BACK GROUND

2.1 The Applicant

Applicant Name: ___________________________________
Nationality: Ethiopian
Address:-
The promoter: ______________
The project:- ______________
Contact person: ___________________________
Mobile:
Marital status: ______________________
Project type: ____________________________________
Project site: ______________________
Legal form of business: ____________________
Status of the business: New

2.2 Back ground of the promoter

______________________, the owner of the project, has engaged indifferent
business activities since 1980 was participating in cafeteria and recreational
business in last years. Presently the promoter is participating in hotel and
building materials shop.
The promoter has an experience to get a credit from banks to facilitate and
develop his business. He has been getting credits from Commercial Bank of
Ethiopia, Dashen Bank and Wogagen Bank and he had always returned the
loan at schedule
There fore, a promoter who has an experience and knowledge about
participating in business is also able to aground or grass root to develop for the
proposed project. Hence such development experiences of a promoter
undoubtedly contribute to expand in such kind of investment.
2.3 Introduction

Tigray, the northern part of Ethiopia, pass through an area of 53,638 sqkm
endowed with picturesque land features, the region with altitude that varies
from 600-2700 meters above sea level. Its population is estimates as about
more than 3.6 million.
Although the region was no achieved the expect development which initiated
external and internal factors, Tigray has also fertile agricultural land and
extremely hard workers of people
For example during the period of the Derg Regime, the region was severely
affected by man-made and natural calamites which once made the over all
national economy nearly collapse. For the present government, this being the
fact, rehabilitating the economy of the country as a whole and Tigray in
particular was no any easy task to accomplish after the demise of Derg. This
was seemed like an indigenous problem the Federal Government Ethiopia was
launch and formulated the market Economy to solve and tackle.
Parallel to that the Regional Government of Tigray also implemented the
federal policies by relating and comparing the ground and environment of the
region.
These policies and regulations which the region able to implemented were try
to appreciated the role of the private sector in developing the economy and
spared no effort to meet its equipments. These policies and regulations are like
facilitating infrastructures and providing land for investment with fair lease
base etc were created conducive environment for private sectors.
Due to this reason many private businesses are tried to invest in the region
indifferent business sectors .This also makes an out come to the economy
growth of the country to increases from year to year in general and the region
particular.
Although there are many business sectors tried to invest their capital and
resources in the proposed area and business type, they are not able to observe
the desire and need of the society both in quantity and quality. Particularly at
Alamata town, the project area, there is no even one similar business which
able to serve the consumer. The societies are getting services either in Mekelle
or Desie cities.
Therefore the promoter is planned to observe the excess demand and needs by
establishing modern laundry based on the expected needs and desires of the
society.
2.4 Justification

The promoter has the following justifications established his business in the
area of laundry.
 The western zone has a unique culture in wearing what locally it called
Gabi which should be washing by laundry.
 Service rendering business by its nature has a good market specifically
the laundry service is un exploited market.
 The region is introduced encourage able police which have an advantage
to attract private business and this make a linkage effect to the expected
project.
 The conducive and encourage able private business police have an
advantage to attract private business and this make a linkage effect to
the expected project.
 The population growth of the country indicates that growing constantly.
Hence, there must a corresponding growth in other social and
economical institution to cop up with the number of population.
 To invest his capital and knowledge in his own country to help the
people of Tigray in particular and the people of Ethiopia in general.
 To generate revenue and increase the government revenue by issuing
taxes.
2.5 Objective of the project
The primary objective of this sort of project proposal is to give more emphasize
on the participating in laundry business at Alamata town at full capacity by getting
bank loan which enable to play a vital role in social, economic and technical
development of the country and finally to generate profit to him.
III. MARKET STUDY
3.1 project description and application of the project
The proposed laundry service business in which established at a given building
will be expected to give services for gleaming blankets, Gabi, Bofe, sheets complete
cloth and other similar clothes.
Specifically:-

For Hotel and bar services: the promoter will plane to serve for clearing for
hotel blanket, sheets and other clothes
For Societies service: the envisaged project will have to serve for societies
who live in Alamata and its surrounding areas for their cultural clothes like
bofe , Gabi and try to serve for blanket , complete cloth and sheets
3.2 Demand and Supply Analysis
The main factors that are considered in the determination of the demand and
supply of project is the availability of hotels and bars , population growth
rate, the level of economy growth, the purchasing power of the society, service
rendering and location of the project, and culture are exampled
To analysis the market assessment of modern hotel there are certain indicators
to show the gap between the demand and supply.
To give some high light the consultancy tries to explain the gap using the
supply and demand approaches.
3.2.1 Demand analysis
The population growth in Wereda Alamata like the Tigray region, the
population growth rate shows that an increment by more than 3% annually.
The consultancy tries to take the analysis of the demand concept by assessing
the available of consumers in Wereda Alamata.
According the study conduct by the consultancy there are more than 142,000
populations at Wereda Alama-Ata.
Table: 3.2.1.1
Number of population Alama-Ata Wereda
Time Urban Rural Total
Recent 45000 97000 142000
Source: assessment conduct by the consultancy
In addition to that there are 938 and 500 employees in rural and urban
Wereda Alamata respectively.
There are also more than 600 traders available presently at Alamata town.

