Project Proposal For Bakery Plant Factory

PROJECT PROPOSAL
FOR BAKERY PLANT
PROJECT TO BE IMPLEMENTED IN ADDIS
ABABA CIYT

PROMOTER: GETACHEW LEGESSE

SEGNI

July 2022
Addis Ababa, Ethiopia
 Project Proposal For Baker Plant
Promoter: - getachew Legesee Segni Page 1
Table of contents
I. Executive Summary 1. Introduction
1.1 Background …………………………………….…………………………….……….5
1.2 Brief History of thee Promoters …………………………………………….……...
…..6
2. General Market Study and Plant Capacity
2.1 Past Supply and Present Demand…………………………………………….………..6
2.1.1 Object of the project ……………………………………………………………....7
2.1.2 The Economic Significance of the project……………………………………...….7
2.1.3 Source of Revenue………………………………………………………………….7
2.1.4 Employment Opportunity………………………………………………………….8
2.1.5 Save the country foreign Exchange………………………………………………..8
2.1.6 Benefit for the local Community …………………………………………..……...8
2.2 Technology and Engineering ………...………………………..………………..……..9
2.2.1 Project Location ,Infrastructure and Economic Activities……….…………….…10
2.2.2 Economic Activities ……………………………………………..…..………..
…..11
2.2.3 Land requirement and land use plan……………………………………….....…11
2.2.4 Price and Distribution……………………………………………………………12
2.3 Plant Capacity and Production Programmer…………..……………………….....….12
2.3.1 Plant Capacity…………………………………………………………………….12
2.3.2 Production Programmed…………………………………………………...…….13
2.3.3 Materials and Inputs…………………………………………………...…………13
3. Organization Structure, Management and Manpower
3.1 Organizational Management duties and Responsibilities………………...………14
3.2 Man power Requirement ………………………………………………….......…..15
3.3 Organizational Structure……………………………………………………….….15
3.4 Man power salary Expense………………………………..………………….......17
4. Financial Requirement and Analysis

4.1. Total Initial Investment Cost………………………………………………………...18

4.1.1. Fixed Investment …………………………………………………………….……19

4.1.2. Initial Working Capital……………………………………………………………20

4.2. Financial Analysis and Statements ………………………………………..………...21

4.2.1. Underlying
Assumption………………………..........................................................22
4.2.2. Source of Fund ………………………………………………………………….....23
4.2.3. Loan Repayment Schedule
…………………………………………………….......24

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 Project Proposal For Baker Plant
4.2.4. Annual depreciation schedule of the fixed asset ( birr)…………………..............25
4.2.5. Balance Sheet (Beginning)………………………………………………….……..25
4.2.6. Income/Loss ………………………………………………………….....................25
4.2.7. Pay-Back Period……………………………………………………….…………...25
5.1 Financial Evaluation …………………………………………………….…...……………..26

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I. EXECUTIVE SUMMARY

1 Project Name Bakery plant Factory

2 Project Owner Getachew Legesse Segni

3 Project status New
4 Nationality Ethiopian

Project Bakery, keki and Others related products

5
Composition
Premises rented New Expansion 5000 M2
6
land
Br. 100,000,000 from this amount 30% (30,000,000) is from
Total Initial
7 the owner’s equity and 70 % (70,000,000) from bank loan.
Investment Cost

50 employees
Employment  On Permanent Basic :- 20 employment
8
Opportunity  On Temporary Basic :- 30 employment

9 Source of fund of  promoters Owner Equity:- 30%

 Expected Bank Loan :- 70 %
the project  Loan Repayment Period :- 5 Year
 Interest Rate :- 12 %

Total Capital 1.1 Fixed Capital = 5,805,200 birr

10 1.2 Working Capital = 4,194,800 birr

Value add, supply of quality product, employment opportunity,

Benefits of the income generation, source of revenue to the government, save
11 project for the the foreign exchange, technology transfer and environmental
region/ country protection through recycling.

1. INTRODUCTION

Bakery products, due to high nutrient value and affordability, are an item of huge consumption.
Due to the rapid population rise, the rising foreign influence, the emergence of a female working
population and the fluctuating eating habits of people, they have gained popularity among

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people, contributing significantly to the growth trajectory of the bakery industry. A number of
healthy products have been launched in the bakery segment and are gaining popularity at a high
rate.

