Project Proposal

of

Production of Sodium Lauryl Sulfate (SLS)

Promoter: KB Cosmetics

Mekele ,Tigray,Ethiopia
TABLE OF CONTENTS PAGE
I. SUMMARY 111-2
II.PRODUCT 111-2
DESCRIPTION &
APPLICATION
III. MARKET STUDY
AND PLANT CAPACITY
A. MARKET STUDY 111-3
B. PLANT CAPACITY & 111-5
PRODUCTION PROGRAM
IV. MATERIALS AND 111-5
INPUTS
A. RAW & AUXILIARY MATERIALS 111-5
B. UTILITIES 111-6
V. TECHNOLOGY & 111-6
ENGINEERING
A. TECHNOLOGY 111-6
B. ENGINEERING 111-7
VI. HUMAN RESOURCE & 111-11
TRAINING
REQUIREMENT
A. HUMAN RESOURCE 111-11
REQUIREMENT
B. TRAINING REQUIREMENT 111-11
VII. FINANCIAL ANLYSIS 111-12
A. TOTAL INITIAL INVESTMENT 111-13
COST
B. PRODUCTION COST 111-14
C. FINANCIAL EVALUATION 111-14
D. ECONOMIC AND SOCIAL 111-16
BENEFITS
I. EXECUTIVE SUMMARY

This profile envisages the establishment of a plant for the production of sodium lauryl
sulfate(SLS) with a capacity of 450,000 tons per annum.Sodium lauryl sulfate(SLS) is used in
manufacturing of hand wash soap, Shampoo production, liquid laundry soap and detergents, Skin
cream, tooth paste and other various cosmetics products, etc.

The demand for Sodium lauryl sulfate(SLS) is entirely met through import from the international
market in abroad.The present (2020) demand for Sodium lauryl sulfate(SLS) at national level is
estimated more more than 350,000 tons. The National demand for Sodium lauryl sulfate(SLS) is
projected to reach 550,000 tons and 950,000 tons by the year 2022 and 2025, respectively.

The principal raw material required by the envisaged plant is Fatty Alcohol (fatty alcohol-
polyoxyethylene ether) or oil seeds and caustic soda and sulfur or sulfur tri oxide(S0 3) which are
available in both in the local and international market .

The total investment cost of the project including working capital is estimated at Birr 30.00
million. From the total investment cost the highest share (Birr 25.5million or 85%) is accounted
by fixed investment cost followed by pre operation cost (Birr 3.3 million or 11%) and initial
working capital (Birr 1.2 million or 4%). From the total investment cost Birr 15 million or 50 %
is required in foreign currency.

The project is financially viable with an internal rate of return (IRR) of 34.62% and a net present
value (NPV) of Birr 76.5 million, discounted at 10%.

The project can create employment opportunity for 225 persons.The project will create backward
linkage with the oil seeds producers agriculture sector and forward linkage with the
manufacturing sector of soap and detergent, shampoo and cosmetics industries and also generate
income for the Government in terms of tax revenue and payroll tax which plays its own role for
increasing the national GDP and GNP of the country.
II. PRODUCT DESCRIPTION AND APPLICATION

SLS is an anionic detergent and surfactant found in many personal care products (soaps and
detergents, shampoos, cosmetics, toothpaste etc.).
SLS is an inexpensive and very effective for cleaning, emulsifying, wetting, solubilizing and
foaming. With good solvency, wide compatibility, strong resistance to hard water, high
biodegradation, and low irritation to skin and eye, it is widely used in liquid detergent, such as
dishware, shampoo, bubble bath and hand cleaner, etc. SLS can also be used in washing powder
and detergent for heavy dirty. Using SLS to replace LAS, phosphate can be saved or reduced,
and general dosage of active matter is reduced. In textile, printing and dyeing, oil and leather
industries, it is the lubricant, dyeing agent, cleaner, foaming agent and degreasing agent.

