Project Proposal for the Establishment of AN

Integrated Depot and Fuel Station at Mekelle

PROJECT PROMOTER: TSEAT PETROLEUM AND PETROLEUM TRADING PLC

MOBILE: 0929397325

MEKELLE, ETHIOPIA

JUNE,2023
 PROJECT PROPOSAL FOR INTEGRATED FUEL DIPOT AND
STATION,MEKELLE

Contents

Executive Summary.............................................................................................................3

Promoter profile.........................................................................................................................4
SERVICE DESCRIPITION...............................................................................................................5
FINANCIAL FEASIBILITY...............................................................................................................5
SOCIO-ECONOMIC BENEFIT........................................................................................................6
GROSS VALUE ADDED (GVA) TO GDP......................................................................................6
EMPLOYMENT.........................................................................................................................6
TAX TO THE GOVERNMENT....................................................................................................6
SOCIAL RESPONSIBILITY..........................................................................................................7
SERVICE DESCRIPTION..................................................................................................7

MARKET ANALYSIS........................................................................................................7

NATURE AND SIZE OF DEMAND FOR PETROLEUM PRODUCTS...................................................7

PAST DEMAND........................................................................................................................8
FOR CASTED DEMAND............................................................................................................8
SERVICE MIX AND PLANT CAPACITY...............................................................................9
PRODUCT OR SERVICE MIX.....................................................................................................9
PRODUCTION PROGRAM................................................................................................10
TARGET CUSTOMERS..........................................................................................................11
COMPETITOR ANALYSIS....................................................................................................11
MARKETING STRATEGY.....................................................................................................11
PRICE OF THE FUEL.............................................................................................................12
TECHNICAL FEASBLITY..............................................................................................12

PROJECT LOCATION AND SITE.........................................................................................12

INFRASTRUCTURE CONDITIONS......................................................................................13
ENGINEERING AND TECHNOLOGY..................................................................................13

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CIVIL ENGENERING AND DESIGN................................................................................13

MACHINERY AND EQUIPMENT.........................................................................................14
Annual Raw Materials Requirement.........................................................................................15
UTILITIES..............................................................................................................................15
ORGANIZATION & MANAGEMENT...........................................................................16

ORGANIZATION STRUCTURE............................................................................................16
IMPLEMENTATION PROGRAM...................................................................................17

PROJECT IMPLEMENTATION PLAN..................................................................................17

RISK MANAGEMENT....................................................................................................18

FINANCIAL ANALYSIS.................................................................................................19

PROJECT ASSUMPTIONS.....................................................................................................19
SUMMARY OF INVESTMENT COSTS................................................................................20
PROJECTED FINANCIAL OPERATION RESULTS............................................................21
SALES REVENUES............................................................................................................21
Service Costs............................................................................................................................22
PROJECTED PROFIT AND LOSS STATEMENT.................................................................23
PAYBACK PERIOD......................................................................................................................25
PROJECTED CASH FLOW STATEMENT/PROJECTED CASH PLAN..............................25
FINANCIAL IRR AND NPV...................................................................................................27
SOCIO-ECONOMIC ASPECTS.......................................................................................27

GROSS VALUE ADDED (GVA) TO GDP..........................................................................27

EMPLOYMENT......................................................................................................................28
TAX TO THE GOVERNMENT..............................................................................................28
SOCIAL RESPONSIBILITY................................................................................................28
ENVIRONMENTAL IMPACT ASSESSMENT (EIA)....................................................29

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LIQUID AND DRY WASTE DISPOSAL...............................................................................29

SOCIAL ASPECT....................................................................................................................29

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Executive Summary
Currently, the rapid growth rate of population in developing countries
creates fast urbanization. Even though, urbanization is considered as the
sign of development for a country, high population growth rates causes over
growing and shortage of public facilities. At present 16% of the Ethiopian
population live in towns and cities. The urban population growth at a rate of
4.3%per annual. This led to the highly visible problems of lack of decent
shelter, unemployment, and general lack of socio-economic infrastructure.
Generally low economic base, a high rate of unemployment, poverty,
overloaded basic services, bad housing conditions have become the
manifestation of our cities.

