I.

Introduction

1.1 Background of Tafach Bakery……………………………………1

 1.2 Objectives of Tafach Bakery …………………………………….1

1.4 Vision of Tafach Bakery………………………………………….1

2. Considerations In Selecting The Project………………………….2
3. Project Component………………………………………………..2
4. Location of Project……………………………………………......2
5. Sources of capital………………………………………………….3
6. Project Infrastructure. ……………………………………………..3
7. Market Analysis……………………………………………………4
8. Project Management. …………………………………………….5
9. Major Duties and Responsibilities…………………………………6
10. Financial Analysis:
10.1 Investment Cost Arrangement…………………………......7
10.1.1 Costs for Building ……………………………...…7
10.1.2 Materials Cost For Baking Process……………….8
10.1.3 Supplies Expense……………………………........8
10.2 Income Statement…………………………………………..9
10.3 Opening Balance Sheet …………………………………….9
10.4 Statement of Stock Holder’s Equity……………………….10
10.5 Balance Sheet……………………………………………...11
10.6 Statement of Cash Flow……………………………………11
11. Project Evaluation...........................................................................12
12. Environmental feasibility………………………………………....12
13. Risk assessment…………………………………………………….12
13. Project Implementation …………………………………………..13
14. Summary and Conclusion……………………………………........13

I. Introduction
Awareness of high quality baked goods is on the rise. Good bread is a rare combination of
nutrition, convenience, and luxury. Today's consumer has less time to create wholesome,
handmade bread, but increasingly appreciates the nutritional and sensory benefits it provides.
Good bread provides fiber and carbohydrates in a convenient, low fat form that is portable and
delicious. Good bread never goes out of style. In this regard, the envisaged project has intended
to produce and sale bread products of high quality ingredients using modern production
techniques. Although there are many established competitors with in the vicinity where the
underlying project has planned to be located; it will possess an advantage that lies with the high
quality of its products due to specialization and artisan manufacturing. The main marketing
focus will be of all community inclusive and having an eye catching sign, the scent of fresh
bread wafting out of the storefront, and periodic printed advertisements.

1.1 Background of Tafach Bakery

Tafach bakery was established in 2013 E.C. by 5 partners. The new business establishment and
construction of new bakery sight will be in Addis Ababa city Bole Sub City Woreda 12 Bole
Bulbula as a basis for production and distribution of bread. In this area, the idea of establishing
such kind of business is penetrated in many of owners mind and appropriate to establish the
business. Tafach Bakery engaged in providing quality product at fair market value for its clients.
From the beginning the business attempt to distribute its products through different distribution
center that it will open. During the first establishment, the business purchases necessary raw
materials from surrounding factories. In this regard, the company with its initial production
capacity intended to move forward.

2.1 Establishment

 Project Name: …………………….Tafach Bakery

 Address: …………………………..boroda City Administration
 Boroda -12, H.No. 112
 Type of Business: ………………….Food Processing and Manufacturing
 Legal form of Business: …………...General proprietorship
 Status of Business: ………………... New Project
 TIN Certificate No.: ……………....
 Trade Registration No: …………..aacdegqrmnqrnvv/2015E.C
 Trade License No.: ………………...Under Process
 Required Initial Investment : ……...ETB 600,000

2.2 Project Ownership

The business is a newly established Ethiopian’s owned business founded by 6 partners of

member walif partiner ship from which 2 of them holding bachelor degree in hotel and
 tourism management and 3 of them have a diploma on food preparation and processing.
The business promoters are young aged, with having a good character and well
appreciated personalities among the society.
Since the new bakery project has intended to produce and sale bread products of high
quality ingredients using modern production techniques the owner’s education
background will help to implement the business well and capable to implement proper
business management.

1.2 Objectives of Tafach Bakery

The General objectives of Tafach bakery are:-

 To embark on a sustainable plan to achieve a reliable source of products for the local
market
 To be leader in the supply of quality breads, using modern production techniques and
efficient management and distribution channels
 Satisfying the customer’s needs as an essential for the business survival and
competition.
 generating revenue to the government in the form of income tax

Specific objectives of Tafach Bakery are:-

 Fully engage in the production of quality and delicious breads

 Provide the product through different distribution center
 Increase the efficiency of the enterprise by wise use of resource
 Offer a quality services attached with selling product
I.3 Vision and strategy of Tafach Bakery
 Become one of well-known trademark in quality food producers with sustainable
profitability. This will be through performing as a multifaceted business
committed in providing maximum customer satisfaction.

