PROJECT PROPOSAL FOR THE ESTABLISHMENT OF

CORRUGATED IRON SHEET and Steel MANUFACTURING

PLANT

PROJECT TO BE IMPLEMENTED IN Diredawa TOWN

PROMOTER: Yasin Diriye Maydane

June,2025

Shinille, sitt_zone,thiopia
Contents
TABLE OF CONTENTS PAGE
I. Table of Contents……………………………………………………………………….....2
II. Lists of Abbreviation………………………………………………………………………4
III. Grand Summary of the Project……………………………………………………5
1. Introduction and Overview of the Project………………………………………………...6
1.1. Introduction………………………………………………………………………
…...6
1.2. Ethiopia’s Restructuring Economy………………………………………………........6
1.3. Economic Liberalization………………………………………………………………6
1.4. The Foreign Investment Policy………………………………………………………..7
1.5. Guarantees to
Investor………………………………………………………………...7
1.5.1. Repatriation of Capital and Profit……………………………………………..7
1.5.2. Guarantees Against Expropriation…………………………………………...7
1.6. Measure Investment Incentives……………………………………………………….8
1.6.1. Customs Import Duty………………………………………………………...8
1.6.2. Exemptions for Payment of Export Customs Duties…………………….......8
1.7. An overview of Ethiopia’s
Performance……………………………………………...8
 1.8. Background of the
Project…………………………………………………………….9
2. Objectives of the project………………………………………………………………….11
2.1. General Objectives…………………………………………………………………...11
2.2. Specific Objective......................................................................................11
3. Product Descriptions and Applications…………………………………………………..11
4. Market Study and Plant Capacity………………………………………………………..12
4.1. Market Study…………………………………………………………………….........12
4.1.1. Past Supply and Present Demand…………………………………………...12

4.1.2. Projected Demand…………………………………………………………..13

4.2. Pricing and Distribution………………………………………………………….......14
4.3. Plant Capacity and Production Program……………………………………………...14
4.3.1. Plant Capacity……………………………………………………………......14
4.3.2. Production Program………………………………………………………….14
5. Material Inputs and Utilities…………………………………………………………......15
5.1. Raw Materials………………………………………………………………………..15
5.2. Utilities……………………………………………………………………………......15
6. Technology and Engineering…………………………………………………….………16
6.1. Technology……………………………………………………………………….......16
6.1.1. Process Description…………………………………………………………...16
7. Environmental Impact…………………………………………………………………….17
8. Engineering………………………………………………………………………………17
8.1. Machinery and Equipment…………………………………………………..…..........17
9. Land, Building and Civil Work………………………………………………………….17
9.1. Building and Civil work……………………………………………………………...21
10. Human Resource and Training Requirement……………………………………………21
10.1. Human Resource Requirement……………………………………………………..22

10.2. Training Requirement………………………………………………………………22

11. Financial Analysis…..........................................................................................................22
12. Total Initial Investment Cost…………………………………………………………….23
13. Production Cost…………………………………………………………………………..24

14. Financial Evaluation………………………………………………………………..……24

 14.1. Profitability………………………………………………………………………...24

14.2. Ratios………………………………………………………………………………25
14.3. Break-even Analysis………………………………………………………………..25
14.4. Pay-back Period………………………………………………………………….....25

14.5. Internal Rate of Return…………………………………………………………......25

14.6. Net Present Value…………………………………………………………………...26
15. Economic and Social Benefits…………………………………………………………...26
16. Monitoring and Evaluation…………………………………………………………........26
16.1. Monitoring…………………………………………………………………………26
16.2. Evaluation…………………………………………………………………………………26

II. Lists of Abbreviation

FDRE Federal Democratic Republic of Ethiopia
GDP Gross Domestic product
MIGA Multilateral Investment guarantee Agency
ICSlD Settlement of Investment disputes between States and nationals of other States
PEST Political, economic, socio- cultural and technological developments,
GTP Growth and Transformation Plan
TVET Technical, Vocational Education and Training
ERW Electric resistance welding
FOB Freight on board ‘in shipping’
IPS Industrial Projects Service
MoI Ministry of Industry
IRR Internal Rate of Return
NPV Net Present Value
 III. Grand Summary of the Project
1 Project Name The Establishment of a plant for the production of steel and corrugated iron sheet
2 Project Owner Yasin Diriye Meydane
3 Nationality Ethiopian
4 Project location Shinille,Sitti_zone
5 Project This profile envisages the establishment of a plant for the production of corrugated
Composition iron sheet with a capacity of 25,700 tons per annum. Corrugated iron sheet is used
for roofing of houses and other construction.
6 Premises Required The total land area of the plant including the open space is 10, 000 m2.
7 Source of Finance The total capital of the project is estimated to be Birr 120,000.00, among this,
(30%) 36,000,000.00 is financed by the contribution of the promoter and the
remaining balance of Birr 84,000,000. 00 [70%] is to be financed by banks.
8 Project Capital The total investment cost of the project including working capital is estimated at
Birr 120 million. From the total investment cost the highest share (Birr 74,400,000
million or 62.62%) is accounted by initial working capital followed by fixed
investment cost (Birr 35,148,000 million or 29.29%) and pre operation cost (Birr
10,680,000 million or 8.09%). From the total investment cost Birr 13.29 million or
15.83% is required in foreign currency.
9 Employment The total man-power required for the envisioned project will be 252 employees at
Opportunity f ull capacity.
 Permanent “workers 116
o Skilled 81 and Unskilled 35
 Temporary workers 136
o Skilled 36 and Unskilled 100
10 Technology The machinery equipment and technology of establishment of the industry can
be secured from foreign countries.
11 Market Share The project is financially viable with an internal rate of return (IRR) of 34.48% and
a net present value (NPV) of Birr 116.59 million discounted at 10%.
11 Benefits of the Provide service and source of revenue, employment opportunity, save/generate the
project for the city country foreign exchange, benefit for the local community stimulate the local
and country economy and technology transfer.