III. MARKET STUDY AND PLANT CAPACITY

A. MARKET STUDY
1. Past supply and Present Demand

There is no available data that indicates SLS manufacturing factory in Ethiopia. However, at
national level on average the annual demand for SLS during the period 2016-2019 was 370,250
tons (see Table 3.1).Therefore, still the above annual national demand for SLS and other related
inputs is supplied through import from abroad.
Table 3.1
ANNUAL DEMAND OF SLS AT NATIONAL LEVEL

YEAR Production(Tons)
2011 150,394
2012 175,955
2013 198,450
2014 215,075
2015 250,326
2016 270,350
2017 285,968
2018 300,500
2019 325,075
2020 350,000

Source: Report on Import and Export by Ministry of trade and industry.

In order to estimate the current level of demand for Sodium lauryl sulfate(SLS) in ethiopia, the
following assumptions are used.
- The average annual import of Sodium lauryl sulfate(SLS) over the latest three years (2018 –
2020) approximates present level of demand for SLS at national level; and

- Due to the increased number of manufacturing companies of soaps, detergents and cosmetics
industries than ever before 50% of annual national demand for Sodium lauryl sulfate(SLS) is
supplied through import from abroad.

Accordingly, based on the above assumptions the present level of annual demand for Sodium
lauryl sulfate (SLS) in Ethiopia is estimated at 325,192 tons.

2. Projected Demand

The rapid development manufacturing industries of hand wash soap,Shampoo production, liquid
laundry soap and detergents, Skin cream, tooth paste and other various cosmetics products, etc
has created high demand for Sodium lauryl sulfate (SLS). The demand for Sodium lauryl sulfate
(SLS) is directly related with the growth in the Manufacturing sector that in turn depends on the
overall economic development of the country.
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 and in order to be conservative a growth rate
of 10% which is slightly lower than the expected growth rate of the country’s GDP during the
GTP period (2011 – 2015) is used.
Based on the above assumption and using the estimated present demand as a base the projected
demand for Sodium lauryl sulfate (SLS) is shown in Table 3.2.
Table 3.2
PROJECTED DEMAND SODIUM LAURYL SULFATE (tons)

YEAR Production(Tons)
2021 425,236
2022 550,175
2023 672,320
2024 805,215
2025 950,000
2026 1,000,255
2027 1,125,000
2028 1,175,250
2029 1,300,125
2030 1,500,750
 3. Pricing and Distribution
The current price of the imported Sodium lauryl sulfate (SLS) in a whole basis sales is Birr
105/kg. Accordingly, a factory-gate price of Birr 80/kg is considered for the product of the
envisaged plant. With regard to distribution, the plant can sell its product directly to users
through various distribution channels, agents,whole sellers or to retailers that purchase from
production site using their own means of transportation.

B. PLANT CAPACITY AND PRODUCTION PROGRAMME

1. Plant Capacity
Based on the demand projection indicated earlier, the proposed plant will have a capacity to
produce 450,000 tons of Sodium lauryl sulfate (SLS) in various sizes per annum.
2. Production Programme
The plant will produce 80% of its capacity during the first year, 90% in the second year and full
capacity in the third year and then after. The plant will operate 300 days in a year and one shift
of 8 hours per day.
IV. RAW MATERIALS AND UTILITIES
A. RAW MATERIALS
The raw material used to produce Sodium lauryl sulfate (SLS) is Fatty Alcohol (fatty alcohol-
polyoxyethylene ether) or oil seeds and caustic soda and sulfur or sulfur tri oxide (S0 3) which are
available in both in the local and international market.
The annual raw material requirement at full operation capacity of the plant and the corresponding
cost estimates are shown in Table 4.1.

Table 4.1
ANNUAL CONSUMPTION OF RAW MATERIALS AND COST
Sr.No Description Qty Cost(‘000 Birr)
FC LC Total
1 Royality (3% of gross sales) 2,424.2 2,424.2
2 Custic Soda Lump-sum 476.00 476.00
Total 476.00 2,424.2 2900.2
B. UTILITIES
Utilities required by the plant include electricity, water and fuel oil. The total cost of utilities is
estimated at Birr 825,000 ( See Table 4.2).