3.2.2 Supply analysis

The consultancy was assessing the availability of similar business in Alama-
Ata by visiting. Hence, there are no even one laundry services at Alamata
which serve the societies. The study show that the people who live in Alamata
tries to get laundry services either in Desie or /and Mekelle which far it from
more than 150,000 kilometers.
There fore, the above demand and supply analysis indicate that the proposed
project has no any competent and there is a gap between the demand and
supply.
3.2.3 Demand and Supply gap
To give a bird’s eye view the consultancy tried to show the demand and supply
gap in the following manner by giving the following assumptions.
The consultancy has tried to use the total population for indicating the
demand and supply gap.
Out of the total urban population 20% are assumed as house hold
Out of the total rural population 15%are assumed as house hold
There fore 9000 and 14550 house holds available in urban and rural
respectively.
To calculate the number and types of services the consultancy has taken in
account the following assumptions.
Assuming in the rural area there is one Bofe and one Blanket in one house
hold. Assuming to use laundry 1 times per year or blanket and two times for
Bofe and /or Gabi
Assuming also there are one Bofe cloth, one complete cloth, one blanket in
urban in one house hold. Assuming to use two times per a year
Assuming there are two hotels available with 10 beds each.
There fore they need to clean their blankets 3 times per a year.
Assuming:
The total population uses the laundry service
Area Number of Nature and quantity of laundry service
demanders rendering
Bofe /Gabi Complete Blanket
cloth /
urban 9000 18000 18000 18000
Rural 14550 29100 = 14550
Hotel 2 60

Assuming also out of the total demanders 50% will be expected to use laundry
services.
Table: 3.2.2.3
Supply and Demand Gap
Types of service Supply Demand Gap/
Excess demand
Bofe / gabi No one 23550 23550
Complete cloth No one 9000 9000
Blanket No one 16305 16305
3.3 Demand Projection
Before try to explain the demand projection of laundry hotel service let see the
main demand projections which are linked with it.
According to central stastics authority the population grew 3 and 4 in rural
and urban respectively. When we see the economic growth of the country
achieved more than 10 % consecutive for four years (Prime Minister Meles).
Thus such opportunity is making comparative advantage to the society to use
the laundry service to keep their health.
The consultancy has assumed in all nature of services will increase by 10 %
annually

Table 3.3.1
The projected demand laundary service for ten years
Year Demand projection

Bofe / gabi Complete Blanket

cloth
2001 23550 9000 16305
2002 25905 9900 17936
2003 28495 10890 19730
2004 31345 11979 21703
2005 34480 13177 23873
2006 37928 14495 26260
2007 41721 15945 28886
2008 45893 17545 31775
2009 50482 19300 34953
2010 55530 21230 38453
3.4 pricing
Pricing decision has strategic and corner stone importance for any organization
to continue and exist in its operation. In most cases there may be above the
upper and below limits prices quote by the owners. In both cases the pricing
systems may be not preferable. To set a price the market structure and
government policies are important.
In view of the above condition and facts the market based approach will be
adopted to estimate or quote price of the project.
To calculate the average prices this taken the average current price of existing
gleaming prices which are in operation in Tigray region.
Assumption:
Prices for :
Gabi /bofe Birr 4.00
Complete cloth Birr 16.00
Blanket Birr 50

3.6 The plant capacity & production program

3.6.1 Plant capacity
The proposed project can be the capacity to gleaming 12 kilo and can be
serve per day I hotel project building is ground plus two: under this there
are 26 rooms classified as first class with private toilet and shower and 6
rooms including under the service rooms as second class with common
toilet and shower. There is one class in the ground with 8.50x9 Meters
which uses for restaurant and bar. There is one modern kitchen, two guest
rooms and one a recreational room. There will be also expecting to exist
under the roof slap one large class which expects to hold more than 40
heads.
 3.6.2 Program
The operation program of the envisaged project has been worked out by
assuming to facilitate and completed all necessary equipment and furniture
and fixture and the remaining building for the coming 6 months during the
Millennium of Ethiopia.

3.6.3 Expected Revenue

Based on the envisaged of the hotel capacity and program and level of price,
the expected revenue of the project will be Birr 1426695.00 for the first
operational period.

Table 3.6.3.1
Expected revenue for proposed project pension for
consecutive ten years

Year First class Second class Total

Qty Price Year Total Qty Price Year Total revenue in
birr
2000 7 60.00 365 153300.00 6 40.00 365 87600.00 240900.00
2001 26 60.00 365 569400 6 40.00 365 87600.00 657000.00
2002 26 60.00 365 569400 6 40.00 365 87600.00 657000.00
2003 26 60.00 365 569400 6 40.00 365 87600.00 657000.00
2004 26 60.00 365 569400 6 40.00 365 87600.00 657000.00
2005 26 60.00 365 569400 6 40.00 365 87600.00 657000.00
2006 26 60.00 365 569400 6 40.00 365 87600.00 657000.00
2007 26 60.00 365 569400 6 40.00 365 87600.00 657000.00
2008 26 60.00 365 569400 6 40.00 365 87600.00 657000.00
2009 26 60.00 365 569400 6 40.00 365 87600.00 657000.00