To achieve this vision, it has to be resolved upon a set of strategies and executing
these strategies by translating directly into the ability to serve the business vision and
objectives. The enterprise’s vision is to be realized through a team of professionals
who have extensive work experience in the proposed industry.

1.4 Mission of Tafach Bakery

 To provide quality product at fair market price/value by using quality raw

material supplied by surrounding manufacturing companies.
 To assess the change in current demand and satisfy the customers need to
increase the business profit
 Build its Owen flour factory in 2018 E.C to improve the cost of production
 which currently purchased from other factories and to save different production
cost incur associated with transportation.
 To open a new plant in surrounding small towns in order to ensure the
profitability of the business.
2.5. Value and Culture
The following are components of values and cultures of Tafach Bakery;
 The enterprise communicates customers openly and honestly.
 Unethical and dishonest practices have no place in the business
 The enterprise Recognizes and rewards for best performance
 The enterprise believes that staff development is integral part of its success
 The enterprise strongly believes that teams, not individuals are the essential unit
of the organization for achieving high performance and accelerating growth.
 The enterprise believes in societal support and community development, hence,
all its personnel will obey to this core value.

3.1 PAST SUPPLY AND TREND ANALYSIS

3.1.1 Bread Production and supply

2. Considerations in Selecting the Project

First of all, the project will develop to increase the revenues of owners.

The main success factors in selecting the project are:-

Macro level Successes

 Access to credit provision at lower interest rate as compared to the business’s ROI
 Attractive investment policy and other packages
 Relatively Secured peace and stability throughout the country
 Continuous increment in household income and associated expenditure patterns

Sector Level key Successes

 The current unbalance between the growth of town and demand for consumption
of bread.
 The Location of existing bakeries business is mostly concentrated at the inner
city. So, many people lived around the city faced shortage of bread and the
existence of enough demand.
 Secured peace and stability throughout the area where the project located
 Availability of the required infrastructure
 Availability of distribution outlets
 Government incentive and encouragement
Firm level successes factors

 Well trained &motivated personnel

 Availability of raw materials relatively with low-cost and nearest locations
 Well educated, trained and specialized in the proposed business
 Good motivation to grow their business and willingness to serve the community
3.1 PAST SUPPLY AND TREND ANALYSIS

3.1.1 Bread Production and supply

The bakery business in Addis Ababa comprises a large number of players that can be segmented
on the basis of their production capacity and a type of services they provide. The major partakers
are those considering the industry’s high fixed cost requirement, profitability is largely
dependent on the company’s ability to increase volumes of sales. The shortage of quality wheat
bread in the domestic and regional market is making the sector challenging and it adversely
affecting the operations and profitability of bakeries.

According to CSA, 2013/14 report in Ethiopia there are 217 bakeries making same products of
which 57% are held in sole ownership, 30% are PLC and 5% are share companies. During the
years 2007 – 2016, the country consumed an average of 1,375,380 tons of bread products out of
which the Addis Ababa market contributed an average of 64%. The table below presents the total
supply of breads in Ethiopia for the years 2007 to 2016 and the share Addis Ababa suppliers of
production in the total supply (CSA, 2016).

Figure : Total supply of Bread 2007-2016 (CSA, 2016).

Year Total Supply Supply in A.A

2007 97,220 62,221
2008 104,512 66,888
2009 112,350 71,904
2010 120,776 77,297
2011 129,834 83,094
2012 139,572 89,326
2013 150,040 96,026
2014 161,293 103,228
2015 173,390 110,970
2016 186,394 119,292
Total supply 1,375,381 880,244

From the above figure we can understand that the supply of bread shows increasing trend.

3.1.2 General Demand Analysis

In the process of demand analysis and estimation for the product under consideration, a thorough
analysis of the set of factors that influence the marketing forces are essentially important and
necessary. The first step in the process involves the analysis of the underlying characteristics of
the target markets and their general macroeconomic environmental aspects.

