82.

PROFILE ON THE PRODUCTION OF

RECYCLED PLASTIC WASTE
 82-ii
TABLE OF CONTENTS

PAGE

I. SUMMARY 82-2

II. PRODUCT DESCRIPTION & APPLICATION 82-3

III. MARKET STUDY AND PLANT CAPACITY 82-3

A. MARKET STUDY 82-3
B. PLANT CAPACITY & PRODUCTION PROGRAM 82-6

IV. MATERIALS AND INPUTS 82-7

A. RAW & AUXILIARY MATERIALS 82-7
B. UTILITIES 82-7

V. TECHNOLOGY & ENGINEERING 82-7

A. TECHNOLOGY 82-7
B. ENGINEERING 82-8

VI. MANPOWER & TRAINING REQUIREMENT 82-12

A. MANPOWER REQUIREMENT 82-12
B. TRAINING REQUIREMENT 82-13

VII. FINANCIAL ANLYSIS 82-13

A. TOTAL INITIAL INVESTMENT COST 82-14
B. PRODUCTION COST 82-15
C. FINANCIAL EVALUATION 82-15
D. ECONOMIC & SOCIAL BENEFITS 82-17

I. SUMMARY

This profile envisages the establishment of a plant for the production of recycled plastic
waste with a capacity of 1,104 tons per annum. The recycled plastic wastes can be reused
alone or regenerated by mixing with fresh raw material in suitable ratio.

The country`s requirement of plastic resin is met through import. The present (2012)
demand for recycled plastic is estimated at 11,396 tons. The demand for the product is
projected to reach 20,189 tones and 39,345 tones by the years 2018 and 2025,
respectively.
 82-iii

The principal raw materials required are styrene and butadiene which have to be
imported.

The total investment cost of the project including working capital is estimated at Birr
14.93 million. From the total investment cost the highest share (Birr 6.57 million or
44.03%) is accounted by fixed investment cost followed by pre operation cost (Birr 4.40
million or 29.47%) and initial working capital (Birr 3.95 million or 26.50%). From the
total investment cost Birr 3.60 million or 24.09% is required in foreign currency.

The project is financially viable with an internal rate of return (IRR) of 24.52% and a net
present value (NPV) of Birr 11.15 million, discounted at 10%.

The project can create employment for 19 persons. The establishment of such factory will
have a foreign exchange saving effect to the country by substituting the current imports.
The project will create forward linkage with the plastic products manufacturing sub
sector and contribute to the mitigation of the adverse environmental impact created by
plastic waste. The project will also generate income for the Government in terms of tax
revenue and payroll tax.
 82-iv
II. PRODUCTION DESCRIPTION AND APPLICATION

The project envisaged here is the recycling of waste plastic materials such as material
made from PE, Polypropylene, PET, PVC, Polyurethane, and Polystyrene, etc.

The recycled plastic wastes can be reused alone or regenerated by mixing with fresh raw
material in suitable ratio. Products made with simple regenerated plastics alone belong to
low-grade products, acceptable only in developing countries while the latter can be
accepted by advanced countries. Some of the products made from simple regenerated
plastics alone include disposable products, such as, dish, knife and fork, and plastic bags.