Awareness of high quality baked goods is on the rise. Good bread is a rare combination of
nutrition, convenience, and luxury. Today's consumer has less time to create wholesome,
handmade bread, but increasingly appreciates the nutritional and sensory benefits it provides.
Good bread provides fiber and carbohydrates in a convenient, low fat form that is portable and
delicious. Good bread never goes out of style

In this regard, the envisaged project is a newly established Ethiopian owned business founded by
Mr. Getachew Legesse Segni , who has been engaged in hotel services business for more than a
decade. The new bakery project has intended to produce and sale bread and pastry products of
high quality ingredients using modern production techniques. In addition the company’s
objective is to generate income for the company by participating actively in the business
environment with creating employment opportunities for surrounding community.

Currently, the project promoter has finalized researching the market and has concluded that the
intended business is an attractive investment. The planned production capacity of the project is
assumed initially based on two shifts with capacity utilization rate at 70%, 80%, 90%, and 100%
during 1st , 2nd , 3rd , and 4th-10th years respectively. Accordingly, it will have a total
production capacity for each item per annum as follow

Although there are many established competitors with in the vicinity where the underlying
project has planned to be located; it will possess an advantage that lies with the high quality of its
products due to specialization and artisan manufacturing. The main marketing focus will be of all
community inclusive and having an eye catching sign, the scent of fresh bread wafting out of the
storefront, and periodic printed advertisements
After establishing the operation, the company will explore the possibility of making takeout and
delivering wholesale bread and baked goods to area restaurants and specialty retailers will also
be considered. Hence, the market for the products under consideration is projected to grow
rapidly in the coming years. The products will be supplied to high demanding domestic market

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and also will improve the supply of breads to and improve the lives of local community through
employment creation.

The Shawa bakery and Sheger bakery industry is one of the biggest sections in the country’s
processed bakery. Bakery products, which include bread and biscuits, form the major baked
foods accounting for over 82 per cent of the total bakery products produced in the country. It
enjoys a comparative advantage in manufacturing, with an abundant supply of primary
ingredients required by the industry, and is the third-largest biscuit manufacturing country (after
the United States and China). The bakery segment in India can be classified into the three broad
segments of bread, biscuits and cakes. India’s organized bakery sector produces about 1.3 million
tonne of bakery products out of 3 million tonnes while the balance is produced by unorganized,
small-scale local manufacturers.
Despite the fact that there are many automatic and semi-automatic bread and biscuit
manufacturing units in India, many people still prefer fresh bread and other products from the
local bakery. The popular biscuit variants in India are glucose biscuits, Marie, cream biscuits,
crackers, digestive biscuits, cookies and milk biscuits.
As far as the Shawa bakery and Sheger bakery market is concerned, the shares of the branded
and organized sector and the unbranded and unorganized sectors are 60 per cent and 40 per cent
respectively. Shawa bakery and Sheger bakery products, especially biscuits, are in great demand
in developing countries.
Baked goods are expected to grow by constant value at a compound annual growth rate (CAGR)
of two per cent over the forecast period. The bakery industry in India has witnessed an annual
growth rate of more than 15 per cent during the past years. As the business and the industry
thrives, the challenges accruing out of it are also growing expediently. Like many industries,
retail bakeries see rising costs in fuel, healthcare and other expenditures cut into their bottom
lines and increase the costs of doing business. Driven by the evolving perception of bakery
products in India and the changing consumer preferences, the Shawa bakery and Sheger bakery
industry would touch levels of Rs. 500 billion in the next five years.
1.1 Background
The bakery industry plays an important role in industrial activities of food processing industry in
the country. In the modern times, it provides nutritious food to go large number of households in
cities. The Shawa bakery and Sheger Bakery sector consists of some of the foods like cakes,
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breads, biscuits and chips etc. Since the development of new food technology, a variety of
products are prepared in the Bakery.. Based on its baking quality and other quality indices such
as gluten quality and content, color, moisture content, granular size of particles and others, flour
is divided into different grades. The basic application of flour is for bread making, cakes and
biscuits, and porridge at household level. Semolina, a product obtained by milling extra hard
(durum) wheat, is also used in pasta and macaroni making. The byproduct bran is used as animal
feed preparation. Biscuits are oven – baked food items with greater nutritive value than plain
bread of equal weight. They are classified as hard, soft and “batter” biscuits. They can be savory,
sweet, plain – baked, filled or coated (or a mixture of several of these options).
Biscuits satisfy special dietary needs, such as those for high fiber, protein or extra vitamins (as in
infant rusks). Biscuits also contain fat and often sugar, and are cut or molded into thin layers and
ked rapidly and thoroughly. If packed in a moisture proof material, biscuits can have a long shelf
life. Biscuit are largely consumed by children and teenagers.

