses 6 6 6 6
250,00 250,0 250,00 250,00 250,0 250,0 250,0 250,0 250,00 250,0
Cost of
0 00 0 0 00 00 00 00 0 00
Sales
34,312 33,82 33,827 33,827 33,82 33,82 33,82 33,82 33,827 33,82
EBITDA ,656 7,736 ,736 ,736 7,736 7,736 7,736 7,736 ,736 7,736
13,050 13,53 13,535 13,535 13,53 13,53 13,53 13,53 13,535 13,53
Interest ,744 5,664 ,664 ,664 5,664 5,664 5,664 5,664 ,664 5,664
677,50 592,8 508,12 423,43 338,7 254,0 169,3 84,68 0 0
Depreciation 1 13 5 8 50 63 75 8
53803 5380 53803 53803 5380 5380 5380 53803 53803 5380
3.496 33.49 3.496 3.496 33.49 33.49 33.49 3.496 3.496 33.49
Profit
6 6 6 6 6
Before Tax

Taxation 11,835 12,40 12,489 12,574 12,65 12,74 12,82 12,91 12,997 12,99
@30% ,210 4,818 ,505 ,193 8,881 3,568 8,256 2,943 ,631 7,631
35505 3721 37468 37722 3797 3823 3848 38738 38992 3899
Net Profit 445.3 664.1 070.4 476.7 82.99 289.2
63.091 63 51.636 57.908 81 54 26 9 89.271 71

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Expected cash flow
Discounted Cash flow statement (Total Investment)

Constru Operat
ction i on
Period Period
Years t=0 t=1 1 2 3 4 5 6 7 8 9 10
Cash Inflows
Net Cash 8,2 8,6 8,7 8,8 8,9 8,9 9,0 9,0 9,0
Accruals After 84, 83, 42, 01, 8,861, 20, 79, 39, 98, 98,
Interest &tax 647 373 654 935 216 498 779 060 342 342
Less: Change
in Working
Capital 0 0 0 0 0 0 0 0 0 0
Add back 677 592 508 423 254 169
financial ,50 ,81 ,12 ,43 338,75 ,06 ,37 84,
Expenses 1 3 5 8 0 3 5 688 0 0
Terminal Cash
in flow 0 0 0 0 0 0 0 0 0
8,9 9,2 9,2 9,2 9,1 9,1 9,1 9,0 9,0
62, 76, 50, 25, 9,199, 74, 49, 23, 98, 98,
Total inflow 148 186 779 373 967 560 154 748 342 342
Cash Outflows
Investment 11,386,565
1,7
9,664,8 21,
Total outflow 87.96 677
1,7
- 21, 8,9 9,2 9,2 9,2 9,1 9,1 9,1 9,0 9,0
9,664,8 677 62, 76, 50, 25, 9,199, 74, 49, 23, 98, 98,
Net Cash flow 88 148 186 779 373 967 560 154 748 342 342
IRR on
Investment 0.8 0.7 0.6 0.6 0.4 0.4 0.3 0.3 0.2
(26.1%) 85 83 93 13 0.54 8 25 76 3 95
7,9 7,2 6,4 5,6 4,4 3,8 3,4 3,0 2,6
NPV (15% 38,251, 31, 63, 10, 55, 4,967, 03, 88, 30, 02, 84,
Discount Rate) 287 501 253 790 154 982 789 391 529 453 011
1 years
Pay Back 3
Period months

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d. Break-even analysis
1. Net present value criteria (NPV)
Is the sum of the present value of all the cash flows (positive or negative) expected to occur
over the life of the project? Value obtained by discounting (at a constant interest rate and
separately for each year) the differences of all annual cash outflows and inflows accruing
throughout the life of a project.

NPV = PV of Cash Inflows - Initial Investment Cost

The projects NPV =Birr 38,251,287

2. Benefit-Cost Ratio (BCR)

It is a measure relates the present value of benefits to the initial investment:

Hence the BCR>1 the project is acceptable

3. Internal Rate of Return (IRR)

It is the discount rate at which the present value of cash inflows is equal to the present value of
cash outflows. Or Discount rate that makes project’s NPV zero.

Where: NPV & NPV are the net present values obtained at the estimated discount
rates & respectively
Or

The project is acceptable hence the IRR is greater than the discount rate (which is
36.5%>15%)
4. PAYBACK PERIOD (PBP)
1. The payback period is the length of time required to recover the initial cash outlay on a
Project.

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 2. When the annual cash inflow is a constant sum, the payback period is simply the initial
outlay divided by the annual cash inflow.

But in our project case the cash inflow is not the same;
3. When the project’s cash flows are not uniform, the payback period is computed as follows:

The payback period is 1 year and 3 months

8. Risk & Contingency

Risk management
[List the potential risks (in order of likelihood) that could impact your business.]
Risk Likelihood Impact Strategy
[Description of the risk and [Highly Unlikely, [High, [What actions will you take to
the potential impact to your Unlikely, Likely, Medium, minimize/mitigate the
business.] Highly Likely] Low] potential risk to your
Business?]
[Description of the risk and [Highly Unlikely, [High, [What actions will you take to
the potential impact to your Unlikely, Likely, Medium, minimize/mitigate the
business.] Highly Likely] Low] potential risk to your
Business?]

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