Accordingly, the demand for Flours is a derived demand, which depends directly on the
performance of its major end users and other general factors, which commonly affects the
products. The following factors are identified to be determent of the demand position of the
products under consideration.

1. Performance of the national economy

2. Rate of population growth and
3. Urbanization
1. Performance of the national economy

Among the factors that influence the demand for Flours, one of the critical factors is identified to
be economic growth leading to construction and infrastructure development. Growth in Flours
products consumption has been correlated to economic growth in the developing world.
According to the African Development Bank Group (ADBG) recent report on African Economic
Outlook (2021), Ethiopian economy in the last 4 consecutive years (2017- 2020) has registered
GDP annual average growth rate was 10% and Agriculture, Industry and Service sectors have 6.6
%, 20.0%, and 10.7% annual average growth rates respectively.(A.D.B: 2021).

The economic growth (GDP at constant basic price) for 2014 is estimated to be 10.3 %. As per
MOFED’s estimates, annual growth rates of the major sectors, i.e. Agriculture, industry and
service were 5.4 %, 21.2 % and 11.9%; respectively and their shares out of the total GDP were
about 40%, 14% and 46 %, respectively.

Positive performance of the Ethiopian economy is expected to continue in the future. According
to the government’s “Growth and Transformation Plan” during the period 2016 – 2020 the GDP
of the country is expected to grow at an average annual growth rate of 11%. As a result, demand
for the products under consideration is also reasonably expected to increase as economic
expansion continues which in turn will increase the demand for Flours.

African Economic Outlook 2021:From Debt Resolution to Growth: The Road Ahead for Africa

2. Population

Population is a key driver of good and service demand. According to CSA, the population of
Ethiopia grew at an average annual rate of 2.6 percent between 1994 and 2007. As shown below,
the number of population is expected to be 129 million in year 2030 from the current number of
85.3 million. From the projection, the number of population in year 2030 will be doubled of
number of population which was in year 1995. If population increases then there will be high
demand of goods and services. As the population increases, the demand for the residential houses
will also increase which in turn increases the demand for the products under consideration.

3. Urbanization

As urbanization indicate people’s living standard, it is a major factor for a higher demand of
goods and services. In Ethiopia, urban population growth rate is projected to increase by 4%
annually, the major contributing factor being the rural-urban migration. By the end of the
2009/10, the total urban population reached to 14.4 million, amounting 17.2% from the level of
11.7 million by the end of 2004/05. Addis Ababa, Dire Dawa, Harar, Nazareth, Gondar, Dessie,
Mekele, Bahir Dar Jimma and Hawasa are assumed to be major urban areas of the country. As
Addis Ababa is a capital city of Ethiopia, the city holds the highest number of population
followed by Dire Dawa and Hawassa. The table below explains the number of population in
major urban areas of the country. Addis Ababa holds 65% share of the total population, 8% of
the country lives in Diredewa and 7% of the population lives in Hawassa. And Jimma holds the
least number of populations of the country with 2%. Consequently, the demand for goods and
services is assumed to grow with the average growth rate of urbanization.

3.2.1.2 Bread Demand

The markets for breads are derived from the different factors, such as

 Increasing number of population,

 Increase in household income & life style,
 Number of commercial and service rendering sectors, hospitality service providers,
universities and hospitals as well as establishment of other business organizations creates
a demand

3. Location of Project

The project will be located in Addis Ababa city administration Bole Sub City around Bole
Bulbula Woreda 12. This location is selected because of the following considerations:-

 The current expansion of the city to different direction especially expansion of many
condominium buildings around bulbula. This expansion in turn brings the increase of
demand for projected business.
 This location will help to approach/easily get/ the raw materials from the nearest
zone/area when the business is constructed its own factory in the near future.
 Decrease current competitions highly observed in the city.
Because of easily getting of the license from the government. This will be a helpful for the
business to be free from any problems will occurred if the business start to build its own factory.

2.7. FUNDING REQUIRMENT and Source of capital

From the beginning the business will be formed in the form of partnership with equal capital
accumulations. The project totally needs 2,000,000 birr, which intended to cover investment
costs of working premises, transport, working capital requirements, and raw material. Out of the
total estimated initial investment costs , 60% birr 1,200,000 will be expected from partners
equity contribution and 40% birr 800,000, for Purchase of light vehicle from external financial
institutions as a loan that will be paid over five years with annual interest rate of 11 .5%.