Assumptions for sales of beverage and soft drinks

1. Assuming the proposed project to sale 120 bottles of beer per day
2. Assuming the proposed project to sale 50 bottles of soft drinks per day
3. There are 365 working days
4. The selling volume will expect to increase by 10 % per year

Table 3.6.3.2
Expected revenue for soft drink and beverage
For consecutive ten years
Sheet one beer
No Year Meas Total beer Unit price Total sales
per year
1 2000 Bottle 43800 4.00 175200.00
2 2001 Bottle 48180 4.00 192720.00
3 2002 Bottle 52998 4.00 211992.00
4 2003 Bottle 58298 4.00 233192.00
 5 20004 Bottle 64128 4.00 256512.00
6 2005 Bottle 70540 4.00 282160.00
7 2006 Bottle 77594 4.00 310376.00
8 2007 Bottle 85353 4.00 341412.00
9 2008 Bottle 93888 4.00 375552.00
10 2009 Bottle 102276 4.00 409104.00

Sheet two soft drink

No Year Meas Total per Unit price Total sales
year
1 2000 Bottle 18250. 3.00 54750.00
2 2001 Bottle 20075 3.00 60225.00
3 2002 Bottle 22083 3.00 66249.00
4 2003 Bottle 24291 3.00 72873.00.
5 20004 Bottle 26720 3.00 80160.00
6 2005 Bottle 29392 3.00 88176.00
 7 2006 Bottle 32331 3.00 64662.00
8 2007 Bottle 35564 3.00 106692.00
9 2008 Bottle 39121 3.00 117363.00
10 2009 Bottle 43033 3.00 129099.00

To calculate for there creational revenues consider the following

assumptions
1. The pool occupied time duration will be 5hours per day.
2. The dart occupied time duration will be 8 hours per day.
3. The carnauba occupied time duration will be 12 hours per day.
4. The table tennis occupied time duration will be 10 hours per day.

Table 3.6.3.3
Expected revenue for recreational activities for consecutive ten years
Year For pool For dart For For table Total
caranbula tennis revenue
2000 18000.00 43200.00 12960.00 10800.00 84960.00
2001 18000.00 43200.00 12960.00 10800.00 84960.00
2002 18000.00 43200.00 12960.00 10800.00 84960.00
2003 18000.00 43200.00 12960.00 10800.00 84960.00
2004 18000.00 43200.00 12960.00 10800.00 84960.00
2005 18000.00 43200.00 12960.00 10800.00 84960.00
2006 18000.00 43200.00 12960.00 10800.00 84960.00
2007 18000.00 43200.00 12960.00 10800.00 84960.00
2008 18000.00 43200.00 12960.00 10800.00 84960.00
2009 18000.00 43200.00 12960.00 10800.00 84960.00
Assumptions to computing the annuals income for meals
 1. There Will Be Expect To Sale 30 Dishes Per Day none for feast food
2. There Will Be Expect To Sale 20 Dishes Per Day for feast food
3. There Are 365 Working Days
4. Prices For Feast Dish Will Birr 5.00
5. Prices For None Feast Meal Will Birr 12.00

Table 3.6.3.4
Expected revenue for meals for consecutive ten years
None Feast foods
Year quantity Meas Unit price Total Remark
2000 10950 Dish 12.00 131400.00
2001 12045 Dish 12.00 144540.00
2002 13250 Dish 12.00 159000.00.
2003 14575 Dish 12.00 174900.00
2004 16032 Dish 12.00 192384.00
2005 17636 Dish 12.00 211632.00
2006 19400 Dish 12.00 232800.00
2007 21340 Dish 12.00 256080.00
2008 23474 Dish 12.00 281688.00
2009 25821 Dish 12.00 309852.00
 Table 3.6.3.5

Expected revenue for meals for consecutive ten years

Feast foods
Year quantity Meas Unit price Total Remark
2000 7300 Dish 5.00 36500.00
2001 8030 Dish 5.00 40150.00
2002 8833 Dish 5.00 44165.00
2003 9716 Dish 5.00 48580.00
2004 10688 Dish 5.00 53440.00
2005 11756 Dish 5.00 58780.00
2006 12931 Dish 5.00 64655.00
2007 14224 Dish 5.00 71120.00
2008 15646 Dish 5.00 78230.00
2009 17210 Dish 5.00 86050.00
Table 3.6.3.6
 Expected revenue for hot drinks for consecutive ten years
Coffee, milk and capichino
Year quantity Meas Unit price Total Remark
2000 146000 Cup 1.00 146000.00
2001 175200 Cup 1.00 175200.00
2002 210240 Cup 1.00 210240.00
2003 252288 Cup 1.00 252288.00
2004 302746 Cup 1.00 302746.00
2005 363295 Cup 1.00 363295.00
2006 435954 Cup 1.00 435954.00
2007 523145 Cup 1.00 523145.00
2008 627774 Cup 1.00 627774.00
2009 753329 Cup 1.00 753329.00