Having a closer look at the construction Industry investment alone, it

becomes clear that these problems call for an aggressive construction of
commercial centers, Hotels, Super markets, shops, fuel station, cafeteria and
motel etc. And the government gave due attention for the promotion of
construction industries in the five year National Growth and Transformation
Plan (GTP2). In recent time, Service rendering fuel station, car wash, motel
and cafe should be built in Mekelle town to address the investment letters
and following phases of construction have proceed in earnest.

Tigray region is one of the development corridor in the following

renaissance development journey of the country and faced various physical
and economic problems that hinders our development journey to have a
society of middle income class like , unemployment, incompatible capacity,
unavailability of adequate business services and etc.

The new economic policy opens a door for local investors to invest their
capital according to business activity needs in the towns. The promoter

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choice whole sales of oil ,lubricants ,battery and car tires to invest indeed
alleviate the shortage of this facilities of the mekelle town.

Since the role of government is indisputable in the provision of multi

business activities it must be complemented by the endeavors of the private
sector/investors.

In addition to the principles guiding urban development, Mekelle

development plan within the framework of new national and sectored
objectives, sets general criteria that characterize the planning of an
equitable and modern city which includes “the optimal and maximum use of
existing resources and in particular of social overhead, in order to reduce
the expenditure for non-needed and badly utilized infrastructure.

Currently, the government launched urban land lease policy and investment
policy that enhance the private sector and further strengthened by the
private sector participation program under implementation.

Accordingly, the objective of this business plan is to construct fuel station

and motel complying car wash, spare parts, parking lots, and lubricants
premises of applicant, modern building that aims to meet the demands made
upon the town in terms shortcomings of fuel station with all aforementioned
services at all and to meet the demands, while also attempting to harness the
development potential of the town.

Promoter profile
The promoters of this project is TSEAT PETROLEUM AND PETROLEUM
PRODUCTS TRADING PLC established by dedicated persons having along
expriance in Public and Business strategic leader ship.Beside to this The
Business partner of the company JR petroleum Trading PLC is one of The
prominent oil companies in Ethiopia and Being successful in establishing
500 fuel station via joint Venture in the whole Ethiopia.
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The total investment cost of the project is estimated approximately at Birr

$58,768,000.00. The Total cost of The fixed investment cost including the
initial working capital will be cover by our Business Partner JR Petroleum
PLC .since JR Petroleum company is one of The largest and Fastest
Growing oil company in the country and engaged in operation via joint
Venture with more than 500 firms , there wiil not be facing any shortage in
financial matters.

SERVICE DESCRIPITION
The company has assessed on the market and identifies high demand for
integrated supply of spare part services .The company service designed to
provide:

1. To establish 0ils and lubricants and other specialized products such like
battery and car tires with accretes

Although the company planned to act a whole sale the above product in the
first two years of the project, the expansion stage other related activities like
distribution of Tires, petrochemicals for paints and detergent will be added.

FINANCIAL FEASIBILITY
The evaluation of the financial feasibility of the specialized whole sale
investment project indicates that the project has a Payback period of 4
years, a Net Present Value (NPV) of Birr 38.8 million, and an Internal Rate
of Return (IRR) of 32 %. The investment project found to be acceptable if it
is evaluated independently, because it’s payback period is less than the
maximum expected payback period( which is 5 years), the NPV is greater
than Zero with higher positive figure, and the IRR is also greater than the
cost of capital(15% to the nearest 1.5%).

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SOCIO-ECONOMIC BENEFIT
Implementing this investment project has a long lasting impact on the socio-
economic conditions of the local, regional and national communities. The
expected contribution of the project to economic development is briefly
described as follows.

GROSS VALUE ADDED (GVA) TO GDP

The GVA, also known as the localized gross domestic product (GDP), is a
measure of the value of goods and services produced in an area, industry or
sector of the economy. It takes into account the following:

• Net profits;

• Depreciation; and

• Salaries and wages.