Table: 1 Grand summery of the project

1. Introduction and Overview of the Project

I.1. Introduction

Since 1991, the new Democratic Government coming into power and soon after it adopted the
market oriented Economic policy in 1992. The Federal Democratic Republic of Ethiopia
(FDRE) was set up under a new constitution in 1995. The FDRE came with new Federal
governmental system that has a bicameral parliament, with the House of people's Representative
being the highest authority of the Federal Government and House of federation which account as
the second chamber with its only federalism character that empowered with the interpretation of
the country’s constitution and representatives of all nation nationalities of Ethiopia, while the
members of both councils are democratically elected for five years.
I.2. Ethiopia’s Restructuring Economy
A prevailing agricultural economy financial records for about 42% of Ethiopia’s Gross Domestic
product (GDP), 62% of total exports and 85% of employment. Coffee alone contributes over
30% of total agricultural exports. Agriculture is supplemented by Industry, mining, trade,
tourism, construction, services, etc. Make the remaining 58% of GDP. About 13% of GDP
comes from the Industrial sector supplying important consumer goods to the domestic and
international markets. The main manufactured export products include textiles, food stuffs,
tobacco, beverages, leather and leather products, wood, metallic and non-metallic products,
paper plastic products, canned and frozen meat, sugar and molasses and oil cakes products.
I.3. Economic Liberalization
Since the new market oriented Economic policy adopted in 1992, a number of policy measures
and reforms have been undertaken to change the structure of the economy and encourage radical
economic growth and development. The reforms include, among others, the following short-term
economic Liberalization and structural adjustment measures:

 Deregulation of domestic prices,

 Abolition of all exports taxes and subsidies,
 Reduction of inflation through fiscal and monetary controls,
 Liberalization of foreign trade,
 Devaluation of national currency, birr to reflects its market value,
 Privatization of public enterprises,
 Issuance of a new labor law,
 Liberalization of foreign exchange regime,
I.4. The Foreign Investment Policy

Ethiopia has endorsed a liberal Investment code. This encourages both domestic and foreign
investors to play a protuberant role in the economic development of the country. The code
provides a wide of incentives including tax holidays, duty exemptions, and free remittance of
founds and retention of foreign exchange earnings.
I.5. Guarantees to Investor
Ethiopia provides the following guarantee to foreign investors:-
I.5.1. Repatriation of Capital and Profit
Capital repatriation and remittance of dividends and interest is guaranteed to foreign investors
under the investment proclamation. Any foreign investor has the light, in respect of an approved
investment, to make the following remittances of Ethiopia in convertible currency at the
prevailing rate of exchange on the date of remittance:
• Profit and dividends accumulating from an investment,
 • Principal and interest payments on external loans,
• Payments related to technology transfer or management agreements,
• Proceeds from sale or liquidation of an enterprise,
• Proceeds from the sale of transfer of shares or assets,
• Compensation paid to a foreign investor.
I.5.2. Guarantees Against Expropriation,

The constitution of the Federal Democratic Republic of Ethiopia protects private property. The
investment proclamation provides investment guarantees against measures of expropriation and
nationalization and nationalization that only may occur with the requirements of the law.
Where such expropriations are made, the government guarantees to provide adequate
compensation corresponding to the prevailing market value of property and such payment shall
be reflected promptly.

Other guarantees in Ethiopia are a member of the World Bank, affiliated Multilateral Investment
guarantee Agency (MIGA) that issues guarantees against none, commercial risks to enterprise,
which invest in signatory countries. Ethiopia is at any time ready to conclude bilateral
Investment promotion and protection treaties with any country and is in fact currently concluding
such agreements with a number of developed countries. Ethiopia has also signed the World Bank
Treaty "The Convention on settlement of Investment disputes between States and nationals of
other States (ICSlD). Investors are protected against expropriation and nationalization. Ethiopia
has ratified the convention establishing the multilateral investment guaranteed Agency (MIGA).
It has also signed bilateral investment promotion and protection agreements with a number of
OECD countries. The Investment offices serve as a one stop shop for foreign investors securing
investment certificates, company registration certificates and operating licenses.

I.6. Measure Investment Incentives

To encourage private investments and promote the inflow of foreign capital and technology into
Ethiopia, the following incentives are granted to investors (both domestic and foreign) engaged
in new enterprises and expansion in areas qualified for investment incentives.
I.6.1. Customs Import Duty
One hundred percent from the payment of import customs duties such as plant, machinery,
equipment etc. plus spare parts worth up to 15% of the value of the imported investment capital
goods. Investment capital goods imported may be transferred to another investor enjoying similar
privileges. The duty drawback scheme applies to all taxes at the time of importation, and those
paid on local purchases.
I.6.2. Exemptions for Payment of Export Customs Duties

Ethiopian products and services intended for exports are exempted from the payment of any
export tax other taxes and levied on export.
I.7. An overview of Ethiopia’s Performance
It is widely known that the ancient country of Ethiopia underwent a period of turmoil economic
stagnation and famine during the 1970s and 1980s. What is less well known is that since the
demise of the military dictatorship in 1991, a new Ethiopia has emerged which is politically
stable and making good economic progress. The achievements of this rapid economic turnaround
rest on solid foundations of political and economic reform, sound management of the economy
and an ongoing partnership with external donor and investors. Ethiopia has been at peace with
itself since the establishment of a federal system of government and parliamentary democracy.
Simultaneously, it has firmly moved from a command to a market economy.

Macroeconomic stability has been secured by careful sequencing of economic reforms, coupled
with tight fiscal and monetary policy. The progress on policy reform to date has secured the
foundations for future growth, creating a favorable climate for foreign and local investment in
Ethiopia. This will be further enhanced by the consolidation of continuous market reforms and
investment code reforms.
Ethiopia offers investors a wide array of opportunities. Ethiopia's proximity to Middle Eastern
and European markets, its abundant natural resources, land, livestock, minerals and a population
of 86 million potential consumers are just some of its key advantages.
In addition, its wealth of unique tourist sites, unoccupied attractive beauty and the authority’s
commitment to upgrade infrastructure, all under lined the country's determination and potential
to work with private investors. A fuller appreciation of the improved environment can be gained
by looking at four factors.
 The broad picture of transition from a command to a market economy,
 Its record of economic growth and stability,
  Improvements in infrastructure,
 Ethiopia's specific investment strategic/ incentives (both foreign and local).
It is with this in mind that the promoter, has intended to establish steel production Industry plant
(project) so as to satisfy the growing demand of the surrounding population for the project out
puts in utilizing long years’ experience in different business.
I.8. Background of the Project
As per the analysis carried out by different institutions on the political, economic, socio- cultural
and technological developments (PEST), Ethiopia offers a stable political and economic
environment as well as security; exceptional climate; almost complete absence of routine
corruption; continuously improving public service delivery which makes it potentially an ideal
destination for investment.
The macroeconomic performance in the past seven years has been very positive and the GTP
indicates a very good prospect, with a minimum of 11% GDP growth per-annum, for the future.
Although the incentive packages that are currently given seem to be adequate, the government is
planning to give additional incentives for the Industry sector, particularly to export oriented and
import substituting projects. Priorities will be given to the Industry sector in support provision in
the areas of licensing, land and finance allocation, training and the like.
The expansion of Universities as well as Technical, Vocational Education and Training (TVET)
in all parts of the country provides good opportunity in the supply of skilled and semi-skilled
technical personnel. Health service provision and development of infrastructures such as roads,
energy and communication are also showing a rapid improvement in the country. The
advancement of science and technology in the world and the spread of same in the country will
favorably influence the smooth operation of the envisaged project.
To encourage investment a number of incentives are granted to investors which include;
exemption of customs duty for importing capital goods and spare parts for investment and raw
materials for production of export goods, income tax holidays and the permission of losses to
carry forward during tax holiday period. Ethiopia also provides different guarantees with respect
to repatriation of capital, profit and against expropriation and nationalization. Accordingly, it
can be concluded that Ethiopia is ideal for investment.