III. MARKET STUDY AND PLANT CAPACITY

A. MARKET STUDY

1. Past Supply and Present Demand

The raw materials required by the local plastic products manufacturing sub sector i.e.
plastic resins are entirely imported. During the period 2009 – 2011, the local plastic
manufacturing sub sector has imported on average 67,235 tons of various type plastic
polymers of which the largest share (40.58%) is accounted by polyethylene and related
polymers followed by polypropylene and related polymers (19.48%) and polyvinyl
chloride and related polymers ( see Table 3.1).
 82-5
Table 3.1
IMPORT OF PLASTIC RESINS (TONS)
%
Type/ Year 2009 2010 2011 Average share
27,006 27,006 27,839 27,283
Polyethylene and related .1 .1 .1 .8 40.58
9,270 13,071 16,955 13,099
Polypropylene and related .3 .0 .7 .0 19.48
14,836 9,251 8,928 11,005
Polyvinyl chloride and related .3 .2 .2 .2 16.37
5,484 5,647 7,990 6,374
Ethylene-vinyl acetate and related .7 .7 .2 .2 9.48
3,042 2,454 2,447 2,648
Other polyethers .2 .9 .8 .3 3.94
1,215 1,971 4,081 2,422
POLY(ETHYLENE TEREPHTHALATE) .0 .3 .5 .6 3.60
82 1,152 1,143 1,041
polyesters 8.7 .7 .9 .7 1.55
93 49 94 79
Polymers of halogenated olefins 5.3 1.4 4.6 0.4 1.18
44 55 1,154 71
Alkyd resins 6.1 5.5 .5 8.7 1.07
2 1,152 34 51
Polystyrene and related polymers 9.0 .7 9.2 0.3 0.76
1,011 15 29 48
Acrylic .7 6.8 2.6 7.1 0.72
16 98 13 42
Polyamides 7.0 0.4 0.3 5.9 0.63
34 1 88 41
Epoxide resins 3.2 2.6 7.5 4.4 0.62
1
Polycarbonates 5.5 0.3 6.7 7.5 0.01
1
POLY(METHYL METHACRYLATE) 0.6 5.9 0.7 5.8 0.01
64,6 63,9 73,1 67,2
Total 22 11 72 35 100
Source: – Ethiopian Revenues & Customs Authority.

During the period 2005 – 2010 ,the annual gross value of the plastic manufacturing sub sectors`
out put at market price has increased from Birr 185.05 million to Birr 1.19 billion registering an
average annual growth rate of 13%. Accordingly, assuming that the demand for the raw material
required by the sub sector will grow at the same rate and taking the average supply during the
2009 -2011 period as a base the present (2012) level of demand for plastic resin is estimated at
75,975 tons. Moreover, conservatively assuming that 15% of the total demand for plastic resins
 82-6
can be substituted by recycled plastic, the present demand for recycled plastic is estimated at
11,396 tons.

2. Demand Projection

According to the GTP, during the period 2010/11 – 2014/15 the real GDP of the country (at a
base case scenario) is expected to grow at an average annual growth rate of 11.2%. Moreover,
during the same period the annual average planned targets of growth for the construction sector
is 20%. Accordingly, by considering the above factors the demand for recycled plastic is
conservatively assumed to grow at a rate of 10%. Projected demand is presented in Table 3.2.

Table 3.2
PROJECTED DEMAND (TONS)

Projecte
d
Year Demand
2013 12,536
2014 13,790
2015 15,169
2016 16,685
2017 18,354
2018 20,189
2019 22,208
2020 24,429
2021 26,872
2022 29,559
2023 32,515
2024 35,767
2025 39,343

3. Pricing and Distribution

Based on the current FOB price of HDPE resin in the world market and considering the cost of
freight, insurance, inland transport, transit charges, bank charges and other costs the
recommended factory gate price is Birr 19,311 per ton.
 82-7
The product of the envisaged factory is an intermediate product used in the manufacturing other
products and the end users are limited in number and their geographical distribution is limited
and are mostly located in or around major cities and towns of the country. Accordingly, by
taking the nature of the product and the characteristics of the end users direct distribution to end
users is selected as the most appropriate distribution channel.

B. PLANT CAPACITY AND PRODUCTION PROGRAM

1. Plant Capacity

According to the market demand projection for plastic products the current effective demand is
11,396 tones per year. The demand is projected to reach 16,685 and 20,189 in the years 2016 and
2018, respectively.

In spite of the available big demand, the limiting factor here is the raw material. As there is no
stabilized collection system in the town and the current trend is just damping, getting the
required amount of plastic waste will remain challenging for the waste recycling industry.

The maximum hourly production capacity of the plant is 230 kg. The plant is proposed to
operated 300 days per year based is double shift, and the total annual production capacity of the
plant will be 1,104 tones of palatalized plastic.