The GVA is an indication of the economic activity that can take place in a
certain geographical area, brought about by the establishment or operation
of a venture. GVA is calculated by adding the average annual net profit,
depreciation and salary spend. The GVA for this project is expected to be
average at ETB 25,261,851.98 per annual and a total of birr 252,618,519.79
during its life time.

EMPLOYMENT
Based on the number of people needed to operate the operations,
management and support staff, the project could yield 32 direct job
opportunities. In addition, the impact multiplier for jobs in the sector is 1.3 –
therefore, in addition to the direct jobs created, this project could contribute
to the livelihoods of 66 people

TAX TO THE GOVERNMENT

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The project is profitable since the beginning period .accordingly it will

generate a tax revenue at average birr $8,979,056.56 per annual and a total
of birr $89,790,565.62 during its life time

SOCIAL RESPONSIBILITY
The envisaged project is planning to allot 10% of its net income to social
and child health development of Tigray and its surrounding area.
Accordingly the project is expected to contribute at average Birr
2,095,113.20 per annual for health service facility sponsorship for low
income part of the community.

SERVICE DESCRIPTION
The main objective of the project is to build fuel station and motel with car
wash, genuine spare parts, cafeteria and parking. It is believed that during
the implementation and after the completion of the project, it has the
following specific objectives:-
 Convert existing retailor shop to whole sale
 To diversify and add new products of car tire and car battery in to exiting
products
To increase its sales volume

MARKET ANALYSIS
NATURE AND SIZE OF DEMAND FOR PETROLEUM
PRODUCTS
Spare parts and oil lubricants is one of the most traded items in the
world .they are necessary product and the nature of its demand is in
elastic .unlike other businesses whose demand is impacted by price and
other economic variables. the consumption of these products in Ethiopia
continues to increase even in the face of any economic slowdowns.

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PAST DEMAND
According to MOT report due to increasing in petroleum most currently are
naphtha and these which are using Benzene are converted in to Naphtha. The
past consumption of petroleum products in Ethiopia are described in the
under below Table:

Table 1: No of Cars in Ethiopia

s/n Type of license 2017 2018 2019 2020 2021

1 Government 37960 30478 41037 42699 44407
2 Mass 5374 5589 5812 6045 6287
organization
3 UN 1859 1933 2011 2091 2175
4 CD 1838 1912 1988 2068 2151
5 Aid Organization 8779 9133 9496 9876 10271
6 OAU 461 480 499 519 539
7 Commercial 146,91 160,72 177,83 196,36 210,444
5 5 4 2
8 Taxi 60,250 65,913 72,109 75,887 86,303
9 private 92,204 40,171 50,511 55,259 60,454
commercial
10 private cars 250,06 273,56 291,26 327,41 356,192
1 7 2 5
Total 605701 589901 652559 718221 779223

Most of all products are consumed in the transportation sector , which

accounts for at least two thirds of the country’s total petroleum product
consumption. The sectorial break dawn as follows. Transport 69%, Industry
10% and Households 21%.

FOR CASTED DEMAND

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According to transport ministry, the growth of vehicles is 8.5% .Based on

the above data the for casted number of vehicles in the country for the
coming five years as follows:

Table2: Forcasted No of cars

s/n Type of license 2023 2024 2025 2026 2027
1 Government 48,033 52116 56546 61352 66567
2 Mass organization 6,800 7378 8005 8686 9424
3 UN 2,446 2654 2879 3124 3390
4 CD 2,326 2524 2738 2971 3224
5 Aid Organization 11,109 12053 13078 14189 15396
6 OAU 583 633 686 745 808
7 Commercial 251,86 273276 296504 321707 349052
7
8 Taxi 103,29 112070 121596 131931 143145
0
9 private 72,353 78503 85176 92416 100271
commercial
10 private cars 428,69 465136 504673 547570 594113
7
Total 927,50 1006342 109188 1,184,69 1,285,38
4 1 1 9

In the year 2022 ,the overall consumption of fuels in Ethiopia was over 3
billion liters. The consumption of both fuels and lubricants is consistently
increasing by 10% in a year and year basis and the trend growth is expected
to continue in similar pattern over the next years . Increased economic
activity coupled with government spending in the areas of infrastructures,
power, mining and other sectors continues to further expand the demand for
petroleum products for long , few multinational oil companies with little
competition to satisfy the increasing demand had controlled the petroleum
industry.