Indeed the Feasibility Study for a plant for the production of nail is prepared by the Industrial
Projects Service (IPS), the Consultant, as per the consultancy agreement concluded with the
Ministry of Industry (MoI), the Client. This profile envisages consists of market, technical and
financial analyses components on the feasibility study of the envisaged plant.
This profile envisages the establishment of a plant for the production of corrugated iron sheet
with a capacity of 25,700 tons per annum. Corrugated iron sheet is used for roofing of houses
and other construction.
The demand for steel and corrugated iron sheet is met through both local production and import.
The present (2012) demand for corrugated iron sheet is estimated at 705,195 tons. The demand
for corrugated iron sheet is projected to reach 1,418,399 tons and 2,852,906 tons by the year
2017 and 2022, respectively. The principal raw materials required is plain iron sheet which has to
be imported.
The total investment cost of the project including working capital is estimated at Birr 84.01
million. From the total investment cost the highest share (Birr 52.61 million or 62.62%) is
accounted by initial working capital followed by fixed investment cost (Birr 24.61 million or
29.29%) and pre operation cost (Birr 6.79 million or 8.09%). From the total investment cost Birr
13.29 million or 15.83% is required in foreign currency.

The project is financially viable with an internal rate of return (IRR) of 34.48% and a net present
value (NPV) of Birr 116.59 million discounted at 10%.
The project can create employment for 252 persons. The establishment of such factory will have
a foreign exchange saving effect to the country by substituting the current imports. The project
will also create forward linkage with the construction sub sector and also generates income for
the Government in terms of tax revenue and payroll tax.

2. Objectives of the project

2.1.General Objectives
The general objective of the project is to establish a plant for the production of steel and
corrugated iron sheet and and to provide the needed quality and quantity with affordable price to
generate profit for the promoter.

2.2. Specific Objective

The market demand for the production of Nail profiles is going to increase due to huge
government plans to transform the country; hence the Sector plays a vital role in the economic
development.
 To establish a plant for the production of corrugated iron sheet,
 To Produce corrugated iron sheet,
 Develop local technology by bringing expatriate technical advisers for few years and
create the base for development of the industry,
 Provide direct and indirect employment to a large segment of the population and reduce
unemployment.
 Generate foreign exchange through the sale of its products in the export markets.
 Increase Government revenue through different forms of taxes which in turn used to
facilitate social and economic development.
3. Product Description and Application
Corrugated iron sheet is used for roofing of houses and other construction. Corrugated iron sheets
are classified according to their thickness and surface area. Standard gauge sizes are 28, 30 and
32. It is usually manufactured 2 meters in length and 1.2 meters in width. Corrugated iron
sheets are mostly used for roofing and fencing. Corrugation is a process of deforming plain
sheets in the uniform way or zigzag shapes pattern by rolling mills across their entire width.
4. Market and Plant Capacity

4.1. Market Study

4.1.1. Past Supply and Present Demand
The country’s requirement of steel and corrugated iron sheet qis met through both local
production and imports. According to CSA as of 2010 there are 23 local producers of corrugated
iron sheet while the products are imported from various countries. Table 4.1 summarizes local
production, import and total supply or apparent consumption of corrugated iron sheet.
Table 4.1 Local Production, Import and Total Supply or Apparent Consumption of Corrugated
Iron Sheet (Tons)
Year Local * production Import** Total
2002 35,341 6,023 41,364
2003 30,688 6,173 36,861
2004 70,760 3,048 73,808
 2005 35,628 2,997 38,625
2006 114,223 592 114,815
2007 604,973 157 605,130
2008 643,903 763 644,666
2009 785,925 16,547 802,472
2010 464,308 17,064 481,372
2011 631,3791 8,036 639,415

Source: * CSA’s “Survey on Large and medium scale manufacturing”

** Ethiopian Revenues & Customs Authority

As can be seen from Table 4.1, the total supply or apparent consumption of corrugated iron sheet
during the period 2002 – 2011 reveals a growth trend specially beginning from year 2007. The
annual average total supply or apparent consumption which was 61,095 tons during the period
2002-2006 has increased to an annual average of 634,611 tons during the period 2007-2011.

Considering the nature of the trend in the apparent consumption of corrugated iron sheet it is
assumed that the growth rate registered in the past will also continue in the near future. During
the period 2002 – 2011 total supply of corrugated iron sheet has registered an average annual
growth rate of 76.65% which is on the high side. Hence, in order to be conservative a growth rate
of 10% is considered.

Accordingly, taking the average apparent consumption during the period 2009-2011 as a base
and applying a growth rate of 10% the present effective demand (2012) for corrugated iron sheet
is estimated at 705,195 tons.

4.1.2. Projected Demand

The demand for steel and corrugated iron sheet depends mainly on the performance of its end-
user (i.e. the construction sector or more specifically the building construction sector). Therefore,
the demand for the products under consideration is a derived demand, which depends directly on
the performance of its major end – user.

1Local production data for 2011 is not available. Hence the average production during the previous three years
(2008-2010) is considered as the production level in 2011
The construction sector of the country has undergone tremendous changes and development in
recent years. The contribution of the construction sector to the GDP during the period 2001 –
2010 have been growing at annual average growth rate of 13 percent which is above the
average annual growth rate of real GDP during the period under consideration (11.4 %),
indicating a rise in the share of the construction sector within the overall economy. Moreover,
during the GTP period (2010 – 2015), the construction sector is expected to grow at annual
average growth rate of 20%.