Since more than half of the project is financed members of the partners, their contributions for
the project finance is presented in the following table:

Figure1: Partners’ investment

No Partners name Contribution in Birr

1. 109091
2. 109091
3. 109091
4. 109091
5. 109091
6. 109091
7. 109091
8. 109091
9. 109091
10. 109091
11. 109091
Total 1200,000.00

5. Project Layout (Infrastructure)

The surrounding of the Tafach bakery project will be set in an attractive layout. That means the
buildings position for the convenience for management and staffs as well as easy to safeguard
the surroundings for guards and safe to the Janitors to clean. The over all building structure will
be as follow.

Figure2: building structure

 S/N Item Size (m3) Quant. purpose
1. Administrative office 10 1 For administration &mgmt
2. Baking and distribution 180 2 For baking/preparing bread
room
3. Bath room 20 2 For Washing
4. Material storage class 100 2 For storing flour and other materials
5. Class for guards 12 1 For keeping/safeguard
6. Staffs for employees 60 1 For resting during tiredness of
employees
7. Class for launch 40 1 For providing food for employees

6. Financial analysis

The project will start the operation with 2,000,000.00. Out of this 60% of the total amount of
investment is financed by the owners (1200, 000.00) and 40% (800,000.00) is from banks as a
loan which will be paid for the next five years. Most of this investment will expanded on
planting the business for future rather than increasing short term gain of owners. This means
some fixed asset of the business may use high portion of the investment.

The investment arrangement and expenditure expected is preserving on the following

constructive table with its respective category.

Figure 3. financial analysis

Item/description Measurement Quantity Unit price Total price

Land purchase 40 X 60 - - 150400
Land preparation M2 - - 20000
Building M2 4 130000 520000
Plant - - - 110000
mach.&equip
Man power & - - - 228000
salary
Supplies - - - 110000
Working capital - - - 92400
Utilities - - - 15600
vehicles Number 4 183250 733000
Other costs - - - 20600
Total 2,000,000.00

Building
 The proposed project will consist four different buildings. These are buildings for the purpose of
planting machinery, storage of purchased materials, for management and staffs and buildings for
other purpose (i.e. showering house, bathrooms, etc.).The investment arrangement for these
buildings is presented as follows:-

Figure: 5 building specification

S/N Description Measurement Quantity Unit Total price

/Items/ price
1. Cement Pkt 100 750 75000
2. Roofing sheet M2 135 185.9 25000
3. Nail Kg 50 100 5000
4. Doors M2 12 5416. 65000
6
5. Windows M2 8 3833. 23000
3
6. Labor costs No 200 - 120000
7. Electric material M 100 125 12500
8. Design costs - - - 150,000
9. Water pipe M 24 500 12,000
10. Fire controller - - - 55,000
11. Other related material cost - - - 57,500
12. Installation and finishing - - - 40000
Total 520,000

Plant machinery and material costs for production

S/N Description Quantity Unit price Total price

1. Gills 5 5000 25,000
2. Mabukia/ baldi 25 200 5,000
3. Plantary mixer 3 5000 15,000
 4. Flour filterate 4 2000 8,000
5. Working tables with aluminum top 10 2500 25,000
6. ventileter 2 2000 12,000
7. Cabenets 25 m2 30000
Total 120,000

Figure:- Cost to supplies

S/N Description Measurement quantity Unit price Total price

Wheat Flour Kuintal 100 500 50,000
RT []\ Kg 200 3.5 700
Oil/leaving agent Kg 25 200 10,000
Yeast Kg 20 30 600
Sugar Kuintal 5 1600 8000
Edible color & Kg 25 80 2000
Flavor
Berly flour Kuintal 30 1290 38700
Total 110,000