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SERVICE MIX AND PLANT CAPACITY

PRODUCT OR SERVICE MIX
The company has assessed on the market and identifies high demand for
integrated Gas fuel station services .The company service designed to
provide:

1. To promote its existing retail shop to whole sale

2. To establish a whole sale station fuel products and 52,000 liters of

lubricants, Bitumen and greases Although the company planned to
retail the above product in the first two years of the project, the
expansion stage other related activities like distribution of Tires,
Battery, petrochemicals for paints and detergent will be added.

PRODUCTION PROGRAM
As we can be noted below in table, the proposed project will operate at
different capacity rate which assumed that all service delivery factors start to
function properly and also till the operators develop skills and experience for
operation and troubleshooting. The annual production program is as shown
in table 3 below
Table 3: Production Program

Service Year 1 Year 2 Year 3 Year 4 and

category above

Distribution of 100% 100% 100% 100%

Oil and
Lubricant
service

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Distribution 100% 100% 100% 100%

Car tire e
service

Distribution of 100% 100% 100% 100%

Bttries

TARGET CUSTOMERS
 Commercial and private transport

 Construction companies

 Power Generation

 Agricultural companies

 Manfacturing companies

 Governmental organization

COMPETITOR ANALYSIS
Fuels products are Generally Homogeneous products from the same resource
transported the same way and are generally sold in similar manner. The
market for the products is therefore very competitive since product
differentiation is closely tied to the marketers corporate

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reputation .Therefore our company will identified ourselves as the liquid and
lubricants distributer of choice .through our innovative approach by
providing a diversified service and competitive pricing to our clients.

MARKETING STRATEGY
The company will offer retail customers the most convenient ways to the
proposed products through our service station . in addition to cash payment
for the oil and lubricants and other non-fuel purchases we will use various
innovative fuel management systems to make fueling at our outlets an
enjoyable experience .we will use Visa cards and Digital cash payment tools
.our excellent customer service irresistible product offer competitive
pricing ,and eye catching branding will make us the marketers choice in all
our markets.

PRICE OF THE FUEL

A Government committee also revises the Retail prices of petroleum
products every three months .lubricants and Greases, however, are being
directly imported by oil companies with the intervention of Government in
setting prices on quarterly basis.

The Margin set by the Ethiopian Government on lubricants and Greases is

attractive as compared to slim margin on Fuel.

TECHNICAL FEASBLITY
PROJECT LOCATION AND SITE
The project location and site will be locate in Mekelle the capital city of
Tigray Regional State The company has demanded 5,600 square meter of
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land from the concerned government body and it is planned to use for the
establishment of Modern Gas filling station project. Hence, the company
has designed to establish an integrated service suchlike carwash service,
Access for oil and lubricant service ,car tire maintenance service , café and
restaurant parking and other services for desired customers.

The under below table describes the land use plan for the proposed plot

Table5: land use plan

s/n Land use Area in cost Total

M2 M2 cost
1 Gas filling station 1000 750 750000
2 Car wash, lubricant and tire 1000 750 750000
maintenance service
3 Café and motel and office 600 750 450000
4 Parking 3000 750 225000
0
Total land lease cost 5600 420000
0
Advance 840000

LAND USE PLAN

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INFRASTRUCTURE CONDITIONS
The basic infrastructure is already in place. The project site can be accessed
by the all-weather asphalt road. There are many factors which determine the
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location of any project. Some of these factors are source of raw materials
and other inputs, near to market places, availability of infrastructure
facilities such as transportation, electricity, water, telephone, postage, etc
and also availability of both skilled and unskilled manpower in the area.