On the other hand, among the factors that influence the demand for corrugated iron sheet one of
the critical factor is identified to be economic growth leading to growth of the construction
sector. According to the government’s “Growth and Transformation Plan” during the period
2010 – 2015 the GDP of the country is expected to grow at a minimum average annual growth
rate of 11.2%.

Accordingly, based on the above discussion a growth rate of 15% which is slightly higher than
the expected growth rate of the country’s GDP during the GTP period (2011 – 2015) is used.
Moreover, it is assumed that the highest local production during 2002 – 2011 indicates the
current local production capacity of corrugated iron sheet.

Based on the above assumption and using the estimated present demand as a base the projected
demand for steel and corrugated iron sheet and demand supply gap is shown in Table 4.2.
Table 4.2 Projected Demand for Corrugated Iron Sheet and Demand Supply Gap (Tons)
Year Projected Demand Existing Capacity Demand Supply Gap
2013 810,974 786,000 24,974
2014 932,620 786,000 146,620
2015 1,072,513 786,000 286,513
2016 1,233,390 786,000 447,390
2017 1,418,399 786,000 632,399
2018 1,631,158 786,000 845,158
2019 1,875,832 786,000 1,089,832
2020 2,157,207 786,000 1,371,207
2021 2,480,788 786,000 1,694,788
2022 2,852,906 786,000 2,066,906
2023 3,280,842 786,000 2,494,842
2024 3,772,969 786,000 2,986,969
 2025 4,338,914 786,000 3,552,914

4.2. Pricing and Distribution

The current retail price of gauge 30 corrugated iron sheet is Birr80 per pieces. Considering
wholesalers and retailers margin of 25% the recommended factory gate price for the envisaged
factory is Birr 65 per pieces or Birr 10,000 per ton.
Considering the nature of the products and the characteristics of the end users a combination both
direct distribution to end users (for bulk purchasers) and indirect distribution (using agents) is
selected as the most appropriate distribution channel.
4.3. Plant Capacity and Production Program
4.3.1.Plant Capacity
The annual production capacity for the envisaged plant will be 25,700 tons. This is based on a
single shift of 8 hours operation per day and for 300 days a year. When demand rises the
production capacity will also be increased either by feeding or rolling multiple sheets at the same
time or by introducing additional shifts. The product mix is scheduled as 50%, 30% and 20%
for 35- 32, 30 and 28 gauges, respectively.
4.3.2. Production Program
The production program will be carried out in such a way that the plant will initially produce at
75% of its capacity, and then will raise its production to 85% in the second year. It will then
attain full capacity production in the third and succeeding years. Such a gradual build-up of
production is required in order to give opportunity for production workers and technicians to
develop skills and experience on operation and maintenance on plant machinery and equipment.
Table 4.3 shows production program.
Table 4.3 Annual Production Program
Year Capacity Utilization Production
Gauge Tons
1 75% 32 5,625
30 3,375
28 2,250
2 85% 32 6,375
30 3,825
28 2,550
3-15 100% 32 7,500
 30 4,500
28 3,000

5. Materials and Inputs

5.1. Raw & Auxiliary Materials

The raw material used for producing corrugated iron sheets is plain iron sheets. Depending on
the required thickness of the iron sheet, the product can be of gauge thickness of 35-32, 30 and
28. Auxiliary materials required by the plant include printing ink, wooden stands, lead and
sulphuric acid. The annual requirement of the raw & auxiliary material at full capacity
production, including its cost is shown in Table 5.1.
Table 5.1 Raw and Auxiliary Materials and Cost
Sr. Description Qty. (tons) Unit Price (in Birr) Cost ('000 Birr)
No.
FC LC TC
A. Raw
1 Materials Plain 5,000 8,700 43,500 43,500
iron sheet a) 28 9,500 8,700 82,650 - 82,650
gauge 7,500 -
8,700 62,250 62,250
b) 30 gauge -
c) 32 gauge
Sub-total 22,000 188,400 188,400
B. Auxiliary Materials
1 Printing ink 2,000 kg - 67.5 - 67.5
2 Lead 3,500 kg - 9 - 9
3 Wooden stands As reqd. - - 25 25
4 Sulphuric acid As reqd - - 15 15
Sub-total 76.5 40 116.5
Bank, insurance and customs
charges, transportation and - - - 150 150
material handling costs
Total Landed Cost 188,476.5 190 188,516.50

Thus, the total annual raw and auxiliary materials cost at full production capacity of the plant is
estimated at Birr 188,516.50 million.
 5.2. Utilities
Utilities are another important category of inputs required for the envisaged process, which
mainly includes electric power, compressed air, furnace oil, gasoil and water with different
consumption rate at different operational points of the process.
Basically, required important utilities cost is following the actual status of the country’s decided
cost of these services.
Accordingly, the annual utilities consumption for plant at full capacity operation is estimated at
about Birr 3,360,000.00 in local currency.

5.3. Location, Site and Environment

5.3.1. Location
In process of the project location selection, the Consultant has adopted two stage selection
processes for the envisaged plant. The first stage is the identification of potential geographical
locations based on the assessment of critical project requirements. The second stage involved
selection of the best location from the potential locations identified using different selection
criteria and as well as established rating scale.
 Since the product is highly customer order based, aluminum frame and furniture making plant
must be located near to the center where the markets are available. This implies the area where
high product consumers are located. It is also located along the main road and this gives better
opportunities to import the required inputs from abroad.

 The existence of well-established infrastructures such as telecommunication, electricity and

water supply contributes to smooth operation of the project. The environment of the area is
also proved to be appropriate to the project.
The plant, therefore, has to identify initially the major beneficiaries and also check the
availability of the required spaces. In fact about 80% of the users are in and around Shinille city
and the capital city of the regional states.
Based on the above requirement of the plant, the following town is proposed to be the alternative
potential location of the plant:
As per the evaluation made on these alternative locations, Shinille town which is about on the
road to Djibouti is found to be the most suitable area.

5.3.2. Site
Site is a plot of land within the selected location sufficient and suitable for installation and
operation of the plant. The project site is near the vicinity of Shinille where infrastructure
facilities like supply of power, water, Road transport, Communication services, banking etc. are
better organized and available for smooth operation of the plant. Moreover, almost all
beneficiaries of the product are located in and around Shinille which is a short distance from the
project site.
Future own raw material development is also farsighted in this project. For collecting waste
papers (damaged cartons and related products) from different industries for reusing this waste
paper and carton, therefore the plant location is also appropriate for collecting the raw material.