Tea
Year quantity Meas Unit price Total Remark
2000 36500 Cup 1.00 36500
2001 43800 Cup 1.00 43800
2002 52560 Cup 1.00 52560
2003 63072 Cup 1.00 63072
2004 75686 Cup 1.00 75686
2005 90823 Cup 1.00 90823
2006 108988 Cup 1.00 108988
2007 130786 Cup 1.00 130786
2008 156943 Cup 1.00 156943
2009 188332 Cup 1.00 188332
There are also other incomes that the expect project to collect revenue
like from laundry service. There fore the consultancy expects to collect
income from laundry service birr 500.00 per day. The laundry expected
to occupied three hundred day per year thus the annual income will be
182500.00
Table 3.6.3.7
Expected revenue for laundry service for consecutive ten years
Year Amount Remark
2000 182500.0
2001 219000.00
2002 262800.00
2003 315360.00
2004 378432.00
2005 454118.00
2006 544942.00
2007 653930.00
2008 784716.00
2009 941659.00

Table 3.6.3.6
Expected revenue for the summary for hotel
For consecutive ten years
Year capacity total

2000 75% 877357.50

2001 80% 935848.00
2002 85% 994338.50
2003 95% 1111319.50
2004 100% 1169810.00
2005 100% 1169810.00
IV. TECHNICAL STUDY
Analysis of technical and engineering aspects is done continually when a
project is being examined and formulated. If the need arise other types of
analysis are expected to done closely in the wined with this project analysis.
The broad purpose of the technical analysis is
 To ensure that the project is technically feasible in the sense that all the
required inputs of the project to be available.
 To facilitate the most optional formulation of the project in terms of
technology, size, location, etc.
4.1 furniture, fixture and equipment required
Each rooms of the project should equip with the required standard of
equipment, furniture and fixture so as to achieve its objectives. The cost
associated with the purchase of these required materials is estimated to be Birr
591520.00 (See table 4.1)

Table 4.1:
the required materials for the pension rooms
Item Description Mes Requir Require Total Unit price Total price
code ed per d rooms require
room d
001 Guests salon Set 1 2 2 20000.00 40000.00
002 TV for guests Pcs 1 2 2 12420 24840.00
003 TV Pcs 1 32 32 4500.00 144000.00
004 Rag Pcs 1 34 34 2000.00 68000.00
005 Bed Pcs 1 32 32 2000.00 64000.00
006 Cupboard Pcs 1 32 32 1500.00 48000.00
007 Tables Pcs 1 32 32 600.00 19200.00
008 Chair Pcs 2 32 64 250.00 16000.00
009 Phone cable Pcs 1 32 32 350.00 11200.00
010 Dish Set 1 1 1 5000.00 5000.00
011 stab Set
012 Pillow Pcs 2 32 64 50.00 1680.00
013 Blanket Pcs 2 32 64 750.00 48000.00
014 Bed sheet Pcs 4 32 168 200.00 33600.00
015 Mattress Pcs 1 32 32 1500.00 48000.00
016 KEBRELETO Plc 2 32 64 250.00 16000.00
017 Panasonic tape Pcs 1 4000.00 4000.00

Table 4.2
the required machinery

Description meas required unit price total price

Coffee machine Pcs 1 40000.00 40000.00

Meat grinder Pcs 1 9000.00 9000.00
Deep frizer Pcs 1 5500.00 5500.00
Freezer normal Pcs 1 4000.00 4000.00
Coffee grinder Pcs 1 3500.00 3500.00
Juicer Pcs 1 6000.00 6000.00
Burner stove diesel Pcs 1 50000.00 50000.00
Gas stove Pcs 1 52000.00 52000.00
Dough machine Pcs 1 28000.00 8000.00
Oven for cake and pisa Pcs 1 80000.00 80000.00
Vaccum cleaner Pcs 1 4000.00 4000.00
Cheese and ham slice Pcs 1 3500.00 3500.00
Ice cream machine Pcs 1 55000.00 55000.00
Ice cream display Pcs 1 22000.00 22000.00
Laundry machine Pcs 1 25000.00 25000.00
Table tennis pcs 1 20000.00 20000.00
Dart game pcs 1 5000.00 5000.00
Pool pcs 1 35000.00 3500.00

396000.00

Table 4.3
the required materials for bar and cafteria

No. types of raw materials quantity meas unity total cost

remark
Price foreign local total

1. Control buffe 1 Pcs 5000 5000.00

2. Cupboard 2 Pcs 2000 4000.00
3. Chair 200 Pcs 500 100000.00
4. Table 60 Pcs 400 24000.00

13300.00

Table 4.4
office of equipment and furniture
No description quantity unity price total price

1 table 2 800 1600.00

2 shelf 2 1200.00 2400.00
3 chair 4 200.00 800.00
4 money safe 1 2500.00 2500.00
5 computer 1 10000.00 10000.00
6 printer 1 4000.00 4000.00
Total in birr 21300.00