ENGINEERING AND TECHNOLOGY

CIVIL ENGENERING AND DESIGN
Building activities with the whole construction will be emphasized on
quality of visual appearance, reinforce/repeal activities in their surroundings.
Therefore, establishing a good building integrated with nice land escaping
the main concern of the promoter, to neighboring property increasing the
value of the area, and to the towns at large.

Our design concept emerges from providing a one stop service for our
customers and diversified our income service from profit making perspective
.Accordingly the civil components will include Gas filling station with
enough space for trafficking movement, modern car wash service, light
maintence services suchlike replacing dated oils and lubricants, car tire
maintenance services , café and parking services for desired customers.

Table 6 : construction cost

s/n Land use Area in cost Total cost
M2 M2
1 Gas filling station with Tanker 1000 17000
and dispenser 17,000,000.00
2 Car wash, lubricant and tire 1000 10,98 10986000
maintenance service 6
5 Café and motel and office 600 15000 9000000
6 Parking and land escaping 3000 2000 6000000
Total 5600
42,986,000.00

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MACHINERY AND EQUIPMENT

The origins of the machines for this Project are primarily from abroad and
local sources. The major machineries for the projects are fuel dispenser,
modern car washing and car tire maintenance machines. Reserve tankers for
Gas to be buried under ground structures office and café equipment’s are
also among the major components machinery and equipment components of
the project .The under below tables described the required machines and
equipment’s as well as their estimated cost.

Table 7: Machinery equipment

s/n Item Amount Estimated Total cost
cost
1 Car wash machine and lump sum 300000 3000000
equipment
2 Car tire maintenance machine and lump sum 1210000 1210000
equipment
3 Café machines and equipment’s lump sum 1572000 1572000
4 Office furniture equipment’s lump sum 400000 400000
Total
6,182,000.0
0

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Annual Raw Materials Requirement

The raw material to be used for service delivery process of the Gas station is mainly Gas
fuel, oil and lubricants and Beverage and food staffs.

Table8:Raw Material

Items to be sold Unit Measurement in liter cost in BIRR

Battery 1920000 96000000

Tire 480000 24000000

libriquant 52000 3,1200,000

Total Cost $151,200,000.00

UTILITIES
The major utilities required by the cardiac center l are electricity and water. The required
quantity of these utilities and corresponding cost are indicated Table
Table 9: Annual Utilities Requirements and Cost.
S.n Utility UM Qty Cost in Birr Remarks

1 Electricity kWh 200,000 98,650.00

2 Water m3 10,000 32,500.00

3 Total 131,150.00

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ORGANIZATION & MANAGEMENT

The organizational structure plays an important role in the day-to-day
functioning of an organization. It is an organization’s skeleton which defines
the roles and departments that make up an organization’s functioning and
shows how everything fits together into a whole. It depicts the relationship
among those involved and their various levels of authority and responsibility
for organizational performance.

This section presents the proposed organization structure and the manpower
requirement for the company to make the steel tube and profile
manufacturing operational and lead profitable venture.

ORGANIZATION STRUCTURE
The overall oversight of proposed factory will be shouldered by the General
Manger which is the highest body in the hierarchy of the factory. The
General Manager will be responsible for the overall management of the
company as a whole as per the detailed duties and responsibilities presented
of the plant

The organization structure is proposed three departments in the company

which are led by their General Manager. The company will hire 32
employee as presented in the under below table
Table 10: Human Resource Requirement

No Description Qty Qualification Monthly Annual salary

salary
1 General 1 Degree 6000 72,000

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Manager
2 Cashier 1 Diploma 4500 54,000
3 Accountant 1 Diploma 4500 54,000
4 On spot seller 3 Diploma 4000 32,000
employee 226800
benefit
Grand Total 1,134,000

IMPLEMENTATION PROGRAM
This section identifies the various activities and the timeframe within which
they are planned to be performed to implement the proposed manufacturing
project and put it into production.