Table 4.2
ANNUAL CONSUMPTION OF UTILITIES

Sr. No. Items Qty Cost Birr

1 Electricity (KWh) 150,000 125,000
2 Water (m3 ) 25,000 250,000
3 Heavy Fuel Oil (lt) 30,000 450,000
Total 825,000

V. TECHNOLOGY AND ENGINEERING

A. TECHNOLOGY
1. Production Process
The proposed product process details like Process description, Material Balance and Chemical
reactions for each grade of products are as below.
The manufacturing of Surfactants and Speciality Surfactants like Sodium lauryl sulfate (SLS)
involves a major process which is SO3 Gas Generation for which the company has a separate
plant. The SO3 gas is used at a primary stage of the process. The manufacturing process and
mass balance for SO3 Gas Generation is shown below along with the manufacturing process,
chemical reactions and mass balance for each product.
1.1 SO3 GAS GENERATION
1.1.2 MANUFACTURING PROCESS
Raw Sulfur is available in solid form. This is melted in a melter. The molten sulfur is fed to the
burner along with dry air. The liquid sulfur is oxidized to Sulfur dioxide.
Sulfur dioxide is cooled to ~400 - 450oC and passed through Vanadium pentoxide catalyst bed
where SO2 is converted to SO3.
This SO3 is further provided to reactors for carrying out sulfonation and sulfation reactions to
produce Surfactants or specialty surfactants like Sodium lauryl sulfate (SLS). This is
intermediate product. It is produced and used instantaneously.
2. Environmental Impact
Specific information regarding pollutants emitted from SLS manufacturing was not found. The
environmental impact Assessment Agency (EIPA) evaluated emissions from soap and detergent
manufacturers and identified three potential air pollutant concerns: odor (e.g., from the sulfonic
acids and salts), fine detergent particles, and volatile organic compounds (VOCs) (e.g., solvents).
When applied soils SLS is biodegradable and may adsorb to soil particles or associate with soil
water. The rate of biodegradation in soils depends on the presence of air, soil characteristics,
diversity and acclimation status of the bacterial cultures, temperature, and other factors.

SLS is biodegradable in surface waters, ground water, and sediments. Biodegradation in water
ranged from 45 to 95 percent biodegradation within 24 hours. SLS’s class of anionic surfactant
—linear alkyl sulfonates—was not among the anionic surfactant classes found to be persistent in
studies of sewage effluent.Products of SLS biodegradation are carbon dioxide or saturated fatty
acids. SLS’s surface activity is lost in the step of its biodegradation pathway.

B. ENGINEERING
1. Machinery and Equipment
The total investment cost of the project including working capital is estimated at Birr 30.00
million. Total cost of machinery and equipment (Capital goods) is Birr 25.5million or 85%
which is accounted by fixed investment cost, of which Birr 20 million or 66.6% is required in
foreign currency. The required plant machinery and equipment and the corresponding cost are
indicated in Table 5.1.

Table 5.1
MACHINERY AND EQUIPMENT REQUIREMENT AND COST

Sr.No. Description Estimated Cost (Birr)

1 Plant and Machinery, land &Building 20,500,0000

2 Electrical Installations 250,000
3 Storage and Reactor tanks 4,500,000
4 Green Belt development 250,000
5 Project Management/Misc. 300,000
6 Effluent Treatment Plant 2,000,000
7 Safety Systems/Misc. 1,000,000
8 Operation Cost and Working Capital 1,200,000
Total 30,000,000
2. Land, Building and Civil Works
The total area required for the envisaged plant including provision for open space(green area)
and Effluent Treatment Plant is estimated to be within the range of 15,000-25,000 m2, out of
which 5000 m2 is a built-up area. The total cost of land, building and civil works is estimated at
Birr 12,500,000.
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
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 Tigray, 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 m 2,
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.
 Table 5.2
LEASE FLOOR PRICE FOR PLOTS IN ETHIOPIA
ZONE Level Floor Price/m2
1st 1686
2nd 1535
Central Market District 3rd 1325
4th 1085
5th 894
1st 1035
2nd 935
Transitional zone 3rd 809
4th 685
5th 555
1st 355
Expansion zone 2nd 299
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 m2 which is equivalent to the average
floor price of plots located in expansion zone is adopted.
Table 5.3
INCENTIVES FOR LEASE PAYMENT OF INDUSTRIAL PROJECTS
Scored Point Grace Period Payment Completion Down Payment
Period
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 period of lease for industry is 60 years.
VI. HUMANRESOURCE AND TRAINING REQUIREMENT
A. HUMANRESOURCE REQUIREMENT
The total manpower requirement for the envisaged project will be 225 persons. Details of labor
force & annual salary requirement are as indicated in Table 6.1.
B. TRAINING REQUIREMENT
Training by the machinery supplier should be given for two technical staff for two weeks during
erection & commissioning, such training is estimated to cost Birr 30,000.
Table 6.1
HUMANRESOURCE REQUIREMENT AND ANNUAL LABOUR COST
Sr. Description Req. Salary per Annual Salary
No. No. Month (Birr) (Birr)
1 Manger 1 8,000 96,000
2 Engineer 2 7500 180,000
3 Commercial staff 2 3,500 84,000
4 Administration 6 3,500 252,000
and finance staff
5 Technical staff 2 2,500 60,000
6 Skilled workers 4 2,500 120,000
7 Unskilled workers 208 1200 2,995,200
Sub-Total 225 308,600 Sub-Total
Benefits (15%) 555,480
Grand Total 4,258,680