2. Production Program

The production program is scheduled in such a way that plant will produce at 80% and 90% of
its designed capacity in the first and second years, and attain 100% in the third year and then
after. The gradual capacity build up is envisaged considering the time required for skill
development and the market factors.
 82-8
IV. MATERIALS AND INPUTS

A. RAW MATERIALS

The raw material inputs are different types of thermoplastic wastes such as sorted hard PP, and
PE milk bottle, and beverage crates. The plastic waste will be collected and sorted into different
categories based on the types of the material they are made from and its physical properties such
as hardness and softness.

The annual quantity of waste plastic to be processed at full capacity would be 1,104 tones. It is
assumed that the cost recovered waste plastic will be Birr 13 per kg and the total annual cost of
the raw material (recovered plastics) is estimated to be Birr 14.352 million.

B. UTILITIES

The required utilities for the envisaged plant are electricity and water. Water is used for cooling
purposes and cleaning/washing the raw material. The rate of utilities consumption is 260KW,
110V-220V, of electricity and 0.3 liter/hr of water. The total annual consumption of electricity is
estimated to be 1.284 MWH and similarly the total annual water required is 1,440 m3 .

The annual cost of electricity consumption is Birr 811,200 calculated with a cost rate of 0.58
Birr/KWH. In the same way, the total annual cost of water is Birr 14,300 calculated with a cost
rate of 10 Birr/m3. Therefore, the total annual cost of electricity and water is estimated to be Birr
825.60 thousands.

V. TECHNOLOGY AND ENGINEERING

A. TECHNOLOGY

1. Process Description

The process for recovering plastic wastes comprises following main steps:
 Sorting,
 Crushing,
 Washing,
 Dehydrating and drying,
 82-9
 Palletizing, and
 Processing to form products.

Among which, sorting is the critical step, plastic wastes must be sorted type by type, such as PE,
PP and PVC, the higher the homogeneity of the sorted plastic waste is, the better it is for
subsequent steps. In case of unclear cut sorting or the plastic garbage contaminated with
laminated material, such as aluminum foil, or draft paper, the producing process will not proceed
anymore.

2. Environmental Impact

Plastic waste is not biodegradable material and the accumulation of the plastic waste on the
environment has already become the great concern for the environment. Collecting and recycling
used plastic material reduce the quantity of plastic waste and therefore it has positive effect in
creating better environment for living. Besides, the process of plastic waste recycling does not
have any adverse effect on the environment.

B. ENGINEERING

1. Machinery and Equipment

The total cost of machinery and equipment is estimated at Birr 4.5 million, of which Birr 3.6
million will be required in foreign currency. The list of machinery and equipment required and
cost estimated are shown in Table 5.1.

Table 5.1
 82-10
LIST OF MACHINERY AND EQUIPMENT AND COST

Description Qty

Crusher (combined with screw type 1

automatic washing machine)

Washing tank 1

Screw type conveyor 1

Automatic dehydrating machine 1

Automatic drying machine 1

Twin palletizing machine (including 1

main extruder, co-extruder, and cutting
device)

Storage hopper and pneumatic automatic 1

pellet conveying device

2. Land, Building and Civil Works

The total land requirement for the envisaged plant is 1,000 m 2 with a built -up area of 450 m2.
The total estimated building cost based on a rate of Birr 5,000/ m2 is Birr 1.35 million.

According to the Federal Legislation on the Lease Holding of Urban Land (Proclamation No.
721/2004) in principle, urban land permit by lease is on auction or negotiation basis, however,
the time and condition of applying the proclamation shall be determined by the concerned
regional or city government depending on the level of development.

The legislation has also set the maximum on lease period and the payment of lease prices. The
lease period ranges from 99 years for education, cultural research health, sport, NGO , religious
and residential area to 80 years for industry and 70 years for trade while the lease payment
period ranges from 10 years to 60 years based on the towns grade and type of investment.