1.2 Brief History of the Promoter

The Promoter Getachew Legessee planned proposed Land plan 5000 M2 own possession. The
Promoter new of buildings, installed machineries, other requirements and the project is
operational, of bakery, keki and Others related Factory and supplying to the local market and
created job opportunity for the local peoples. The financial performance of the factory was
viable.

2. MARKET STUDY AND PLANT CAPACITY A. MARKET STUDY

2. 1. Past Supply and Present Demand

Now a days, Bakery products are an item of mass consumption. In view of its low price and with
rapid growth and changing eating habits of people, bakery products have gained popularity
among masses of the sector overall. The growth rate of bakery products has been tremendous in
both urban and rural areas. Increased number of working women, Change in Shawa bakery and
Sheger bakery meal pattern, increased income, urbanization etc., has increased the demand for
bakery products In Ethiopia, the rural population used to consume flour made from cereals by
traditional means at home. Grain mills, however, are expanding deep into rural areas reducing

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labour and time for women, replacing home-made flour consumption of industrially processed
flour, however, is still insignificant in rural Ethiopia.
Urban dwellers, on the other hand, consume more and more flour produced by flour mills thus
shifting to manufactured flour. Urban house-holds also consume food items like bread, biscuits
and cakes prepared at home or in bakeries and pastries from industrially processed flour. The
demand for wheat flour is met through both local production and imports. The apparent
consumption of flour, comprising both domestic production and Biscuits are very popular food
items. They are pleasant in taste and do not require cocking and hence ready to be served.
The local demand for biscuits is met both by domestic production and imports.

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2.1.1. Objective of the Project

The main objective of this factory is to manufacture, cost effective, market oriented, client based
and quality baker and Others related for local market.

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To generate employment in PACS by production activity 

Provide financial benefits to member farmers of the PACS 

Develop an attitude of business in PACS.

 Women empowerment by generating employment for women

 To utilize idle land resources of the PACS and make them business generation
entity.

2.1.2. The Economic Significance of the Project

The envisaged project deemed to contribute to the economic development of the nation in
general and the region in specific with following ways:

2.1.3. Source of Revenue

As public policy of any nation, the government collects different forms of taxes from different
business organizations and individuals. Among the different forms of taxes, business income
taxes, payroll tax and VAT are collected from undertaking business activities. Therefore, the
project will serve as sources of revenue for both the region and nation as a whole.

2.1.4. Employment opportunity

One of the problems that our country faced is unemployment. Therefore, the current objective of
the government is working on tackling the problem of unemployment and fostering the
development process either through creating self employment or employment in other
organization. Hence, this project will hire 50 (20 permanent and 30 on temporarily basis)
citizens.

2.1.5. Save/Generate the Country Foreign Exchange

All types of the envisioned products (Produced by the project) are mostly imported from abroad.
By producing in Ethiopia, the factory will save the foreign currency of the nation.

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By minimizing the market demand and supply gab for these products, the factory will help to
reduce the nation’s foreign exchange cost to import these products. This will save the foreign
exchange resource of the nation.

2.1.6. Benefit for The Local Community

As a corporate responsibility the promoter will engage in different development activities on the
surrounding areas. This will better worse the community and contribute for the development of
the nation.

2.1.7. Stimulate the Local Economy

This factory has positive externality in the country that will encourage the economic movement
of local economy. There will be economic relationship and transactions among different factors.