4.4 Installation cost of utilities

A sum of birr 5000.00 is provided for installation of electricity, water and
telephone lines and internet connection
4.5 Stand- by generator set
The nature of the business is such that electricity supply disruption could
create not only fall in providing services, but also related technical problems
like making wastage the fresh cake and other foods. In order to avoid such a
problems, the provision of a stand-by generator set is recommended. The cost
of the stand-by generator set estimated 80000.00
4.6 Maintenance cost
Maintenance cost is estimated at Birr 30,000.00 in thefirst operation year.
4.7 Other cost
The consultancy will be estimated certain costs will be appeared during the
operation period which may now to be not considered or unseen. There for the
other cost will be estimated as birr 20000.00.
4.8 Land, Building and civil work Requirement
4.8.1 Location OF the building
The envisaged project land is already at hand to meet its main target and
objective. The building is located in Adigrat town lie in 335 square meter on
the most suitable site at the heart of the town first grade marketable area
near Ato Gebreslasie’s building ground plus 5 which is a sky rocket
building.
4.8.2 Building and civil works
The owner of project is already secured with 335 square meters which is
important for the proposed hotel business services. The required building of
the project has been decided by taking in to account the dimensions of
different blocks based on its importance.
Ground
Under the ground there are five rooms which is planed to serve for bar,
restaurant, kitchen and for laundry services .There is also common toilet
and showers
Service areas
Under the service areas it is G+2 which consists 6 each rooms out of these 6
rooms are with common shower and toilet and 12 rooms are with private
shower and toilet.
From first to second floors
Under these floors there are 16 rooms which use for beds consists with
private toilet and shower and 2 guest rooms
Roof Slap with terrace.
Under the roof slap there is one large room for cafeteria which planed to
establish with shelter materials.
In addition to these there is also enough space corridors and parking for
more than 3 medium cars. They will be also plan to have one receptionist
and gourd rooms separately.

4.9.3 Cost
According the engineering estimation made the total cost of the buildings
and civil works estimated as Birr 2191056.00. Out of the total tasks 40% is
finished and for the remaining cost will be estimated as birr 876422.40.
Finished building
 Except the service rooms ,the ground and first floor of the main
building is already finished
Building on process
 The second floor of the building is now on process to start. The
promoter will be also to start by step on the coming year.
 V. RAW MATERIAL, STATIONARY, UTILITIES OTHER EXPENSES

5.1 RAW MATERIALS

Raw materials which use for cafeteria and bar are almost all local materials.
It is fabricated and produced in Ethiopia. To detail the consultancy has
taken the raw material to this project as follows. The estimated raw
materials for bar and cafeteria is birr-387016.00 see table 5.1 .1
Table: 5.1.1
The required materials and its cost of materials

No Types of raw Quantity Meas Unit Total cost Remark

Price Foreign Local total
 materials
1 Beer 1825 Case 78 142350
2 Soft drink 761 Case 56 42616
3 Tea 20 Carton 200 4000.00
4 Milk 10000 Liter 2.50 25000.00
5 Coffee 5 Quintal 2200 11000.00
6 Detergents soap 1050 Dozen 1.00 1050.00
7 Omo 500 Carton 250 125000.00
8 Teff 10 Quintal 600 6000.00
9 Other 30000.00

5.2 Utility expense

Utilities include expenses like, telephone, electricity, postage, internet,
and the like. The estimated consumption rates for these utility items are
about 120000 KWh and about 4800m3. The cost of electricity per KWh is
at Birr. 50 and that of Water are at Birr 2.50 per m3. For utility annual
expense will be estimated at Birr 103,248.00

Table 5.2.1
Utility expense per a year
No Description Monthly expense Yearly
1 Telephone 2000.00 24000.00
2 Eclectic 5000.00 60000.00
3 Internet 600.00 7200.00
4 Postage 48/12 48.00
5 Water 1000.00 12000.00

5.3 Stationary
 In fact there is no such row material which uses for this project sine there is
no production or fabrication activities in the processes. While the
consultancy has taken the stationary materials will require for cash receipt,
report writing and other purposes. The estimated stationary materials as
birr—23800 are given in the following tables.

Table 5.3.1
The required materials and its cost of materials
No types of raw materials quantity means unit total cost remark
1. Paper 50 Lasta 40 2000.00
2 .Pen 1200 Pcs 1.50 1800.00
3. Financial pads 1000 pcs 20.00 20000.00
23800.00
5.5 Pre-operation
Pre operation expenditure includes the cost for feasibility training if key
persons and is expected as Birr 10,000.00

VI man power requirement

The project at full capacity will be need more than 20 permanent employees.
Their respective annual salary is Birr 104400.00. The break down of the
cost of manpower is here below.
Table 6.1
Manpower requirement and its cost
No Job title Number Monthly Annual salary
salary
1 General manager 1 2000.00 24000.00
2 Receptionist 2 500.00 12000.00
3 Accountant 1 600.00 7200.00
4 Waiter 10 300.00 36000.00
5 Store /purchaser 1 400.00 4800.00
6 Casher 1 300.00 3600.00
7 Cleaner 2 300.00 7200.00
8 Guard 2 400.00 9600.00
20 104400.00

VII. Financial analysis

The following assumptions have been made as a standard practice in the
financial analysis. All of the assumptions are based on standard and
accepted practices, and the purpose of describing them here is for clarity
and to avoid repetition later,
The location of the business centre is envisaged to be at the centre Adigrat
town in Tigray region lie at 335 square meters with none lease.