VII. FINANCIAL ANALYSIS

The financial analysis of the aggregates project is based on the data presented in the previous
chapters and the following assumptions:-
Construction period 4 year
Source of finance 20 % equity & 80% loan
Tax holidays 5 years
Bank interest 14%
Discount cash flow 10%
Accounts receivable 30 days
Raw material local 30 days
Work in progress 5 days
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 Birr 30 million.
(see Table 7.1). From the total investment cost the highest share (Birr 25.5million or 85%) is
accounted by fixed investment cost followed by pre operation cost (Birr 3.3 million or 11%) and
initial working capital (Birr 1.2 million or 4%). From the total investment cost Birr 15 million or
50 % is required in foreign currency.

Table 7.1
INITIAL INVESTMENT COST ( ‘000 Birr)

Sr. Cost Items Local Cost Foreign Cost Total Cost % Share
No
1 Fixed investment
1.1 Land Lease 250,000 250,000 0.83
1.2 Building and civil 12,500,000 12,500,000 41.67
work
1.3 Machinery and 13,000,000 13,000,000 43.33
equipment
1.4 Vehicles 2,000,000 2,000,000 6.67
1.5 Office furniture and 100,000 100,000 0.33
equipment
Sub total 12,850,000 15,000,000 27,500,000 91.60
2 Pre operating cost *
2.1 Pre operating cost 250,000 250,000 0.83
2.2 Interest during 700,000 700,000 6.54
construction
Sub total 950,000 950,000 3.16
3 Working capital ** 1,200,000 1,200,000 4.00
Grand Total 15,000,000 15,000,000 30,00,000 100

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 5.5 million. However, only
the initial working capital of Birr 1.2 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 19.50 million (see Table
7.2). Depreciation account for 20.02% of the production cost. The other major components of the
production cost are the cost of raw material, financial cost and labor, which account for 29.75%,
8.48 and 8.19%, respectively. The remaining 25.05% is the share of marketing and distribution,
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 (Birr) %

Raw Material and Inputs 9,500,000 48.72
Utilities 825,000 4.2
Maintenance and repair 200,000 1.02
Labor direct 1,675,100 8.19
Labor overheads 250,000 1.28
Administration Costs 516,000 2.72
Land lease cost 250,000 1.28
Cost of marketing and 350,000 1.79
distribution
Total Operating Costs 450,000 2.3
Depreciation 3,903,900 20.02
Cost of Finance 1,653,600 8.48
Total Production Cost 19,500,000 100.00

C. FINANCIAL EVALUATION
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 ranges from Birr 15. million to Birr 18.5 million during
the life of the project. Moreover, at the end of the project life the accumulated net cash flow
amounts to Birr 250.5million. For profit and loss statement and cash flow projection see
Appendix 7.A.3 and 7.A.4, respectively.
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.

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 12,150,000
Variable Margin ratio (%)
Break Even Capacity utilization = Break even Sales Value X 100 = 27.5 %
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 2 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 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 34.62% 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 76.5
million which is acceptable. For detail discounted cash flow see Appendix 7.A.5. D.