2.2 TECHNOLOGY AND ENGINEERING

A. TECHNOLOGY
1. Production Process
The production process of baker plan consists of four major operations:-
• Wheat Intake and Pre-Cleaning,
• Wheat Cleaning and preparation,
• Milling, and
• Packing and Dispatching.
Wheat Intake and Pre-cleaning:- The major unit operations are dumping, conveying, weighing,
pre-cleaning and conveying to storage silos or transferring to the working bins of the cleaning
room.

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Wheat Cleaning and Preparation: - The main unit operations involved are weighing,
screening, destining, impurity separation, ferromagnetic separation, scouring, aspiration,
dampening, tempering and ventilating.
Milling: - Major operations involved are weighing, breaking open, scalping, scratching,
detaching, sifting, purifying, milling (grounding), resifting and entoleting.
Packing and Dispatching: - The major operations involved are collection of flour streams and
bran, mixing and aerating, resifting, entoleting, packing, sewing, loading and dispatching. The
process does not release any pollutant to the environment.

1.1. Location and Premises required

A. Location
The envisioned project is planned to be located in Addis Ababa City. Generally, the rental value
period of rural land are determined and fixed by land use regulations of the regional
governmental of Addis Ababa City. The area of land needed for development activities are based
on the types of projects. The maximum period of land allotted for investment purposed is not
greater than forty five (45) years. Rental prices in rural are determined on the types, magnitude
and location of the project areas.

An Investor has the right to hold land either on lease or rental basis in Addis Ababa. The
investment Board of the region with priority given to approve investments delivers land to an
investor within a short period of time through its channels. Urban land in these cities and towns
can also be given with the maximum price within a short period based on the interest and
capacity of the investor. The maximum and minimum annual lease charge ranges will largely
depends on the type of project location of the land and the size of land requested.
2.2.2. Economic activity of Area

Most of the residents of the Country earn its living means from business activity, even though the
number of civil servants can’t be under mined. The location of the town on a get way to many

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zonal towns facilitated by types, quantity of transactions being under taken, & different types of
private industries are allocated in the town. Bars, restaurants, hotels, pastry, recreation centers
and Industrialization area are flourishing as well as response to demand from the business
community. This is further facilitated by the number of daily arrivals from different enroot to
Addis Ababa.

2.2.3. Land Use Plan

The Promoter acquired a total of 5000 M2 areas of land the promoter had been using the land and
planned to use it as indicated in table below.

Table: Land Use Plan for bakery and related product Factory
SN Description Land Requirement (M2)
1 Baking Ovens 1000
2 Dough Mixers 1000
3 Cutter, Divider, Sheeter 1000
4 Rusk Making Machine 500
5 Flour Sifter, Sugar Pulverize, Biscuit Grinder 500
6 Trays, Scoops, SS Bins, Pellets, 150
7 Miscellaneous Equips: Small RO Plant, small 150
flour mill

8 Shopping area 200

Total 5000

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2.2.4. Pricing and Distribution

The current price of flour at Addis Ababa, adama, bale and arsi is Birr 1,600 per quintal. For this
project, an ex-Factory price of Birr 1,600 per quintal is proposed. bakers is an industrial as well
as a consumer product. Bakeries and pastries could be supplied directly at factory gate or through
intermediaries. Households could be supplied through retailers as well as with distribution
centers to be established by the new project itself. The prices of most biscuit brands are within
reach of ordinary people’s budget. Biscuits are, therefore, in demand in both urban and rural
areas of the country. There are also many convenient outlets for biscuits including neighborhood
and village shops. The general situation in the market for biscuits is going towards full-fledged
competition through brand development, range of products offered, delivery, advertisements and
packaging. The price of biscuits varies with the brands and their contents and packaging are also
different. The average price some of the most popular brands is Birr 4/100 gm. On the basis of
this price level and taking in to account a margin of 25% for wholesalers and distributors, the
recommended ex-factory price for the new project is Birr 3.20/100gm.