Moreover, advance payment of lease based on the type of investment ranges from 5% to
10%.The lease price is payable after the grace period annually. For those that pay the entire
amount of the lease will receive 0.5% discount from the total lease value and those that pay in
 82-11
installments will be charged interest based on the prevailing interest rate of banks. Moreover,
based on the type of investment, two to seven years grace period shall also be provided.

However, the Federal Legislation on the Lease Holding of Urban Land apart from setting the
maximum has conferred on regional and city governments the power to issue regulations on the
exact terms based on the development level of each region.

In Addis Ababa, the City’s Land Administration and Development Authority is directly
responsible in dealing with matters concerning land. However, regarding the manufacturing
sector, industrial zone preparation is one of the strategic intervention measures adopted by the
City Administration for the promotion of the sector and all manufacturing projects are assumed
to be located in the developed industrial zones.

Regarding land allocation of industrial zones if the land requirement of the project is below
5,000 m2, the land lease request is evaluated and decided upon by the Industrial Zone
Development and Coordination Committee of the City’s Investment Authority. However, if the
land request is above 5,000 m2 the request is evaluated by the City’s Investment Authority and
passed with recommendation to the Land Development and Administration Authority for
decision, while the lease price is the same for both cases.

Moreover, the Addis Ababa City Administration has recently adopted a new land lease floor
price for plots in the city. The new prices will be used as a benchmark for plots that are going to
be auctioned by the city government or transferred under the new “Urban Lands Lease Holding
Proclamation.”

The new regulation classified the city into three zones. The first Zone is Central Market District
Zone, which is classified in five levels and the floor land lease price ranges from Birr 1,686 to
Birr 894 per m2. The rate for Central Market District Zone will be applicable in most areas of the
city that are considered to be main business areas that entertain high level of business activities.

The second zone, Transitional Zone, will also have five levels and the floor land lease price
ranges from Birr 1,035 to Birr 555 per m2 .This zone includes places that are surrounding the city
and are occupied by mainly residential units and industries.

The last and the third zone, Expansion Zone, is classified into four levels and covers areas that
are considered to be in the outskirts of the city, where the city is expected to expand in the future.
 82-12
The floor land lease price in the Expansion Zone ranges from Birr 355 to Birr 191 per m 2 (see
Table 5.2).

Table 5.2
NEW LAND LEASE FLOOR PRICE FOR PLOTS IN ADDIS ABABA
Floor
Zone Level Price/m2
1st 1686
2nd 1535
Central Market
District 3rd 1323
4th 1085
5th 894
1st 1035
2nd 935
Transitional zone 3rd 809
4th 685
5th 555
1st 355
2nd 299
Expansion zone
3rd 217
4th 191

Accordingly, in order to estimate the land lease cost of the project profiles it is assumed that all
new manufacturing projects will be located in industrial zones located in expansion zones.
Therefore, for the profile a land lease rate of Birr 266 per m 2 which is equivalent to the average
floor price of plots located in expansion zone is adopted.

On the other hand, some of the investment incentives arranged by the Addis Ababa City
Administration on lease payment for industrial projects are granting longer grace period and
extending the lease payment period. The criterions are creation of job opportunity, foreign
exchange saving, investment capital and land utilization tendency etc. Accordingly, Table 5.3
shows incentives for lease payment.
Table 5.3

INCENTIVES FOR LEASE PAYMENT OF INDUSTRIAL PROJECTS

 82-13
Payment Down
Grace Completion Paymen
Scored Point Period Period t

Above 75% 5 Years 30 Years 10%

From 50 - 75% 5 Years 28 Years 10%

From 25 - 49% 4 Years 25 Years 10%

For the purpose of this project profile, the average i.e. five years grace period, 28 years payment
completion period and 10% down payment is used. The land lease period for industry is 60
years.

Accordingly, the total land lease cost at a rate of Birr 266 per m 2 is estimated at Birr 266,000 of
which 10% or Birr 26,600 will be paid in advance. The remaining Birr 239,400 will be paid in
equal installments with in 28 years i.e. Birr 8,550 annually

VI. HUMAN RESOURCE AND TRAINING REQUIREMENT

A. HUMAN RESOURCE REQUIREMENT

The project creates direct job opportunity for about 19 persons. The annual cost of labor is
estimated at Birr 480,000. The required human resource list and the corresponding costs are
shown in Table 6.1.