PROJECT IMPLEMENTATION PLAN

The project is assumed to be executed with in one year, after the appraisal
and formal acquisition of the plot of land. The main activities done during
this period includes, preparation of detailed designs, procuring the necessary
equipment’s and furniture, and allocating the running cost and budget the
required manpower staffs. The implementation will be carried out in close
and day to day supervision and collaboration with zonal construction and
urban development departments, wereda administrative, and the town
municipal offices.

Table 1. Project Implementation Action Plan

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S.N Project Implementation Schedule

Year year
Activity Year 2024 2025 2026
1 Land processing & civil work
2 Machinery and Equipment installation
3 Operation Gas fuel station
4 Operation of car wash and Lub change
Operation of supermarket , café and
5 restaurant

RISK MANAGEMENT
Investment is risk taking business. The difference is managing risk through
careful analysis based on meaningful assumptions. Out of the risk categories
and their components property oriented risks involve tangible and highly
visible assets. When these physical assets are lost or destroyed, they are
quickly missed fortunately; many property oriented risks are insurable. The
following are the Major ones.

Fire, Natural disaster, Electrical power failure, Damage to equipment,

burglary and theft. More or less Insurance serves as tool of Management

No Risk Type Cause and Possibility of Tools of Management

occurrence

1 Fire Stove, electric power and Insurance contact

candles-they occur
frequently in kitchen and
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bars Avoid flammable

material

2 Natural disasters Floods, lubricants, lightening protective

lightening
Flood diversion canals

3 Electric power failure Electric power failure are - Installing stand by

frequent from ELPA Generator

4 Damage to equipment Glasses, cups, bottles, Training staffs on safety

fridges, TVs, dishes are rules of
sensitive and can be
damaged easily Handling equipments

5 Burglary and theft Removal of cash by Strong guards and daily

criminals and the act of banking system
fraud by few employees
can lead to bankruptcy Select honest applicants

FINANCIAL ANALYSIS
PROJECT ASSUMPTIONS
Detailed project assumptions on which the financial analysis is carried out
are provided in Annex 1. The assumptions cover issues related to investment
plan, plant production program, sales, operating costs, depreciation, interest
rate and taxes.

Some of the major assumptions used in assessing the financial viability of

the project are presented below.

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 The implementation (construction and installation) of project is

expected to be completed in one year.

 For the purpose of the financial and economic analyses, the operating
period is taken to be 3 years.

 Project revenues are calculated on the basis of the following

assumptions:

 Working days per year 270

 Number of shift per day 8

 Working hours per shift 8

 Annual production, selling price and capacity utilization and other is

presented in annex 1.

 The investment requirement is envisaged to be financed 20 %by

equity 80% .

 Investors Discount Rate20%,

SUMMARY OF INVESTMENT COSTS

The total investment cost of the project is estimated approximately at Birr
58,768,000.00. The Total cost of The fixed investment cost including the
initial working capital will be cover by our Business Partner JR Petroleum
PLC .since JR Petroleum company is one of The largest and Fastest
Growing oil company in the country and engaged in operation via joint
Venture with more than 500 firms , there wiil not face any shortage in
financial matters.

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Table 10.Summary of Investment Cost (Birr)

s/n Item cost

1 Land lease 840,000.

00
2 Civil work 48,000,000.
00
3 Machinery and equipment 6,767,200.
00
4 preproduction cost 650,000.
00
5 working capital 12,600,000.0
0
Total 58,768,000.0
0

PRE-PRODUCTION COSTS
Preproduction costs (pre-operating cost & interest) comprise of all
expenditures incurred by the project in relation to establishment of the
project prior to beginning of operation. It includes advance lease payment,
construction design and other consultancy service costs, travel and
accommodation expenditures, and interest during the construction period.
Interest during construction is determined based on the loan disbursement
schedule and grace period. The total cost including interest is estimated at
Birr 250,000. Table 19. presents the breakdown of preproduction cost
estimate.