2.3. PLANT CAPACITY AND PRODUCTION PROGRAMME

2.3.1 Plant Capacity
According to the market study, the unsatisfied demand of wheat flour in the year 2008 will be
65,445 tones, whereas this demand will grow to 384,611 tons by the year 2020. Taking only
about 50% of the demand of the year 2008, the envisaged plant will have an annual capacity of
processing 41,000 tones pure wheat and produce 31,160 tons of wheat flour and 9,840 tones of
bran. The plant will operate 3 shifts of 24 hours a day, and for 300 days a year.
Based on the outcome of market study and considering the minimum economic scale of
production, the envisaged plant will have production capacity of 1,500 tons of hard biscuits per
annum. This capacity is proposed on the basis of a single shift of 8 hours per day and 320
working days per annum

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2.3.2. Production Programmed

The plant will start operation at 75% of its installed capacity during the first year, and will
increase production to 85% in the second year, and then to 100% in the third year and then after.
1kg of flour corresponds to 1.33kg of baked bread
(depend on daily consumption of flour and equipment capacity)
Year 1 2 3-10
Capacity utilization (%) 75 85 100
(kg) Bakery 100,000 5,000,000 1,080,000

Production capacity
The project starts supply the product after the establishment of the factory.
After the factory construction is completed the company will produce standard bakery, chocolate,
candy and chewing gum products. with regard to market potential, there is a wide domestic and
international market.
Sales Plan
The Revenue of the Project is assumed to be generated from the sales of the company’s products
as follows:
No Description Unit Yearly Unit Total Price
production price/pieces

1 Bakery Pieces 1,080,000 2.50 birr 2,7,000,000

2 Chewing gum , “ 3,600,000 2.00 birr 7,200,000
Chocolate and
others

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Land requirement and land use plan

The area of land required for the proposed project is estimated to be 5,000 m2. The land
requirement of the project has been decided by taking the dimension of building and for other
facilities.

2.3.3 MATERIALS AND INPUTS

A. RAW MATERIALS
Various types of baker do exist depending on the ingredients used and manufacturing process
employed. The envisaged plant will produce hard biscuit. The raw materials required for
production of hard biscuit comprise wheat flour, sugar, shortenings, salt, Sal volatile, sweet jelly,
glucose, and starch. The major raw materials like wheat flour and sugar can be obtained locally
from flour mills and sugar factories while the remaining 8 raw materials will be imported.
Annual requirement for raw materials at full production capacity of the envisaged plant and the
estimated costs are given
The principal raw material for flour production is wheat grain. Flour for baking bread is
produced from hard wheat or a blend of hard and soft wheat, while flour for cakes and biscuits is
milled from soft wheat. Wheat can be available in different part of the region. The impurity rate
for local wheat should not exceed 8%.

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B. Utilities
A number of utilities would be put in place in order to ensure smooth functioning of the factory.
These utilities include: Water Supply, Supplementary Electricity supply, Paved Road
Transportation, Drainage Facility.

3. OGANIZATION, MANAGEMENT AND MANPOWER

3.1. Organization and Management
1. General Manager Duties and responsibilities
 She/he will plan, organize, direct and control the overall activities of the factory
 She/he will devise policies and strategies that will enable the factory to be profitable.
 She/he will incorporate modern technological innovation that will facilitate the service
delivery of the project center and increase customer’s satisfaction.
 He/he will plan, organize, direct and control the human and non-human resources of the
plant so as to achieve the short and long run objectives of the organization.

2. The Manufacturing Department Duties and responsibilities: -

It is the core department of the project center and has the following responsibilities.
 Use modern manufacture, processing and technologies that will enhance the quality
of those products.
 Produce quality product that will enable the center competent both in the domestic
and international market.
 Use appropriate technology to manage its products.
 Control on the quality of raw materials, inputs, quality of the product and also the
overall production process.
 Produce products in least cost so that the profitability of the center is guaranteed. 
Moreover, control over the quality of the final products

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3. Administration and Finance Department Duties and responsibilities: -

 Will plan, organize direct and control the financial transaction of the plant by using the
entire necessary document.
 Will develop sound financial control system by developing modern financial control
systems.
 Will prepare the annual financial statements and prepare condensed reports for the
general manager, owner and other concerned government body.
 Will control the human and non human resources of the plant, which include: effective
handling of the different inventories of the machineries, equipments, raw materials,
finished products, and devise strategies of controlling against fraud and damage.
 Manage and execute The promoter national and international procurement procedure
 Administer and control The promoter logistic resource
 Effectively administer the promoter Procurement process domestically as well as
internationally.
 Manage the public relation of The promoter/factory with external parties/stakeholders 
Provide and manage general supportive service to the plant.