Table 6.1
HUMAN RESOURCE REQUIREMENT AND COST

Sr. Description No. of Monthly Annual

 82-14
No. Person Salary Salary
(Birr) (Birr)
1 Manager 1 7,000 84,000
2 Secretary/accountant 1 3,000 36,000
3 Sales Person 1 3,000 36,000
4 Supervisor 2 4,000 48,000
5 Technician 2 6,000 2,000
6 Operator 2 4,000 48,000
 7 Manual Sorting 6 9,000 108,000
8 Guards 4 4,000 48,000
  Sub-total 19 40,000 480,000
Employees benefit(25% 120,000
of basic salary)
Grand Total 600,000

B. TRAINING REQUIREMENT

The project does not require special technical know-how and training is not proposed.

VII. FINANCIAL ANALYSIS

The financial analysis of the waste plastic recycling 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 3 years
Bank interest 10%
Discount cash flow 10%
Accounts receivable 30 days
Raw material local 30 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

A. TOTAL INITIAL INVESTMENT COST

The total investment cost of the project including working capital is estimated at Birr 14.93
million (see Table 7.1). From the total investment cost the highest share (Birr 6.57 million or
 82-15
44.03%) is accounted by fixed investment cost followed by pre operation cost ( Birr 4.40 million
or 29.47%) and initial working capital (Birr 3.95 million or 26.50%). From the total investment
cost Birr 3.60 million or 24.09% is required in foreign currency.

Table 7.1
INITIAL INVESTMENT COST ( ‘000 Birr)
Sr. Local Foreign Total %
No. Cost Items Cost Cost Share
1 Fixed investment    
Cost    
1.1 Land Lease 26.60   26.60 0.18
1.2 Building and civil work 1,350.00   1,350.00 9.04
1.3 Machinery and equipment 900.00 3,600.00 4,500.00 30.12
1.4 Vehicles 450.00   450.00 3.01
1.5 Office furniture and equipment 250.00   250.00 1.67
Sub- total 2,976.60 3,600.00 6,576.60 44.03
2 Pre operating cost *        
2.1 Pre operating cost 3,425.00   3,425.00 22.93
2.2 Interest during construction 977.24   977.24 6.54
Sub- total 4,402.24   4,402.24 29.47
3 Working capital 3,958.98   3,958.98 26.50
Grand Total 11,337.83 3,600.00 14,937.83 100

* 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 4.93 million. However,
only the initial working capital of Birr 3.95 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 7.A.1).

B. PRODUCTION COST

The annual production cost at full operation capacity is estimated at Birr 19.35 million (see Table
7.2). The cost of raw material account for 74.14% of the production cost. The other major
components of the production cost are depreciation, financial cost and utility which account for
 82-16
9.06%, 4.86% and 4.27%, respectively. The remaining 7.67% is the share of labor, repair and
maintenance, labor overhead and administration cost. For detail production cost see Appendix
7.A.2.

Table 7.2

ANNUAL PRODUCTION COST AT FULL CAPACITY (YEAR THREE)

Items Cost
(in 000 Birr) %
Raw Material and Inputs 14,350.00 74.14
Utilities 825.60 4.27
Maintenance and repair 135.00 0.70
Labor direct 480.00 2.48
Labor overheads 120.00 0.62
Administration Costs 250.00 1.29
Land lease cost - -
Cost of marketing and distribution 500.00 2.58
Total Operating Costs 16,660.60 86.08
Depreciation 1,754.00 9.06
Cost of Finance 940.59 4.86
Total Production Cost 19,355.19 100

C. FINANCIAL EVALUATION

1. Profitability

Based on the projected profit and loss statement, the project will generate a profit through out its
operation life. Annual net profit after tax will grow from Birr 1.31 million to Birr 3.19 million
during the life of the project. Moreover, at the end of the project life the accumulated net cash
flow amounts to Birr 27.41 million. For profit and loss statement and cash flow projection see
Appendix 7.A.3 and 7.A.4, respectively.