D. ECONOMIC AND SOCIAL BENEFITS

The project can create employment for 225 persons. The project will generate Birr 25.5 million
in terms of tax revenue. The project will create backward linkage with the oil seed producers of
agriculture sector and forward linkage with the manufacturing sectors of Soap and detergents,
shampoos, hand washing soap, dish wash detergent, and other various cosmetics products and
also generate income for the Government in terms of payroll tax.
 Appendix 7.A
FINANCIAL ANALYSES SUPPORTING TABLES
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 Year
10 11
Total inventory 290.00 326.25 362.50 362.50 362.50 362.50 362.50 362.50 362.50 362.50
Accounts receivable 267.69 295.95 324.20 324.20 345.58 345.58 345.58 345.58 345.58 345.58
Cash-in-hand 15.70 17.67 19.63 19.63 23.19 23.19 23.19 23.19 23.19 23.19
CURRENT 573.39 639.86 706.33 706.33 731.26 731.26 731.26 731.26 731.26 731.26
ASSETS
Accounts payable 74.88 84.24 93.60 93.60 93.60 93.60 93.60 93.60 93.60 93.60
CURRENT 74.88 84.24 93.60 93.60 93.60 93.60 93.60 93.60 93.60 93.60
LIABILITIES
TOTAL 498.51 555.62 612.72 612.72 637.66 637.66 637.66 637.66 637.66 637.66
WORKING
CAPITAL

Appendix 7.A.2
PRODUCTION COST ( in 000 Birr)
Item Year Year Year Year Year Year Year Year Year Year
2 3 4 5 6 7 8 9 10 11
Raw Material 1,160 1,305 1,450 1,450 1,450 1,450 1,450 1,450 1,450 1,450
and Inputs
Utilities 422 474 527 527 527 527 527 527 527 527
Maintenance 418 470 522 522 522 522 522 522 522 522
and repair
Labour direct 481 541 601 601 601 601 601 601 601 601
Labour 72 81 90 90 90 90 90 90 90 90
overheads
Administration 160 180 200 200 200 200 200 200 200 200
Costs
Land lease 0 0 0 0 257 257 257 257 257 257
cost
Cost of 500 500 500 500 500 500 500 500 500 500
marketing and
distribution
Total 3,212 3,551 3,890 3,890 4,147 4,147 4,147 4,147 4,147 4,147
Operating
Costs
Depreciation 2,471 2,471 2,471 2,471 2,471 63 63 63 63 63
Cost of 0 1,120 980 840 700 560 420 280 140 0
Finance
Total 5,683 7,142 7,341 7,201 7,318 4,770 4,630 4,490 4,350 4,210
Production
Cost
 Appendix 7.A.3
INCOME STATEMENT ( in 000 Birr)

Item Year Year Year Year Year Year Year Year Year Year
2 3 4 5 6 7 8 9 10 11
Sales revenue 11,635 13,090 14,544 14,544 14,544 14,544 14,544 14,544 14,544 14,544
Less variable 2,712 3,051 3,390 3,390 3,390 3,390 3,390 3,390 3,390 3,390
costs
VARIABLE 8,923 10,038 11,154 11,154 11,154 11,154 11,154 11,154 11,154 11,154
MARGIN
in % of sales 76.69 76.69 76.69 76.69 76.69 76.69 76.69 76.69 76.69 76.69
revenue
Less fixed costs 2,971 2,971 2,971 2,971 3,228 820 820 820 820 820
OPERATIONAL 5,952 7,067 8,183 8,183 7,926 10,334 10,334 10,334 10,334 10,334
MARGIN
in % of sales 51.15 53.99 56.26 56.26 54.50 71.05 71.05 71.05 71.05 71.05
revenue
Financial costs 1,120 980 840 700 560 420 280 140 0
GROSS PROFIT 5,952 5,947 7,203 7,343 7,226 9,774 9,914 10,054 10,194 10,334
in % of sales 51.15 45.43 49.52 50.49 49.68 67.20 68.16 69.13 70.09 71.05
revenue
Income 0 0 0 2,203 2,168 2,932 2,974 3,016 3,058 3,100
(corporate) tax
NET PROFIT 5,952 5,947 7,203 5,140 5,058 6,842 6,940 7,038 7,136 7,234