6. Technology and Engineering

6.1. Technology
6.1.1. Process Description
The production process of making steel and corrugated iron sheet consisted of cleaning the rust
and other ingredients from the plain iron sheet, then drying by dry, hot air. Then the iron sheet is
passed into the molten lead to attain the required thickness. It is then dried by forced air from
where it is fed to feeding table by a suitable hoist or crane. Then they are conveyed to the
corrugating machine. After corrugation, the product is passed to correcting machine where
deformation is corrected. The product is then cut to standard size and trade mark of the
company is printed.
6.1.2. Environmental Impact
Since the raw material used by the plant is pre coated steel sheet the production process does not
have negative environmental impact.
6.2. Engineering
6.2.1. Machinery and Equipment
The total cost of machinery and equipment is estimated at Birr 13.95 million, of which Birr 13.58
million is required in foreign currency, and the remaining Birr 0.375 million is in local currency.
The machinery & equipment required for the envisaged plant and corresponding cost is depicted
in Table 6.1.
Table 6.1 Machinery and Equipment Requirement & Cost
Sr. No. Description Qty. No. Cost (‘000
FC Birr)
LC TC
1 Crane (10 tons) for loading and 2 4,200 8,2000,00
2 unloading
Feeding conveyor 2 900 1,800
3 Feeding table 2 90 180
4 Corrugating machine 1 1,800 1,800
5 Correcting machine 1 1,350 1,350
6 cutting (rimming) machine 4 900 3,600
7 Furnace (oil fired) 2 180 360
8 Boiler (oil fired) 3 330 990
9 Other auxiliary equipment Req. 90 90
Sub-total 9,840 12,570
Bank, customs and insurance charges, 375 375
transport and handling costs
Total Landed Cost 9,840 375 12,945
6.2.2. Vehicle
The investment cost of transportation facilities for material handling and public transport service
is estimated to be Birr 4,200,500.00 [5%] required in local currency;

For the transportation of raw materials and finished products one mini truck will be procured.
For the project manager and administrative work one double cabin pick up (4WD), one Mini
Trucks and one Ambulance are purchased.

Table 6:2 Cost of Vehicles

Description Quantity Rate Amount(Br.)
Pickup(4WD) 1,894,200.00 1,678,396.00
1
Service bus 803,140.80 803,140.80
1
Ambulance 1 1,318,363.20 1,318,363.20
Total 4,200,500.00

6.2.3. Office Equipment’s

The investment cost of plant office furniture and equipment’s is Birr 281,200.00 [0.37%] in local
currency.
Table 6: 3, Office Equipment’s
S Description Measurement Qty. Unit cost in birr Total cost in Birr
1N Managerial tables Unit 5 2,600.00 13,000.00
 2 Managerial chairs Unit 5 1,950.00 9,750.00
3 Office table with chair Unit 7 1,350.00 9,450.00
4 Secretarial table with chairs Unit 2 1,450.00 2,900.00
5 Computer with chairs Unit 12 16,000.00 192,000.00
6 Shelf Unit 12,081.00 12,081.00
7 Filing cabinets Unit 1 1,500.00 1,500.00
8 Guest chairs Unit 11,719.00
9 Fax & Telephone machine Unit 5 1,300.00 1,300.00
1 Carpet and Curtain LS 1 23,000.00
0 Total 350,200.00

7. Land, Building and Civil Works

The total area of the envisaged wire Nail manufacturing plant estimated to be is 10,000 m 2 (1.00
hectare) with a length of 100 m and of 100 m width. Of the envisaged total area, the building
area including the main production area, administrative staff accommodation area, raw materials
storage area, finished items storage area all covers about 2758m 2 or 27.58%, Generator, furnace
house, guard house and water reservoir cover about 93 m2 or 0.93%. Roads, parking areas and,
walk ways account for 3220 m2 or 32.20 %. Open space accounts for 1,706 m 2 or 17.06 %. The
greenery accounts 2223 m2 or 22.23 %.
Accordingly, assuming a land lease cost of Birr 11 per m 2 the total land lease cost is estimated at
Birr 10,890,000 of which 10 % of the total or Birr 1,089,000 be paid in advance and the
remaining balance will be paid in equal installments.
The total estimated cost of the civil engineering works is Birr 29,520,000 [24.6%], of this total
amount Birr 76,332,000 or 63.61 % of the total is expected to be incurred for the construction of
Factory building including administrative & technical offices, raw material & finished items
storage.
7.1. Building and Civil work

To estimate the construction cost of buildings the prevailing contractors average unit cost of the
project area. Accordingly, building and construction cost is estimated as follows.
Table 7:1 Land use plan; Cost of Building and Construction:
No Description Unit Qty. Rate Amount
1 Site clearing and leveling M2 10,080 40.58 402,871.00
 2 Factory Buildings m.2 4000 3,095.40 18,039,077.60
3 Office building M2 600 3,095.40 1,773,835.00
4 Raw Material, Finished product Store and M2 2,200 3,095.40 6,494,040.00
showroom/Rig Metal/
5 Guardhouse.Shower and Toiler M2 60 180,390.00
3,095.40
,
6 Other supportive functions like Parking area, M2 3,140 1,142,440.00
internal roads, Greenery area etc/
, ,
7 Fencing mL 1,082,340.00
Ground Total 32,091,820.00

8. Organization Structure and Human Resource

The total personnel requirement of the plant is estimated to be 252 skilled, Semi-skilled and
unskilled. The project will have employees with an initial total annual salary of about Birr
4,330,750.00. The factory management should arrange for on job training with the machinery
suppliers before and during the installation & commissioning of the machineries at the premises
of the supplier for about one month.
However it should be emphasized that training should be viewed as ongoing activity of the
factory and not just one-time affair. Accordingly the estimated training cost is summarized to be
birr 165,250.00, similarly legal recruitment of employee demands coverage of some employees’
benefits such as pension contribution, medical allowance, and employee insurance that are
protected by the local labor law. Accordingly the estimated employees annual benefit cost is
summarized to be birr 617,250.00.
Table 8:1 Human Resources Requirement and Labor Costs (in Birr)
No. Position Held No. Monthly Monthly Annual
1 Manager 1 10,000.00 10,000.00 120,000.00
2 Secretary 3 3,000.00 3,000.00 108,000.00
3 Administration and Finance Head 1 6,000.00 6,000.00 72,000.00
4 Commercial Head 1 5,000.00 5,000.00 60,000.00
5 Technical Head 1 8,000.00 8,000.00 96,000.00
6 Production Head 1 7,000.00 7,000.00 84,000.00
7 Clerk 10 2,000.00 2,000.00 24,000.00
8 Messenger and Cleaner 6 800.00 4,800.00 57,600.00
9 Guard 6 1,000.00 6,000.00 72,000.00
 10 Production supervisor 3 5,000.00 15,000.00 180,000.00
11 Technicians 4 4,000.00 16,000.00 192,000.00
12 Operators 12 2,500.00 5,000.00 360,000.00
13 Assistant Operators 5 2,000.00 10,000.00 120,000.00
14 Mechanics and electricians 4 2,500.00 10,000.00 120,000.00
15 General Services 3 2,500.00 7,500.00 90,000.00
16 Personnel 1 2,500.00 2,500.00 30,000.00
17 Store Head 1 2,000.00 2,000.00 24,000.00
18 Cashier 1 2,000.00 2,000.00 24,000.00
19 Skilled labor 65 1000.00 65,000 780,000.00
20 Un skilled labor 90 900.00 81,000 972,000.00
Subtotal 3,464,600.00
Workers Benefit (25%) 866,150.00
Total 252 4,330,750.00