2. Ratios
 82-17
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.

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.

Brake -Even Sales Value = Fixed Cost + Financial Cost = Birr 9,316,860
Variable Margin ratio (%)

Brake-Even Capacity utilization = Break -even Sales Value X 100 = 44%

Sales revenue

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 4 years.

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
 82-18
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 24.52 % indicating the viability of the
project.

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 11.15
million which is acceptable. For detail discounted cash flow see Appendix 7.A.5.

D. ECONOMIC AND SOCIAL BENEFITS

The project can create employment for 19 persons. The project will generate Birr 7.74 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 create forward linkage
with the plastic products manufacturing sub sector and contribute to the mitigation of the adverse
environmental impact created by plastic waste. The project will also generate income for the
Government in terms of payroll tax.
 82-19

Appendix 7.A

FINANCIAL ANALYSES SUPPORTING TABLES

 82-19

Appendix 7.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 2,870 3,229 3,588 3,588 3,588 3,588 3,588 3,588 3,588 3,588

Accounts receivable 1,119 1,254 1,388 1,388 1,389 1,389 1,389 1,389 1,389 1,389

Cash-in-hand 11 12 14 14 14 14 14 14 14 14

CURRENT ASSETS 4,000 4,495 4,990 4,990 4,990 4,990 4,990 4,990 4,990 4,990

Accounts payable 41 46 51 51 51 51 51 51 51 51

CURRENT LIABILITIES 41 46 51 51 51 51 51 51 51 51

TOTAL WORKING
CAPITAL 3,959 4,449 4,938 4,938 4,939 4,939 4,939 4,939 4,939 4,939

Appendix 7.A.2
 82-20

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 11,480 12,915 14,350 14,350 14,350 14,350 14,350 14,350 14,350 14,350
Utilities 660 743 826 826 826 826 826 826 826 826

Maintenance and repair 108 122 135 135 135 135 135 135 135 135
Labour direct 384 432 480 480 480 480 480 480 480 480

Labour overheads 96 108 120 120 120 120 120 120 120 120

Administration Costs 200 225 250 250 250 250 250 250 250 250

Land lease cost 0 0 0 0 9 9 9 9 9 9

Cost of marketing
and distribution 500 500 500 500 500 500 500 500 500 500

Total Operating Costs 13,428 15,045 16,661 16,661 16,669 16,669 16,669 16,669 16,669 16,669

Depreciation 1,754 1,754 1,754 1,754 1,754 79 79 79 79 79

Cost of Finance 0 1,075 941 806 672 537 403 269 134 0

Total Production Cost 15,182 17,874 19,355 19,221 19,095 17,286 17,151 17,017 16,883 16,748

Appendix 7.A.3
 82-21

INCOME STATEMENT ( in 000 Birr)

Item Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10
Sales revenue 17,055 19,186 21,318 21,318 21,318 21,318 21,318 21,318 21,318 21,318

Less variable costs 12,928 14,545 16,161 16,161 16,161 16,161 16,161 16,161 16,161 16,161
VARIABLE MARGIN 4,127 4,641 5,157 5,157 5,157 5,157 5,157 5,157 5,157 5,157

in % of sales revenue 24.20 24.19 24.19 24.19 24.19 24.19 24.19 24.19 24.19 24.19
Less fixed costs 2,254 2,254 2,254 2,254 2,263 588 588 588 588 588
OPERATIONAL
MARGIN 1,873 2,387 2,903 2,903 2,895 4,570 4,570 4,570 4,570 4,570
in % of sales revenue 10.98 12.44 13.62 13.62 13.58 21.44 21.44 21.44 21.44 21.44

Financial costs   1,075 941 806 672 537 403 269 134 0
GROSS PROFIT 1,873 1,312 1,963 2,097 2,223 4,032 4,167 4,301 4,435 4,570

in % of sales revenue 10.98 6.84 9.21 9.84 10.43 18.92 19.55 20.18 20.81 21.44
Income tax 0 0 0 629 667 1,210 1,250 1,290 1,331 1,371