Figure:- Man power and supplies expense

S/N Position Qualification Experienc No. Monthly Annual

e req. salary salary
1. G.manager BSc in production 2year 1 4,500 54,000
2. Purchaser Diploma in purchasing 3 year 1 2,500 30,000
3. Sales Diploma in marketing 3 year 4 2,500 30,000
person
4. Baker 10th grade& above 2 year 4 2,000 24,000
5. Cashier Diploma in accounting 2 year 1 2,500 30,000
6. Janitor 6th grade and above 0 year 4 2000 24,000
7. Guard 8th grade and above 4 year 1 1000 12000
8. driver 10th grade& above 2yaer 2 2000 24000
Total salary expense 228,00.00

Figure:- Utility expenses

No. Description measurement Consumption per Yearly cost in birr

month
1 Water Liter 10,000 4,800
2 Electric power Kwh 15,000 7,200
3 Telephone 250 3,600
Total 15,600.00
 Summary of Annual costs

Salary expenses………………………………………..228,000

Interest expenses (800,000x12%).....…………………..96000

Supplies expenses………………………………………110,000

Utility expenses……………………………..………….15, 600

Depreciation expenses:
Building…………………………………......14,444.44
Machinery and equip………………………...6,333.33

Total ………………….…………480,497.77

Depreciation expense- building= Cost_-salvage value = 520,000-87500 =14444.44

Estimated useful life 30

120,000−25000
Depreciation expense- machinery & equip. = =6,333.33
15

733000−90000
Depreciation expense of vehicles = =25,720
25

6. Market analysis
Market Size and Target
In the recent period, the bread market showed a better growth rate than in previous years.
This was mainly because retail price cuts were fewer and less stringent, but it was also because
of the growing importance of added-value products, especially in the specialty bread and bakery
products sectors. The target markets for the business are:-
 Households
 Cafes
 Hospitality service providers,
 universities and hospitals as well as establishment of other business organization

A. Products
Product quality is one of the basic and most important marketing mixes that affect the success of
the business. Product quality has two dimensions, i.e., level and consistency. Level means the
producer must first choose a quality level that will be acceptable in the target market and in a
level that comply with the quality of competing products. Consistency refers to the consistent
delivering of established quality through strict quality control measures. The products by the
tafach bakery will have;
  Good quality,
 Fulfill the standard criteria set for product commercialization,
 Brand will be developed to create independent identity and image.
 Brand positioning statements will also be developed
This project, the Tafach Bakery, is planned to satisfy the current needs and wants of the people
around the area which there shows a shortage of bread suppliers in the near area. The demand for
bread shows an increase through time. Because of this reason we prefer to start the New Bakery
project in this area/place. Our sources of revenues will comes from the daily sale of bread.

B. Pricing
Pricing a product is an important and critical activity since it is the major factor in determining
revenue. If a lower price is fixed, it will affect the profitability of the company, and if a higher
price is fixed, the product will not be able to stand in market competition and may be forced out
of the market. Therefore, pricing strategy will be:
 Affordable pricing.
 Continuously monitoring competitors’ price
 Price revision is going to be performed when the need arises, and
 The right price has to be fixe

C. Channels of Distribution
The following are the main alternative distribution channels commonly used by producers to
reach consumers.
 Direct sale to consumers:
- Manufacturer Consumer
 Indirect sale through the medium of third party:
- Manufacturer Wholesale Retailer Consumer
- Manufacturer Agent Wholesaler Retailer Consumer
- Manufacturer Retailer Consumer
Accordingly, for the tafach bakery by taking the nature of its product marketing under
consideration; both direct and indirect distribution is selected as the most appropriate distribution
channel. Therefore, at least one factory-outlet shop will used.

D. Promotion Strategy
In a competitive market, trade promotion should be made to persuade or to make a product
attractive for end users. Such trade promotional tools include; credit and discount with the
volume of products sold etc. The envisaged factory is recommended to offer discounts with the
volume of product bought and credit for one to two weeks. As the product of the envisaged
project is entering a competitive market it has been assumed that the cost of promotion will be
1% of the annual sales revenue throughout the operation life of the project.
Demand Forecasting
We expect/forecast our sales by using a quantitative method called trend projection/time series
method that enables us to predict the next annual sales. Depending on this trend we try to
forecast for the next two or more year’s sales as follows:
Figure: demand forecast