Depreciation rates applied on fixed assets are as follows.

Building 5%
 Other 20%
Machines and equipment 20%
Office furniture and equipment 20%
Computer 10%

Period of operation
When the implantation process has been started, the period required to
complete the activities are assumed to be 6 months and the project will
expect to start its service at full capacity after 6 months.
Financing of the project is to be financed in the following manner.
Equity: 40%
Total equity -------------------------------------------- Birr 1388616.80
Long term loan (60%)
Total long term loan ---------------------------------- Birr 2082925.20
The total initial investment will be birr------------------ 3471542.00
Initial investment cost
The total initial investment cost amounts about Birr 3.47 million including
initial working capital. The foreign currency portions will not such should
be taken in account. The cost of civil works is about Birr 2.19 million, or
63% of total investment cost, this indicates that the balance goes for the
building costs the major components of the per production expenditure are
interest during construction, project study, erection of machinery and
equipment other and implementation costs. The details of the initial
investment are given in the following table.
The total initial investment cost including initial working capital amount to
about Birr 3471542.00
Table 5.1 initial investment cost.

Item Local currency Foreign Currency Total

Land lease
Site preparation & development
Building and civil works 2191056.00 2191056.00
Machinery and equipment 396000.00 396000.00

Auxiliary equipment-Generating set 80000.00 80000.00

Required materials for pension 591520.00 591520.00
Furniture 13300.00 13300.00
Office equipment & furniture 21300.00 21300.00
Pre-production expenditure 10000.00 10000.00
Total fixed investment 3303176.00 3303176.00
Initial working capital 168366.00 168366.00
Total initial investment 3471542.00 3471542.00
Initial working capital
The assumptions made for the estimation of the working capital, in terns of
the number of days for which each items of current assets would tie capital,
are the following.
Cash ----------------------------------------------- 30
Raw materials ------------------------------------ 90
Other running costs ------------------------- ----- 90
Based of the above, the initial working capital estimated is about birr
673464.00per a year
Pay- back period
Pay back period is the amount of time taken that would take to recover the initial investment.
The computation is done based on the initial investment and cumulative net cash inflow at the specific
year. But, if the cumulative net cash inflow is greater than the initial investment the year before it reaches
to cover plus the difference among the initial investment and net cash in flow the year before over the next
period net cash in flow is the expected recover time. In this case the computation is done as follow.
Description Year
1 2 3 4 5 6 7 8 9 10

Initial Ivest 3471542.00

Net income (166898.32) 222581.44 228677.55 255234.63 282761.97 549855.66 558261.83 613514.14 64622.90 669702.32

Dep 367080.80 367080.80 367080.80 367080.80 367080.80 367080.80 109552.80 109552.80 109552.80 109552.80

Net cash flow 200182.48 589662.24 595758.35 622315.43 649842.77 916936.46 667814.63 723066.94 174175.70 779255.12

Cum. cash flow 200182.48 789844.72 1385603.07 2007918.50 2657761.27 3574697.73 4242512.36 4965579.30 5139755.00 5919010.12

Based on the above table the project will cover its initial investments cost at the binning of years two that is
after 6 years and 7 months.
Pay bank period= 6 year + (3471542.00 -2657761.27)
3574697.73
= 6 year + .2 year
= 6.2 year
The net cash flows if the operations of the project can generate enough money to recover the total initial
investment cost within a period of less than 7 years. This can be seen form the cash flow statement in the
annexed financial analysis schedule
Payment of medium term loan
The yearly cash flows of the operations of the project can generate enough term
loan of Birr 2082925.20 and the rate of payment Birr208292.52 for the first
year and 52073.13 quarterly. The loan repayment is not envisaged to strain the
cash strain in cash position of the project after the first period of payment
Break-even capacity
The calculation of the break even capacity of a project must be with reference of
the fixed costs expected in insure when the project is purposed to read the rater
capacity utilization level usually 90% -100% the lower this capacity is the more
the chances are for the project to earn profits are for the project to earn, the
break even capacity during the first year operation is calculated as follows.
Break even capacity = fixed costs
Sales-variable
3303176.00 =3303176.00
1082210.00.-390763.47 691446.53
4.8
Average yearly net return
Average yearly net return which us a variable of the average return allows the
comparison of projects of different life times through computational of the
average percentage return on the initial investment per a year. Under this
technique for a single project to be accepted the average yearly net return must
be at least the rate of interest available in the company and at least the current
interest rate
Sales-initial in. vestment cost =1082210.00-3471542.00 = 2389332.00
Initial investment (year) 3471542.00x5 17357710.00
= 14%
From the above analysis understand that the project is justifiable when the
promoter invests his money on the project of hotel business. Because of the
average yearly net return rate is greater than even the rate of bank interest i.e.
8.50 %.
Other benefits
Other than its commercial viability and profitability to the owner of the project,
there are a number of contributions that can be derived form the
implementation of the project.
The project will contribute several important types of benefits, such as
1. It creates job opportunities for more than 20 citizens.
2. It promotes sustainable and continuous market stability.
3. It makes self confidence for the promoter.
 Annex 1