4. Commercial Department
Duties and responsibilities:-
 Will handle the overall marketing activities of the organization which include
planning,organizing, directing, and controlling.
 Provide cost estimates in preparation for securing ...
 Gather information on new product design, profile
 Approval of new products profile & brand plan analyzes market research.
 Plan and execute sales.
 Will develop effective customer handling strategies
 Will design and implement effective advertisement and promotion schemes
 Will develop the marketing strategies for future project center’s development.
 Conduct both foreign and domestic market research for expanding the sales of The
promoter
All workers have responsibilities on each activity they assigned for.

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B. TRAINING REQUIREMENT
The production supervisor and skilled workers require few weeks training on machine operation
and production technology. Training is assumed to be entertained during the erection and
commissioning period and the cost is in built there and hence about Birr 25,000 is sufficient to
cover expenses associated with the training programmed.

3.2 Man Power

The total manpower required for the factory will be 50 (20 temporary and 30 permanent)
persons. The manpower list and the Corresponding labor cost are shown in part 5 on the financial
part.

3.3 Organizational Structure

The organizational structure of the project is designed by including all the necessary personnel
under the right division. At the top of the organizational structure, there will be manager with the
responsibility of supervising the overall activity of the plant. Depending up on the nature of the
center and the amount of work to be performs; there exist auxiliary units under the general
manager.
Employees under each unit will be supervised by the department head that is accountable for the
general manager. General Manager is appointed by the owners.

Owner

Executive
Secretary General Manager

Manufacturin
gDepartme
nt
Admin &
Departme
Finance
nt

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Commercial
Department

3.4. Salary Expense

The total number of manpower, manpower list, qualification, and salary and sex composition are
listed in the table below.
Description of Required qualification Unit Required Monthly Annual
manpower Number salary (Br.)

salary (Br.)
Project Manager Management No 1 3,000 36,000

Cashier Dip. Accounting “ 2 1500 36,000

Administration [Link] mgt “ 2 2,500 60,000

Store keeper Accounting “ 1 1500 18,000

Mechanics Technique “ 2 2000 48,000

Production Control Food and Niuterion “ 2 2500 60,000

Driver 3rdlevel license “ 2 1200 28,800

Tire and fuel man Grade 10 “ 2 800 19,200

Guards Grade 8 “ 5 800 48,000
Supervisor BA in economics “ 4 1800 86,400
Accountant BA Accounting “ 3 1,500 54,000
Sales man BA in Marketing “ 5 1,650 99,000
Purchaser BA in Purchasing mgt. “ 5 1,650 99,000
Sanitary dip. Sanitary “ 2 1500 36,000
Daily laborers 40 - “ 12 - 153,600
birr/day (40*12*320)

Total 50 88,200,000

4. FINANCIAL REQUIREMENT AND ANALYSIS

4.1. Total Initial Investment Cost

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The total cost of money that is required to estimated the envisaged Bakery Plant Factory is to be
birr 100,000,000.
Table Total Initial Investment Capital
No Description Cost

1 Fixed Investment
1.1 Land, Building and Construction 18,052,000 0.00
1.2 Machines and Equipment’s 22,000,000 0.00
1.3 Vehicles and Motors 130,000,000 0.00
1.4 Office Furniture and Equipment 0.00
5,000,000
Total Fixed Investment Cost 58,052,000 0.00

2 Operating Expense

2.1 Raw Materials Purchase and Products 23,128,000 0.00

2.2 Salary Expense 88,200,000 0.00
2.3 Other Operating Expense 5,000,000 0.00
2.4 Pre-operating Expense 5,000,000 0.00
Total Operating Expense 41,948,000 0.00