No Years Estimated annual revenues

(000,000)
1 2008 1.28
2 2009 2.34
3 2010 2.52
4 2011 3.06
5 2012 3.60

This trend projection method uses the formula that is a linear relationship between annual sales
volume and the year that we can expect.
Y=a+bx where, x- no of years
a -intercept relationship
b- Slope relationship
In this regard the projection will be as follow

X Y X2 Xy
1 1.28 1 1.728
2 2.34 4 4.68
3 2.52 9 7.56
4 3.06 16 12.24
5 3.60 25 18
1/5x=15 1/3y=13.23 1/5x2=55 1/1xy=44.21

Computation for the values of a and b:

a= 1x2(y)-x(xy) = 55(13.23)-15(44.21) = 64.65 =1.29
nx2-(x)25(55)-(15)2 50 50

b= nxy-x(y) = 5(44.21)-15(13.23) = 22.6 = 0.45

nx2- (x)25(55)-(15)2 50 50
so, here, y=a+bx

Y10= 1.29 + 0.45(6) = 3.99

This means that the next 2012 annual sales will be 3.99x1000, 000= 3,990,000
Y11 = 1.29 + 0.45(7) = 4.44
Annual sales for 2013 will be 4.44x1000, 000 = 4,440,000
Y12 = 1.29 + 0.45(8) = 4.89 X 1000,000 = 4,890,000
7. Project management
The proposed project will have consolidated management system controlled by the owners of the
project. This enables us to get the profit that we estimate and minimize the cost of administrative
through replace other employees being hired from outside. Besides, to business owners other
employees will be hired on permanent and contract basis.
Organizational structure

General Manager

Finance dep`t
Purchasing and selling Selling dep`t
dep`t

Janitors Production dep`t

Guards

Bakers Other employees

Major Duties and responsibilities

From the beginning the major activities performed in organization will expect to done by the
owners to minimize the related initial cost and to increase the profitability of the business.
General Manager will be responsible to lead and control all other employees to attain the goal of
the organization. The purchaser will be responsible for search market and present the supplies
with reasonable market price. the sales person will be responsible for selling the prepared
product by searching and attracting a good market segments to increase the share of market.
Finance department will be responsible to prepare and follow up the business budget and
periodic control of cash inflows and out flows. It also responsible to pay the employee`s salary
and wage in time and in accurate ways. These all are the major responsibilities related to
administrative department.
The other major duties are related to production department. Under this department there are
responsibilities to prepare and bake a quality and attractive product for customers. They will be
responsible for the use of the organization`s input materials and other equipment in proper ways.
In addition to these responsibilities, other employees work in organization will have different
responsibility related to their jobs. These are the responsibility declared by the organization`s
administrative to increase the earning of the business and to ensure the benefit of employees.
These duties are the responsibilities given to guard, janitors and other contract employees.
Guard will be responsible for keeping the security of the surrounding of the business
organization. Janitors will be responsible to keep the organization clean and make the compound
attractive/ maintain the attractive site in the organization/. They are also responsible for the
proper use of the organization`s property in a cleaned and safety ways.
Generally, imposing these all responsibilities to each individual is important to keep the business
strength and increase the earning of the business and benefit of employees too.

Menn Bakery
Income Statement
For The Year Ended Sene, 2008-2012

2008 2009 2010 2011 2012

Revenues 720,000 1,220,000 2,520,000 2’560,000 3,600,000
Expenses:
Salary expense 228000 228000 276000 276000 276000
Interest expense 96000 96000 96000 96000 96000
Supplies 110,000 339246 1,210,000 310,000 410,000
Utility expenses 15,600 15,600 15,600 15,600 16,900
Depreciation exp:
-Machinery 14444 14444 14444 14444 14444
-Building 6333 6333 6333 6333 6333
Travel expense
(fuel expense) 25000 25000 35000 45000 65000
Total operating 495377 734623 1,653,377 1763377 1884677
expenses
Operating income 254623 485377 866,623 1796623 2715323
Pension contribution 25080 25080 30360 30360
(11%)
Taxable income 470297 460297 836263 1766263 2684963
Tax 35% 164603.95 161103.95 292692.05 610192.05 939737.05