Income statement for the mixed business centre project

For the consecutive five years 2000-2009

Description Y e a r s

1 2 3 4 5 6 7 8 9 10

Revenue 1082210.00 1639798.00 1739606.00 1890993.00 2067842.00 2274770.60 2484928.52 2801834.42 3136277.51 3525846.41
Less cost 1249108.32 1309595.78 1400025.15 1510555.10 1645054.36 1441069.58 1638294.94 1876274.20 2162934.4 2507765.92
0
Raw maternal 387016.00 464419.20 557303.04 668763.65 802516.38 963019.66 1155623.59 1386748.31 1664097.9 1996917.56
7
Stationary materials 23800.00 26180.00 28798.00 31677.00 34844.00 38328.00 42160.00 46376 51013.00 56114.00
Preoperational 10000.00
Installation of utility 5000.00
Promotion/marketing 12000.00 12000.00 12000.00 12000.00 12000.00 12000.00 12000.00 12000.00 12000.00 12000.00
Salary 104400.00 114840.00 126324 138956.00 152851 168136.00 184949.00 203443.00 223787.00 246165
Utility 103248.00 103248.00 103248.00 103248.00 103248.00 103248.00 103248.00 103248.00 103248.00 103248.00
Other expense 20000.00 20000.00 20000.00 20000.00 20000.00 20000.00 20000.00 20000.00 20000.00 20000.00
Maintenance 30000.00 30000.00 30000.00 30000.00 30000.00 30000.00 30000.00 30000.00 30000.00 30000.00
Provident fund 8259.84 11484.00 12632.40 13895.60 15285.10 16813.60 18494.90 20344.30 22378.70 24616.50
Bank interest 177303.63 159343.78 141638.91 123934.05 106229.18 88524.32 70819.45 53114.59 35409.73 17704.86
Dep. computer 1000.00 1000.00 1000.00 1000.00 1000.00 1000.00 1000.00 1000.00 1000.00 1000.00
Dep building 109552.80 109552.80 109552.80 109552.80 109552.80 109552.80 109552.80 109552.80 109552.80 109552.80
Dep for machines 118304.00 118304.00 118304.00 118304.00 118304.00
Dep in furniture 123224.00 123224.00 123224.00 123224.00 123224.00
Dep generator 16000.00 16000.00 16000.00 16000.00 16000.00 16000.00 16000.00 16000.00 16000.00 16000.00

Grosse income B.Tax (166898.32) 330202.22 339580.85 380437.90 422787.64 833701.02 846633.58 928560.22 973342.91 1018080.49
Profit Tax 35% 107620.78 110903.30 125203.27 140025.67 283845.36 288371.75 315046.08 332720.01 348378.17
Net income (166898.32) 222581.44 228677.55 255234.63 282761.97 549855.66 558261.83 613514.14 640622.90 669702.32
Assumptions to computing this income statement
1. Depreciation rate policy for the other fixed assets are using the pooling system by 20%
2. The salary expenses will be increase by 10% per a year to motivate the employees
3. There is no a any fear of price fluctuating for the material
4. provident fund is 20%
Annex 2

Repayment of long term bank loan

For the following consecutive years
Description Years
1 2 3 4 5 6 7 8 9 10
Total bank loan 2082925.20 1697329.05 1329692.75 979761.32 647534.75 333013.05 36196.21 (242915.76) (504322.87) (748025.12)
balance
Interest payment 177303.63 159343.78 141638.91 123934.05 106229.18 88524.32 70819.45 53114.59 35409.73 17704.86
Principal of payment 208292.52 208292.52 208292.52 208292.52 208292.52 208292.52 208292.52 208292.52 208292.52 208292.52
Total payment 385596.15 367636.30 349931.43 332226.57 314521.70 296816.84 (279111.97) 261407.11 243702.25 225997.38
Portion of long term 1697329.05 1329692.75 979761.32 647534.75 333013.05 36196.21 (242915.76) (504322.87) (748025.12) (974022.5)
bank loan
 Annex 3
Cash flow of the project for the following consecutive years
Description Y e a r s
1 2 3 4 5 6 7 8 9 10
Cash balance 120000.00 206672.56 588442.28 976308.11 1390731.02 1832681.27 2190643.81 2557013.12 2975634.74 3424365.52
Collection 1082210.00 1639798.00 1739606.00 1890993.00 2067842.00 2274770.60 2484928.52 2801834.42 3136277.51 3525846.41
Bank loan 2082925.20
Total available cash 3285135.00 1846470.56 2328048.28 2867301.11 3458573.02 4107451.27 4675572.33 5358847.54 6111912.25 6950211.93
Total operating expense 881027.52 941514.98 1031944.35 1142474.30 1276973.56 1424069.58 1621294.94 1859274.20 2145934.40 2490765.92
Purchase of fixed asset 1988542.40
Payment of long term debt 208892.52 208892.52 208892.52 208892.52 208892.52 208892.52 208892.52 208892.52 208892.52 208892.52
Profit tax payment 107620.78 110903.30 125203.27 140025.67 283845.36 288371.75 315046.08 332720.01 348378.17
Total expense 3078462.44 1258028.28 1351740.17 1476570.09 1625891.75 1916807.46 2118559.21 2383212.80 2687546.73 3048036.61
Cash balance 206672.56 588442.28 976308.11 1390731.02 1832681.27 2190643.81 2557013.12 2975634.74 3424365.52 3902175.32
 Annex 4
Projected balance sheet