Total Investment Cost 100,000,000 0.00

4.1.1. Fixed Investment

Building and Construction
No Particulars Unit Unit cost Estimated total
(Br.) cost (Br.)
1 Main Production Building for rents M2 1,460 5,000,000
2 Production Hall M2 1100 200,000
3 500
Quality control and standardization area M2 200,000
4 Storage for Raw materials different Bakery 500
plant Complex M2 200,000
5 Product Store M2 300 105,200
6 Offices Building M2 130 100,000
7 Toilet and shower room M2 120 100,000
8 Warehouse M2 150 100,000
9 Show room M2 120 100,000

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10 Cafeteria Service M2 120 100,000

11 Waste disposal accumulation center 150
M2 100,000
Total 5,000 18,052,000
4.1.2. Required Machinery
A. Total Cost Machinery and Equipment for Wheat flour and macaroni and Pasta
No Description Qty Unit Price Total Cost Total
(Birr)
1 Weighing balance No 2 4,000 8,000
2 Planetary Mixer “ 3 80,000 240,000
3 Double deck oven 3 200,000 600,000

4 Slicer 3 200,000 600,000

5 Dough sheeter 2 100,000 200,000

6 Packaging machine (sealing machine 2 200,000 400,000

7 Miscellaneous equipment includes different types of

tray, mold, nozzles and cutter, spatula, shifter, 2 100,000 200,000
grinder, working table etc

Total 22,000,000

4.1.3. Vehicles
SN Description Qty Unit Price Total Price(Birr)

1 Pick Up 1
2,750,000 2,750,000
3 Mini Bus Service 1
1,550,000 1,550,000
Total 4,300,000 4,300,000

4.1.4. Office Furniture and Equipment

SN Description Qty Unit cost(Br). Total cost (Br).

1 Managerial chair with tables 1 5,000 5,000

2 Secretarial chairs with table 1 3,000 3,000

3 Office Chairs with tables 5 1,350 6,750

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 Project Proposal For Baker Plant

4 Computer with printer 5 10,000 50,000

5 Shelf 2 3,500 7,000

7 Telephone machine set 2 1,500 3,000

8 Filing Cabinets 2 2,000 4,000

9 Assembly chair and table 19,250
10 Decoration(Carpet & Curtain) 12,000
11 Reserve different Equipments 390,000
Total 5,000,000
4.1.4. Office Equipments

4.2. INITIAL WORKING CAPITAL

The initial working capital is established to be 5,194,800.00 birr
4.2.1. Pre -Service Expense
SN Description Cost in br.
1 Project proposal 10,000
2 Licensing fee and others 2,000
3 Promotion and adverting 20,000
4 Land Composition and Cleaning area 378,000
5 Land Lease 90,000
Total 5,000,000
4.2.2. Material and Inputs
A. Raw and Auxiliary Materials
The major raw materials and auxiliaries required for the production of baker shown in Table 4.1
below. All the raw and auxiliary materials are to be imported.

Sr. No. Description Unit of Unit Price (CIF)

Measure
1 Different Bakery Raw materials tone 23,128,000.00
and other related

Total 23,128,000.00

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4.2.3. Salary Expense

As indicated in part three of this study, the total cost of salary and wage is estimated to be
8,200,000 birr.

4.2.4. Other Operating Expenses

SN Description Annual Cost in Br. Assumption Used
1 Property Insurance 10,091.95 10% of Fixed investment cost
2 Audit and Legal Fee 10,000 10% of Salary
3 Uniforms 1,600 1% of FC
4 Telephone, Fax and Postal 1,000 1000per month
5 Cleaning Gods Supplies 2,000.00 70*60br
6 Repair and Maintenance 5,229.88 900 per month
7 Advertisement 2,000.00 1000 per month
9 Stationery and other office 1,000.00 700 per month
supplies

10 Electricity 1,000.00 0.45*150,000W per year

11 Water 5,00.00 2*1000 m3 per year
12 Fuel 90,000.00 6500 lit*20 per year
13 Oil and lubricant 1,000.00 10% of fuel cost
14 Miscellaneous Expense 1,000.00 3,000 br month
Total 5,000,000.00
4.3. Financial Analysis and Statements