Appendix 7.A.4
CASH FLOW FOR FINANCIAL MANAGEMENT ( in 000 Birr)

Item Yea Yea Yea Yea Yea Yea Yea Yea Yea Yea
r1 r2 r3 r4 r5 r6 r7 r8 r9 r 10
TOTAL 14,0 13,2 13,0 14,5 14,5 14,5 14,5 14,5 14,5 14,5 14,5 3,03
CASH 46 27 99 53 44 44 44 44 44 44 44 0
INFLOW
Inflow 14,0 1,59 9 9 0 0 0 0 0 0 0 0
funds 46 2
Inflow 0 11,6 13,0 14,5 14,5 14,5 14,5 14,5 14,5 14,5 14,5 0
operation 35 90 44 44 44 44 44 44 44 44
Other 0 0 0 0 0 0 0 0 0 0 0 3,03
income 0
TOTAL 14,0 4,80 6,13 6,33 8,33 8,44 9,03 8,94 8,84 8,74 7,24 0
CASH 46 4 8 7 3 0 9 1 3 5 7
OUTFLO
W
Increase in 14,0 0 0 0 0 0 0 0 0 0 0 0
fixed assets 46
Increase in 0 573 66 66 0 25 0 0 0 0 0 0
current
assets
Operating 0 2,71 3,05 3,39 3,39 3,64 3,64 3,64 3,64 3,64 3,64 0
costs 2 1 0 0 7 7 7 7 7 7
Marketing 0 500 500 500 500 500 500 500 500 500 500 0
and
Distribution
cost
Income tax 0 0 0 0 2,20 2,16 2,93 2,97 3,01 3,05 3,10 0
3 8 2 4 6 8 0
Financial 0 1,01 1,12 980 840 700 560 420 280 140 0 0
costs 8 0
Loan 0 0 1,40 1,40 1,40 1,40 1,40 1,40 1,40 1,40 0 0
repayment 0 0 0 0 0 0 0 0
SURPLUS 0 8,42 6,96 8,21 6,21 6,10 5,50 5,60 5,70 5,79 7,29 3,03
(DEFICIT) 3 1 7 1 4 5 3 1 9 7 0
CUMULA 0 8,42 15,3 23,6 29,8 35,9 41,4 47,0 52,7 58,5 65,8 68,8
TIVE 3 84 00 11 16 21 24 25 24 21 51
CASH
BALANCE

Appendix 7.A.5
DISCOUNTED CASH FLOW ( in 000 Birr)

Item Year Year Year Year Year Year Year Year Year Year
2 3 4 5 6 7 8 9 10 11
Item Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year
10
TOTAL CASH 0 11,635 13,090 14,544 14,544 14,544 14,544 14,544 14,544 14,544
INFLOW
Inflow 0 11,635 13,090 14,544 14,544 14,544 14,544 14,544 14,544 14,544
operation
Other income 0 0 0 0 0 0 0 0 0 0
TOTAL CASH 14,545 3,269 3,608 3,890 6,118 6,315 7,079 7,121 7,163 7,205
OUTFLOW
Increase in 14,046 0 0 0 0 0 0 0 0 0
fixed assets
Increase in net 499 57 57 0 25 0 0 0 0 0
working capital
Operating costs 0 2,712 3,051 3,390 3,390 3,647 3,647 3,647 3,647 3,647 3,647
Marketing and 0 500 500 500 500 500 500 500 500 500 500
Distribution cost
Income 0 0 0 2,203 2,168 2,932 2,974 3,016 3,058 3,100 0
(corporate) tax
NET CASH -14,545 8,366 9,481 10,654 8,426 8,229 7,465 7,423 7,381 7,339 7,297
FLOW
CUMULATIVE -14,545 -6,179 3,302 13,956 22,381 30,611 38,076 45,499 52,880 60,219 67,516
NET CASH
FLOW
Net present -14,545 7,605 7,836 8,004 5,755 5,110 4,214 3,809 3,443 3,112 2,813
value
Cumulative net -14,545 -6,940 -896 8,900 14,655 19,765 23,979 27,788 31,231 34,344 37,157
present value

NET PRESENT VALUE 38,325

INTERNAL RATE OF RETURN 34.62%
NORMAL PAYBACK 2 years