A. Training Requirement
On the job training of the operators would be enough for workers with technical back ground.
For this purpose an amount of Birr 150,000 would be required to train for all professionals and
other workers.
9. Financial and Economic Analysis
The financial analysis of the project (benefits and costs) is computed over seventeen years
assuming 18 months implementation period and 15 years of operation. In addition depreciation
and amortization, customs duty and income tax, repair and maintenance costs, terminal (salvage)
values well as working capital have been worked out based on the existing laws of the country
and standard assumptions. Accordingly, the major findings of the financial analyses are given
below.
The total investment cost of the project is estimated at Birr 120,000,000.00. From the total
investment cost the highest share (Birr 102,660,000 or 85.55%) is accounted by fixed investment
cost followed by initial working capital ((Birr 17,340,000 or 14.45%) and pre operation cost
(Birr 13,360,000 or 11.14%). The total annual cost of production and revenue at 100% capacity
utilization (year 4) is estimated at Birr 84.47 million and Birr 105.84 million respectively.
The project will generate a profit throughout its operation life. Annual net profit after tax will
increase from 8,401,000 during first year of operation to Birr 21,002,500.00 during the last year
of the project life.

The projected cash flow of the envisaged project shows that the project would generate positive
net cash flows throughout the operation years. Based on a 10% discount rate the Internal Rate of
Return (IRR) and Net Present Value (NPV) are computed to be 34.48% and Birr 116.59
respectively, indicating the viability of the project.
The initial investment cost of the project will be fully recovered within six years, which is a
reasonably short period of time. Other measures of profitability net profit as a % of sales
revenue, net profit to equity and net profit to total investment are also attractive.
The efficiency ratios like current assets to current liabilities and net cash flow to sales calculated
from the balance sheet show that the project is highly liquid with sound financial performance.
The breakeven point for sales and capacity utilization is computed at Birr 34,200,000.00 and
47% which are reasonable. Moreover, the sensitivity analysis carried out indicates that the
project could be viable at adverse conditions i.e. either a decrease of 16% in sales price or
increase of 22% in production cost or an increase of 40% in investment cost. In addition to its
financial viability the project has a number of economic and social benefits. The establishment of
the project has a foreign exchange saving effect to the economy.

Moreover, as a profitable venture it will contribute to the increase of Regional and Federal
government revenue through corporate, payroll and other taxes. The project will create direct
employment opportunities for about 304 persons. Furthermore, it creates conducive environment
for the rapid growth of service and trade sectors around the project site which in turn create
employment opportunity for a substantial number of persons. Moreover, the project will also
create forward linkage with the manufacturing sector.
Table 9:1 Summery of Fixed Costs
Item No. Description Estimated Cost (Br)
1 Building and construction 32,091,820.00
 2 Machinery and equipments 27,010,400.00
3 Vehicle . 4,200,500.00
Total 63,302,7200.00
Table 9:2 Repair and Maintenance

Item No. Description Cost estimate/year

% Value
1 Building and construction 2 641,836.4
2 Machinery and equipment 3 810,312.00
Vehicle 5 210,025.00
Total - 1,662,173.4

The financial analysis of the aluminum frames and profiles project is based on the data presented
in the previous chapters and the following assumptions:-
Construction period 1 year
Source of finance 30 % equity & 70% loan
Tax holidays 5 years
Bank interest 10%
Discount cash flow 10%
Accounts receivable 30 days
Raw material local 30 days
Raw material imported 120 days
Work in progress 1 day
Finished products 30 days
Cash in hand 5 days
Accounts payable 30 days
 Repair and maintenance 5% of machinery cost

9.1.Total Initial Investment Cost

The total investment cost of the project including working capital is estimated at Birr 84.01
million (see Table 9.3). From the total investment cost the highest share (Birr 41.75 million or
49.70%) is accounted by initial working capital followed by fixed investment cost (Birr 34.99
million or 41.66%) and pre operation cost (Birr 7.26 million or 8.64%). From the total
investment cost Birr 19.46 million or 23.16% is required in foreign currency.

Table 9.3 Initial Investment Cost (‘000 Birr)

Sr. No Cost Items Local Cost Foreign Cost Total Cost % Share
1 Fixed investment
1.1 Land Lease - - - -
1.2 Building and civil work 27,091.82 - 27,091.82 9.24
1.3 Machinery and equipment 5,550.40 19,460.00 25,010.40 28.95
1.4 Vehicles 4,200.50 4,200.50 2.77
1.5 Office furniture and equipment 350.00 350.00 0.65
Sub total 37,192.82 19,460.00 56,652.82 41.66
2 Pre operating cost *
2.1 Pre operating cost 1,102.69 1,102.69 2.09
2.2 Interest during construction 3,500.10 3,500.10 6.54
Sub total 4,602.79 4,602.79 8.64
3 Working capital ** 23,200.00 23,200.00 49.70
 Grand Total 64,995.61 19,460.00 84,010.51 100

* N.B Pre operating cost include project implementation cost such as installation, startup,
commissioning, project engineering, project management etc and capitalized interest during
construction.
** The total working capital required at full capacity operation is Birr 59.63 million. However,
only the initial working capital of Birr 41.76 million during the first year of production is
assumed to be funded through external sources. During the remaining years the working
capital requirement will be financed by funds to be generated internally (for detail working
capital requirement see Appendix 9.A.1).