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Table 2. Preproduction Cost (in Birr)

Description Total Cost (in Birr)

Project planning and management 200,000

Civil work design and consultancy service 450,000

Total 650,000

PROJECTED FINANCIAL OPERATION RESULTS

SALES REVENUES
The project is expected to generate revenues with different production
capacity and initial commencement of production with 80% capacity.
Revenues at different capacity utilization levels are presented below:

Table 11: sales revenue at full capacity

Capacity Utilization Revenues (Birr)

1 sales of lubricant $
40,560,000.00
2 sales of fuel $
124,800,000.00
3 car wash $
12,960,000.00
4 parking $
324,000.00
5 tire maintenance $

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7,200,000.00
6 Café service $
2,520,000.00
7 parking $
270,000.00
Total $
188,634,000.00

Service Costs
The cost of service at 100% capacity utilization is determined based on
company expenses shown in the table below.

Table 13. Service expense

Material cost $
151,200,000.00
salary and wage $
1,134,000.00
storage handling $
214,454.55
spare part and $
maintenance 1,673,016.00
depreciation $
3,176,720.00
others $
538,180.18
Total $
157,936,370.73

PROJECTED PROFIT AND LOSS STATEMENT

The projected profit and loss statement (presented shows that the project
will remain profitable over its lifetime. The projected annual net profits
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show steady growth over the project period, from Birr $591,037.75 in year
1 to Birr $1,009,538.39 in years 10. The average annual net profit turned
out to be Birr $9,139,864.78

Table Projected Profit and loss statement

1 2 3 4 5

$ $ $

160,338,900. 169,770,600. 188,634,000. $ $

sales 00 00 00 188,634,000.00 188,634,000.00

$ $ $

direct 134,245,915. 142,142,733. 157,936,370. $ $

cost 12 65 73 157,936,370.73 157,936,370.73

$ $ $

26,092,984.8 27,627,866.3 30,697,629.2 $ $

EBIT 8 5 7 30,697,629.27 30,697,629.27

interest 0 0 0 0 0

EBT $ $ $ $ $

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26,092,984.8 27,627,866.3 30,697,629.2

8 5 7 30,697,629.27 30,697,629.27

TAX

expens $ $ $ $ $

e 7,827,895.46 8,288,359.90 9,209,288.78 9,209,288.78 9,209,288.78

$ $ $

Net 18,265,089.4 19,339,506.4 21,488,340.4 $ $

income 2 4 9 21,488,340.49 21,488,340.49

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5 6 7 8 9
$ $ $ $ $ $
188,634,000.00 188,634,000.00 188,634,000.00 188,634,000.00 188,634,000.00 188,634,000.00
$ $ $ $ $ $
157,936,370.73 157,936,370.73 157,936,370.73 157,936,370.73 157,936,370.73 157,936,370.73
$ $ $ $ $ $
30,697,629.27 30,697,629.27 30,697,629.27 30,697,629.27 30,697,629.27 30,697,629.27
0 0 0 0 0
$ $ $ $ $ $
30,697,629.27 30,697,629.27 30,697,629.27 30,697,629.27 30,697,629.27 30,697,629.27
$ $ $ $ $ $
9,209,288.78 9,209,288.78 9,209,288.78 9,209,288.78 9,209,288.78 9,209,288.78
$ $ $ $ $ $
21,488,340.49 21,488,340.49 21,488,340.49 21,488,340.49 21,488,340.49 21,488,340.49

PAYBACK PERIOD
Both non-discounted and discounted techniques were employed to measure
the attractiveness of the investment. As one of the non-discounted methods,
the Consultants computed the payback period which measures the length of
time it takes the company to recoup the investment. Accordingly, the
payback period of the investment project was computed to be 43 months.
This indicates that our company will cover the investment costs of the
project and the property will transfer totally after four years since its
operation.

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PROJECTED CASH FLOW STATEMENT/PROJECTED

CASH PLAN
The cash flow plan depicts the project’s projected cash inflows and
outflows. As can be noted from the cash flow forecast in Annex 9), the
project will remain with cash surplus over its lifetime after meeting its
internal and external commitments, thereby standing at a sound liquidity
position. The ending cash balance begins with Birr 324,936.35 surplus and
steadily builds up to Birr 150,743,319.79 at the end of the 10 th year. The
project can also meet its debt service obligations to lender banks over 10
years at equal semiannual payments with a grace period of two years for
implementation.