Description y e a r s

1 2 3 4 5
Assets
Cash 206672.56 588442.28 976308.11 1390731.02 1832681.27
Fixed asset 3303176.00 3303176.00 3303176.00 3303176.00 3303176.00
Less Acc Dep 368080.80 736161.60 1104242.40 1472323.20 1840404.
Net fixed asset 2935095.20 2567014.40 2198933.6 1830852.80 1462772.00
Total asset 3141767.76 3155456.68 3175241.71 3221583.82 3295453.27
Bank loan 2082925.20 1874632.68 1666340.16 1458047.64 1249755.12
Capital 1225740.88 1058242.56 1280224.00 1508301.55 1762936.18
Acc. Income (166898.32) 222581.44 228677.55 255234.63 282761.97
Total liable & capital 3141767.76 3155456.68 3175241.71 3221583.82 3295453.27
 WOLDAY LEMMA

FEASIBILITY STUDY
FOR

ESTABLISHMENT OF MODERN HOTEL SERVICE

CONSULTANCY:
TEADY BUSINESS PROMOTION AND CONSULTANCY

MEKELLE, TIGRAY ETHIOPIA

SEP 2007
 Table of contents

Title Page
Executive -------------------------------------------------------------------------------------- I.II
Back ground
Applicant profile -------------------------------------------------------------------------------1
Introduction ----------------------------------------------------------------------------------- 2
Justification ------------------------------------------------------------------------------------3
Objectives -------------------------------------------------------------------------------------- 4

Market Study
Project description -------------------------------------------------------------------------- 5
Demand & Supply analysis ---------------------------------------------------------------- 5
Demand Projection --------------------------------------------------------------------------9
Pricing -----------------------------------------------------------------------------------------11
Capacity and revenue ----------------------------------------------------------------------12
Technical study
Furniture, equipment ----------------------------------------------------------------------21
Machines-------------------------------------------------------------------------------------23
Stand by generatore ------------------------------------------------------------------------25
Required land, building and civil work--------------------------------------------------26
Raw material , stationary , utility, other expense
Raw materials --------------------------------------------------------------------------------28
Utility ---------- -------------------------------------------------------------------------------28
Stationary-------------------------------------------------------------------------------------29
Pre operation ---------------------------------------------------------------------------------29
Required humane resource ---------------------------------------------------------- ------30
Financial analysis ----------------------------------------------------------------------------31

Annex
1. income statements ------------------------------------------------------------ 37
2. repayment of bank loan ---------------------------------------------------- --39
3. cash flow of the project ----------------------------------------------------- --40
4. projected balance sheet ------------------------------------------------------41
Executive summary
Tourism is one of the under exploited niche markets that will be focused on the
government on the coming 20 years. The long vision of the government is to
make Ethiopia one of the top ten tourist destination in Africa by the year 2020.
Hotel service is also one of the main components of tourism sector.
Thus Establishing Modern Hotel service is regarded as a very important
business to the promoter and contributes at all levels, local, regional as well as
national. It has also a high degree of contribution to alleviate and solve the
burn issues of food in security problems to the country. It generates and
contributes in the form of different types of taxes to the government from its
revenue. In addition to this it makes employment opportunities. It consumes
high utilities like electric, water and telephones. It also tries to maintain the
excess demand to ward to the tourism expansion desire of the region.
To this effect due attention has been given at all levels for the study and
implementation. The feasibility study made on the modern hotel service has
been investigate in different aspects that could justify viability of the project,
such as the market assessment, demand analysis, capacity and programmed,
financial aspects and profitability of the project, economical aspects and its
opportunities. In addition to the above benefits of the project, is converted in to
reality, it will definitely play its role in promoting the nation’s economy.
This brings quietly therefore the promoter has an intention to invest his
resources in the mentioned sector in this region.
This project is located at the heart of the Adigrat town marketable areas near
the sky rocket building of Ato Gebreslasie .
The proposed project has lied on 335square meters which consists different
rooms and sections for the purpose of pension , restaurant , recreational , and
cafeteria .the total investment of the project is estimated as birr 3471542.
The project is expected to finance 40% and 60% from the owner/promoter and
bank long term loan respectively for ten years.
It is fact that to applied and assessed the market studies of a project can be
employ using different approaches. But here in this project the consultancy
applied the demand and supply approach: - In this approach the number of
available such business activities mainly the competent and the actual plan
toward socio and economical development of the government have considered
in the assessment. In this assessment and study the present effective demand
for domestic and foreign tourist flow is very high.
The selected price has taken to calculate the expected revenue is using
average current local prices for renting per classes and selling different
products and services of the envisage project.
The Consultancy is applied to calculate the Depreciation rate of the fixed asset
a straight line depreciation systems.
The project can certainly expected to return all the initial investment cost in
the six year and two months of the next year of operational periods. And the
project can expected to return the bank loan even in the fourth year of
operational periods.
It is concluding that with above justification this project is justifiable.