Tafach Bakery
Opening balance sheet
Meskerem , 1, 2013 E.C
Assets:
Cash……………………………………….…….…2,000.000
Investment for:
Supplies………………..………………………….110, 000
Machinery......................................................120,000
Utilities………………………...……………15,600
 Land………………………………………....150400
Building………………………………...……520,000
Vehicles………………………………..……733,000
Others …………………………………..……20,000
Total assets………………………………..……….1,669,000
Liabilities:
Accounts payable………………………………………...800,000
Owner`s equity:
Owner`s capital………………………………….……331,000
Total liabilities and owner`s equity………………………469,000

12. Project evaluation

Figure: Project evaluation

Years Cash inflows Cumulative cash inflows

2009 3,360 3,360
2010 27,390 24,030
2011 72,660 96,690
2012 143,300 239,990
2013 243,900 483,890

Payback period (PBP) =Years Before full recovery + unrecovered cost

Cash flow in next plan
= 4 + 269,300-239,990 = 4.12
243,900
PBP= 4 years and a month. This means that our initial investment cost will be covered after 4
years and 1 month cash inflows.

Net present value(NPV)

Years cash inflows PV of cash flows @ 10%

2006 3,360 3,360)x0.909091=(3,054.55)
2007 27,390 27,390x0.826446=22,636.4
2008 72,660 72,660x0.751315=54,590.55
2009 143,300 143,300x0.683013= 97,875.76
2010 243,900 243,900x0.620921=151,442.63
 Total PV of cash inflows……………..……323,490.79
(-) PV of cash outflows…………..…………..269,300
Net present value…………………………….…….54,190.80
Therefore, this project is feasible because it has a NPV of greater than 0 or above the equilibrium
point.
Benefit cost ratio (BCR)
BCR = PV of cash inflows =323,490.8 =1.2
PV of cash out flows 269,300

So, the profit is greater than 1 or higher than one.

8. Environmental feasibility
As it is known environmental issue is the current critical things which require detail study
whenever any business is attempt to established. This is helpful to assess the impact of that
project on the environment as well. Tafach bakery project is planned to engage in production
process. Thus, our project is highly concentrated on the use of electric power/energy to
prepare/bake bread. This enables us to minimize the pollution that our business can cause to the
environment than other sources of energy such as wood burning and use of kerosene. In addition
to this advantage the use of the electric source of power saves the product that our organization
can produce in different ways. In fact, bakery project doesn`t have any noise and other influence
with environment.

9. Risk assessments

The risks for Tafach bakery are there might be natural and human disasters. We cannot control
natural disasters because they are uncontrollable but we can control human made disasters by
creating awareness to our employees and we are going to insure our assets by giving an
insurance.

Project implementation
In fact, at this stage there are different challenges that arise from evaluation of a project. A
project evaluated it is challenging to implement. But with support of other advisory and
consultants who try to evaluate our project, we can conclude our project as follows:
 Although some fixed assets require high cost at the beginning ,it enables to plan the
project for future on good ground
 As the current earning of the project can cover all related expenses and yield profit to
owners, the length of period to cover initial cost never frustrate the project from
implementation.
When we decided to implement our project by using different methods and as well we expect
some difficulties at this stage. Some of them are:
  Technical problem related quality materials
 Shortage of distribution point
 Unfamiliarity with customers. This may affect the test of market during implementation.

Summary and conclusion

As we know Bakery in Ethiopia is still a crucial and valuable activity because countries like
Ethiopia have citizens who want to consume bread more than once a day. The needs and wants of
the people for bread consumption in Addis Ababa city grow from time to time that enables us to
open/start new bakery business project in the city specially in woreda 12.
In reality, Bakery project can cause less environmental pollution because it can be baked by
electricity. This enables us to get our license from the government of the country and the
administrative office of Addis Ababa city government. Thus, government allows this kind of
project to enhance the access bread for dwellers by encouraging the newly open business firms
and already existed business organizations in Bakery project.
There are formal and informal as well as legal and illegal baking and selling of bread in the town
as a whole including rural related and urban areas. However, we prefer our project to be formal
and legal one because we can distribute our product and compete as we want without price
fluctuation ( i.e. by setting our price affordable for the people) and enables us to accumulate our
own capital by providing and diversifying our production level through maintaining our clients
wants and serving them in satisfied ways.