9.2. Production Costs of the Project

Production cost of the project includes direct production cost and overhead or administrative
costs. The major cost items under this include salary of employee; cost of raw materials and
utilities, repair and maintenance, office supplies its medical and other miscellaneous expenses.
The annual production cost at full operation capacity is estimated at Birr 214.19 million (see
Table 9.4). The cost of raw material account for 94.45% of the production cost. The other major
components of the production cost are financial cost, depreciation and utility, which account for
2.47%, 1.75% and 0.51%, respectively. The remaining 0.82% is the share of repair and
maintenance, direct labor, labor overhead, cost of marketing and distribution and administration
cost. For detail production cost see Appendix 9.A.2.
Table 9.4 Annual Production Cost at Full Capacity (year three)
Items Cost ( 000 %
Raw Material and Inputs Birr)
188,516.50 94.45
Utilities 3,360.00 0.51
Maintenance and repair 1,662.17 0.18
Labor direct 4,330.75 0.15
Labor overheads 1,624.50 0.08
Administration Costs 309.43 0.14
Land lease cost - -
Cost of marketing and distribution 601.67 0.28
Total Operating Costs 200,405.02 95.78
Depreciation 3,746.07 1.75
Cost of Finance 5,290.89 2.47
 Total Production Cost 214,190.65 100

10. Financial Evaluation

10.1.Profitability
Based on the projected profit and loss statement, the project will generate a profit throughout its
operation life. Annual net profit after tax will grow from Birr 17.04 million to Birr 20.66 million
during the life of the project. Moreover, at the end of the project life the accumulated net cash
flow amounts to Birr 253.04 million. For profit and loss statement and cash flow projection see
Appendix 9.A.3 and 9.A.4, respectively.

10.2. Ratios
In financial analysis financial ratios and efficiency ratios are used as an index or yardstick for
evaluating the financial position of a firm. It is also an indicator for the strength and weakness of
the firm or a project. Using the year-end balance sheet figures and other relevant data, the most
important ratios such as return on sales which is computed by dividing net income by revenue,
return on assets (operating income divided by assets), return on equity (net profit divided by
equity) and return on total investment (net profit plus interest divided by total investment) has
been carried out over the period of the project life and all the results are found to be satisfactory.

10.3.Break-even Analysis
The break-even analysis establishes a relationship between operation costs and revenues. It
indicates the level at which costs and revenue are in equilibrium. To this end, the break-even
point for capacity utilization and sales value estimated by using income statement projection are
computed as followed.

Break Even Sales Value = Fixed Cost + Financial Cost = Birr 36,685,633
Variable Margin ratio (%)

Break Even Capacity utilization = Break even Sales Value X 100 = 14%
Sales revenue
 10.4.Pay-back Period
The pay -back period, also called pay-off period is defined as the period required for recovering
the original investment outlay through the accumulated net cash flows earned by the project.
Accordingly, based on the projected cash flow it is estimated that the project’s initial investment
will be fully recovered within 5 years.

11.5. Risk- Assessment

Rent buy (own) decision are also taken based on a risk management assessment even though the
cost benefit analysis doesn't justify acquiring situations taken in to account while considering this
method are: whether the process/ facility is critical to overall operation of the business and
required now and then.

10.5. Internal Rate of Return

The internal rate of return (IRR) is the annualized effective compounded return rate that can be
earned on the invested capital, i.e., the yield on the investment. Put another way, the internal rate
of return for an investment is the discount rate that makes the net present value of the
investment's income stream total to zero. It is an indicator of the efficiency or quality of an
investment. A project is a good investment proposition if its IRR is greater than the rate of return
that could be earned by alternate investments or putting the money in a bank account.
Accordingly, the IRR of this project is computed to be 34.48% indicating the viability of the
project.
10.6. Net Present Value
Net present value (NPV) is defined as the total present (discounted) value of a time series of cash
flows. NPV aggregates cash flows that occur during different periods of time during the life of a
project in to a common measuring unit i.e. present value. It is a standard method for using the
time value of money to appraise long-term projects. NPV is an indicator of how much value an
investment or project adds to the capital invested. In principle, a project is accepted if the NPV is
non-negative. Accordingly, the net present value of the project at 10% discount rate is found to
be Birr 116.59 million which is acceptable. For detail discounted cash flow see Appendix 9.A.5.
11. Economic and Social Benefits
The project can create employment for 252 persons. The project will generate Birr 63.19 million
in terms of tax revenue. The establishment of such factory will have a foreign exchange saving
effect to the country by substituting the current imports. The project will also create forward
linkage with the construction sub sector and also generates other income for the Government.
12. Monitoring and Evaluation
12.1. Monitoring
With support of executive bodies and decisions in line with agreed up on project as well as
guidelines between stakeholder bodies and the project owner. The project owner shall monitor all
activities [Land request processing, Land approval, Bank loan processing, Site Development,
Building and construction work, Preparation for service and service execution] required to make
the process of the project from beginning to end and deliver required commercial service
efficiently and effectively.
12.2. Evaluation
The project promoter evaluates the on-going process of the project at each phase of
implementation. Even if joint evaluation conducted at the end of the project, the engineering
estimation of bill of quantity is the basic tool of project success evaluation. This evaluation will
be based on the agreed upon project document.
 Appendix 9.A

FINANCIAL ANALYSES SUPPORTING TABLES

 Appendix 9.A.1 NET WORKING CAPITAL (in 000 Birr)
Items Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Year 11
Total inventory 25,203 28,153.40 30,422.58 32,691.75 32,691.75 32,691.75 32,691.75 32,691.75 32,691.75 32,691.75
Accounts receivable 7,742.18 8,844.03 9,945.89 11,047.75 11,049.18 11,049.18 11,049.18 11,049.18 11,049.18 11,049.18
Cash-in-hand 7.29 8.33 9.38 10.42 10.65 10.65 10.65 10.65 10.65 10.65
CURRENT ASSETS 32,952.69 35,005.77 39,377.84 43,749.92 43,751.58 43,751.58 43,751.58 43,751.58 43,751.58 43,751.58
Accounts payable 25.96 29.67 33.38 37.08 37.08 37.08 37.08 37.08 37.08 37.08
CURRENT 25.96 29.67 33.38 37.08 37.08 37.08 37.08 37.08 37.08 37.08
LIABILITIES
TOTAL WORKING 32,977.96 36,976.10 39,344.47 43,712.83 43,714.50 43,714.50 43,714.50 43,714.50 43,714.50 43,714.50
CAPITAL
 Appendix 9.A.2 PRODUCTION COST (in 000 Birr)
Item Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Year 11
Raw Material and Inputs 91,537 104,614 117,690 130,767 130,767 130,767 130,767 130,767 130,767 130,767
Utilities 494 565 635 706 706 706 706 706 706 706
Maintenance and repair 170 194 219 243 243 243 243 243 243 243
Labour direct 141 162 182 202 202 202 202 202 202 202
Labour overheads 74 84 95 105 105 105 105 105 105 105
Administration Costs 140 160 180 200 200 200 200 200 200 200
Land lease cost 0 0 0 0 17 17 17 17 17 17
Cost of marketing 350 350 350 350 350 350 350 350 350 350
and distribution
Total Operating Costs 92,906 106,128 119,351 132,573 132,590 132,590 132,590 132,590 132,590 132,590