Table 13: Cash flow statement

Data’s cumulative cash years
flow
1 0.15 discount
rate
2 $ $ Year 0
(58,768,000.00) (58,768,000.00)
3 $ $ year1
18,265,089.42 (40,502,910.58)
4 $ $ Year 2
19,339,506.44 (21,163,404.14)
5 $ $ Year 3
21,488,340.49 324,936.35
6 $ $ Year 4
21,488,340.49 21,813,276.84
7 $ $ Year 6
21,488,340.49 43,301,617.33
8 $ $ Year 7
21,488,340.49 64,789,957.82
9 $ $ Year 8
21,488,340.49 86,278,298.31
10 $ $ Year 9
21,488,340.49 107,766,638.80

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11 $ $ Year 10
21,488,340.49 129,254,979.30
12 $ $
21,488,340.49 150,743,319.79

FINANCIAL IRR AND NPV

The profitability of the investment was tested by applying the discounting
techniques as well (Annex 14). The calculations show that the investment
yields after tax internal rates of return (IRR) of 31% on total operation.

The Net Present Value calculated at a 15% discount rate (which is far greater
than the investers discount rate of 15%) comes up to Birr $38,825,525.91.

SOCIO-ECONOMIC ASPECTS
Expected Contribution of Project to Economic Development treated with the
contribution in GDP, employment, tax to Government, its contribution in
saving the hard currency of the country and stimulating factor to other
sectors.
Implementing this investment project has a long lasting impact on the socio-
economic conditions of the local, regional and national communities. The
expected contribution of the project to economic development is briefly
described as follows.

GROSS VALUE ADDED (GVA) TO GDP

The GVA, also known as the localized gross domestic product (GDP), is a
measure of the value of goods and services produced in an area, industry or
sector of the economy. It takes into account the following:
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• Net profits;
• Depreciation; and
• Salaries and wages.
The GVA is an indication of the economic activity that can take place in a
certain geographical area, brought about by the establishment or operation
of a venture. GVA is calculated by adding the average annual net profit,
depreciation and salary spend. The GVA for this project is expected to be
average at ETB 25,261,851.98 per annual and a total of birr 25,261,8519.8
during its life time.

EMPLOYMENT
Based on the number of people needed to operate the operations,
management and support staff, the project could yield 32 direct job
opportunities. In addition, the impact multiplier for jobs in the sector is 1.3
– therefore, in addition to the direct jobs created, this project could
contribute to the livelihoods of 66 people.

TAX TO THE GOVERNMENT

The project is profitable since the beginning period .accordingly it will
generate a tax revenue at average birr 8,979,056.56 per annual and a total
of birr $89,790,565.62 during its life time.

SOCIAL RESPONSIBILITY
The envisaged project is planning to allot 10% of its net income to social
and child health development of Tigray and its surrounding area.
Accordingly the project is expected to contribute at average Birr

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2,095,113.20 per annual for health service facility sponsorship for low
income part of the community.

ENVIRONMENTAL IMPACT ASSESSMENT

(EIA)
It is commonly understood fact that all new developments will have an
impact of varying degrees, on the existing natural or built environment. This
section briefly describes the environmental related issues in connection with
this project. The positive impact of the project are tried to be enhanced and
the negative ones are appropriately handled and reduced.

LIQUID AND DRY WASTE DISPOSAL

Liquid waste from the business units is to be collected in a two champers
septic tank an appropriate volume built in the compound and organically
treated. The over flow, if any, of the treated water will be discharged to the
municipal sewerage system available on side of arterial and collector road.

The dry waste generated from the users and facilities of the business centre
will be collected in garbage bin and regularly collected by the municipal dry
waste service campaign and local entrepreneur enterprises garbage
collections for dumping.

SOCIAL ASPECT
The land which is applied for the acquisition is actually under the provision
of city administration. Therefore, there will no relocation of people in the
site to be developed. These needs other applicants to participate and develop
the land, has no cost to be incurred rather the land acquisition fees.

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