NET PROFIT 1,873 1,312 1,963 1,468 1,556 2,823 2,917 3,011 3,105 3,199
in % of sales revenue 10.98 6.84 9.21 6.89 7.30 13.24 13.68 14.12 14.56 15.01
 82-22

Appendix 7.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 Year 9 Year 10 Year 11 Scrap
TOTAL CASH 10,00
INFLOW 2 22,032 19,191 21,323 21,318 21,318 21,318 21,318 21,318 21,318 21,318 6,753
10,00
Inflow funds 2 4,977 5 5 0 0 0 0 0 0 0 0

Inflow operation 0 17,055 19,186 21,318 21,318 21,318 21,318 21,318 21,318 21,318 21,318 0
Other income 0 0 0 0 0 0 0 0 0 0 0 6,753
TOTAL CASH 10,00
OUTFLOW 2 18,406 17,958 19,440 19,440 19,352 19,760 19,666 19,572 19,478 18,040 0
Increase in fixed 10,00
assets 2 0 0 0 0 0 0 0 0 0 0 0
Increase in current
assets 0 4,000 495 495 0 1 0 0 0 0 0 0

Operating costs 0 12,928 14,545 16,161 16,161 16,169 16,169 16,169 16,169 16,169 16,169 0
Marketing cost 0 500 500 500 500 500 500 500 500 500 500 0

Income tax 0 0 0 0 629 667 1,210 1,250 1,290 1,331 1,371 0

 82-23

Financial costs 0 977 1,075 941 806 672 537 403 269 134 0 0
Loan repayment 0 0 1,344 1,344 1,344 1,344 1,344 1,344 1,344 1,344 0 0
SURPLUS
(DEFICIT) 0 3,627 1,233 1,883 1,878 1,966 1,558 1,652 1,746 1,840 3,278 6,753
CUMULATIVE
CASH BALANCE 0 3,627 4,860 6,743 8,621 10,587 12,145 13,797 15,543 17,383 20,661 27,414
Appendix 7.A.5
DISCOUNTED CASH FLOW ( in 000 Birr)
Year
Item Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 10 Year 11 Scrap

TOTAL CASH INFLOW 0 17,055 19,186 21,318 21,318 21,318 21,318 21,318 21,318 21,318 21,318 6,753
Inflow operation 0 17,055 19,186 21,318 21,318 21,318 21,318 21,318 21,318 21,318 21,318 0
Other income 0 0 0 0 0 0 0 0 0 0 0 6,753
TOTAL CASH OUTFLOW 13,961 13,918 15,534 16,661 17,291 17,336 17,879 17,919 17,959 18,000 18,040 0
Increase in fixed assets 10,002 0 0 0 0 0 0 0 0 0 0 0
Increase in net working
capital 3,959 490 490 0 1 0 0 0 0 0 0 0
Operating costs 0 12,928 14,545 16,161 16,161 16,169 16,169 16,169 16,169 16,169 16,169 0
Marketing cost 0 500 500 500 500 500 500 500 500 500 500 0
Income tax   0 0 0 629 667 1,210 1,250 1,290 1,331 1,371 0
NET CASH FLOW -13,961 3,137 3,652 4,657 4,027 3,982 3,439 3,399 3,359 3,318 3,278 6,753
CUMULATIVE NET CASH
FLOW -13,961 -10,824 -7,172 -2,515 1,513 5,495 8,934 12,333 15,691 19,010 22,287 29,040
 82-24

Net present value -13,961 2,852 3,018 3,499 2,751 2,472 1,941 1,744 1,567 1,407 1,264 2,604
Cumulative net present value -13,961 -11,109 -8,091 -4,592 -1,841 632 2,573 4,317 5,884 7,291 8,555 11,158

NET PRESENT VALUE 11,158

INTERNAL RATE OF
RETURN 24.52%
PAYBACK 4 years
82-25