Depreciation 2,179 2,179 2,179 2,179 2,179 225 225 225 225 225
Cost of Finance 0 3,517 3,078 2,638 2,198 1,759 1,319 879 440 0
Total Production Cost 95,085 111,825 124,608 137,390 136,968 134,574 134,134 133,694 133,255 132,815
 Appendix 9.A.3 NET INCOME STATEMENT (in 000 Birr)
Item Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year Year
10 11
Sales revenue 105,00 135,00 150,00 150,00 150,00 150,00 150,00 150,00 150,00 150,00
Less variable costs 092,556 0105,77 0119,00 0132,22 0132,22 0132,22 0132,22 0132,22 0132,22 0132,22

VARIABLE MARGIN 12,444 829,222 130,999 317,777 317,777 317,777 317,777 317,777 317,777 317,777

in % of sales revenue 11.85 21.65 20.67 11.85 11.85 11.85 11.85 11.85 11.85 11.85
Less fixed costs 2,529 2,529 2,529 2,529 2,546 592 592 592 592 592
OPERATIONAL MARGIN 9,915 26,692 28,470 15,248 15,231 17,185 17,185 17,185 17,185 17,185
in % of sales revenue 9.44 19.77 18.98 10.17 10.15 11.46 11.46 11.46 11.46 11.46
Financial costs 3,517 3,078 2,638 2,198 1,759 1,319 879 440 0
GROSS PROFIT 9,915 23,175 25,392 12,610 13,032 15,426 15,866 16,306 16,745 17,185
in % of sales revenue 9.44 17.17 16.93 8.41 8.69 10.28 10.58 10.87 11.16 11.46
Income (corporate) tax 0 0 0 3,783 3,910 4,628 4,760 4,892 5,024 5,155
NET PROFIT 9,915 23,175 25,392 8,827 9,123 10,798 11,106 11,414 11,722 12,029
in % of sales revenue 9.44 17.17 16.93 5.88 6.08 7.20 7.40 7.61 7.81 8.02
 Appendix 9.A.4 CASH FLOW FOR FINANCIAL MANAGEMENT ( in 000
Birr)
Item Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8
YearYear 9
Year Scrap
TOTAL CASH 15,074 138,831 135,004 150,004 150,000 150,000 150,000 150,000 150,000 10 11
150,000 150,000 49,965
INFLOW
Inflow funds 15,074 33,831 4 4 0 0 0 0 0 0 0 0
Inflow operation 0 105,000 135,000 150,000 150,000 150,000 150,000 150,000 150,000 150,000 150,000 0
Other income 0 0 0 0 0 0 0 0 0 0 0 49,965
TOTAL CASH 15,074 126,738 118,415 131,197 147,763 143,097 143,374 143,066 142,758 142,450 137,746 0
OUTFLOW
Increase in fixed assets 15,074 0 0 0 0 0 0 0 0 0 0 0
Increase in current assets 0 30,634 4,372 4,372 4,372 2 0 0 0 0 0 0
Operating costs 0 92,556 105,778 119,001 132,223 132,240 132,240 132,240 132,240 132,240 132,240 0
Marketing and 0 350 350 350 350 350 350 350 350 350 350 0
Distribution cost
Income tax 0 0 0 0 3,783 3,910 4,628 4,760 4,892 5,024 5,155 0
Financial costs 0 3,198 3,517 3,078 2,638 2,198 1,759 1,319 879 440 0 0
Loan repayment 0 0 4,397 4,397 4,397 4,397 4,397 4,397 4,397 4,397 0 0
SURPLUS (DEFICIT) 0 12,094 16,589 18,806 2,237 6,903 6,626 6,934 7,242 7,550 12,254 49,965
CUMULATIVE CASH 0 12,094 28,683 47,489 49,726 56,629 63,256 70,190 77,432 84,982 97,236 147,202
BALANCE
 Appendix 9.A.5 DISCOUNTED CASH FLOW (in 000 Birr)
Item Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9
Year Year 11 Scrap
TOTAL CASH INFLOW 0 105,000 135,000 150,000 150,000 150,000 150,000 150,000 150,000 10
150,000 150,000 49,965

Inflow operation 0 105,000 135,000 150,000 150,000 150,000 150,000 150,000 150,000 150,000 150,000 0

Other income 0 0 0 0 0 0 0 0 0 0 0 49,965

TOTAL CASH OUTFLOW 58,807 97,274 110,497 123,719 136,358 136,500 137,218 137,350 137,482 137,614 137,746 0

Increase in fixed assets 15,074 0 0 0 0 0 0 0 0 0 0 0

Increase in net working capital 30,608 4,368 4,368 4,368 2 0 0 0 0 0 0 0

Operating costs 0 92,556 105,778 119,001 132,223 132,240 132,240 132,240 132,240 132,240 132,240 0

Marketing and Distribution cost 0 350 350 350 350 350 350 350 350 350 350 0

Income (corporate) tax 0 0 0 3,783 3,910 4,628 4,760 4,892 5,024 5,155 0

NET CASH FLOW -58,807 7,726 24,503 26,281 13,642 13,500 12,782 12,650 12,518 12,386 12,254 49,965

CUMULATIVE NET CASH FLOW -58,807 -37,956 -13,453 12,828 26,470 39,971 52,753 65,403 77,921 90,307 102,562 152,527

Net present value -58,807 7,023 20,251 19,745 9,318 8,383 7,215 6,492 5,840 5,253 4,725 19,264

Cumulative net present value -58,807 -38,658 -18,408 1,337 10,655 19,038 26,253 32,745 38,584 43,837 48,562 67,826

NET PRESENT VALUE 67,826

INTERNAL RATE OF RETURN 34.48%
NORMAL PAYBACK 2 years