4.3.1. Underlying Assumption

The financial analysis of the envisioned Baker plant is based on the data provided in the
preceding sections and the following assumptions.
A. Construction and Finance
• Construction Period ………………………………………………………….…18 Months
• Source of finance……………………………………………..…30% equity and 70% loan
 Bank interest rate …………………………………………………………..…………10

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 Project Proposal For Baker Plant

%  Tax holidays ………………………………………………………………………2

years
• Operating costs increase by……………………………………………..………………2%
 Operating costs and raw material increased by………………………………...………
5%
• Utilities and operation expense …………………..…increase 3% per annum after 2ndyear
• Wages and Salary increase…………………………Increase 3% Per annum after 2 nd year

 Sales …………………………………………..increase by 5 % per annum after 2nd year

B. Depreciation
• Building…………………………………………………………………………….5%
• Machinery and Equipment ………………………………………………………..10%
• Office Furniture……………………………………………………………………10%

• Vehicles ………………………………………………………………………..…..20%

C. Working Capital
• Accounts Receivable…………………………………………………………….30 days
• Raw material Local …………………………………………………………..…..30 days
• Work in progress…………………………………………………………………5 days

• Finished Production ……………………………………………………………..30 days

• Cash in hand ……………………………………………………………………...5 days
• Accounts payable …………………………………………………………….…..30 days

4.3.2. Source of Fund

SN Description % share Amount(in birr)

1 Owners Share 3 30,000,000

0
2 Bank Loan 7 70,000,000
0
Total 10 100,000,000
0
4.3.3. Loan Repayment Schedule

Principal Interest Remaining

Year Total Annual Payment
Payment (10%) Balance

0 0 0 0 70,000,000

1 7,000,000 7,000,000 1,400,000 6,300,000

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 Project Proposal For Baker Plant

2 7,000,000 630,000 1,330,000 5,600,000

3 7,000,000 560,000 1,260,000 4,900,000

4 7,000,000 490,000 1,190,000 4,200,000

5 7,000,000 420,000 1,120,000 3,5,000,000

6 7,000,000 350,000 1,050,000 2,800,000

7 7,000,000 280,000 980,000 2,100,000

8 7,000,000 210,000 910,000 1,400,000

9 7,000,000 140,000 840,000 7,000,000

10 7,000,000 70,000 770,000 0

4.3.4. Annual depreciation schedule of the fixed Asset ( birr)
Amount of
Rate of
values of Capital Depreciation
No Capital Assets depreciation
assets (Br.) estimated
(%)
(Br.)
1 Land, Building and Construction 3,805,200 5 190,260
2 Machines and Equipments 4,200,000 15 630,000
3 Vehicles and Motors 130,000,000 15 195,000
4 Office Equipment 5,000,000 20 100,000
Total 9,805,200 1,115,260
4.3.5. Balance Sheet (Beginning)
Asset

Current Asset Value in Br

Cash 30,000,000

Inventory of raw material and input 70,000,000

Total Current Asset 100,000,000

Fixed Asset

Land, Building and Construction 18,052,000

Machineries and Equipment 22,000,000
Office Equipment 130,000,000
Vehicles 5,000,000

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 Project Proposal For Baker Plant

Total Fixed Asset 5,805,000

Total Asset 100,000,000
Liability

Account Payable 4,194,800

Owner Equity

Capital 30,000,000
Total Liability and Owners Equity 100,000,000

5. FINANCIAL EVALUATION
1. Profitability
According to the projected income statement, the project will start generating profit in the first
year of operation. Important ratios such as profit to total sales, net profit to equity (Return on
equity) and net profit plus interest on total investment (return on total investment) show an
increasing trend during the life-time of the project.
The income statement and the other indicators of profitability show that the project is viable.

2. Break-even Analysis
The break-even point of the project including cost of finance when it starts to operate at full
capacity ( year 3) is estimated by using income statement projection.

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BE = Fixed Cost = 30%

Sales – Variable Cost 48-16

3. Pay Back Period

The investment cost and income statement projection are used to project the pay-back period.
The project’s initial investment will be fully recovered within 2-4 years.
4. Internal Rate of Return and Net Present Value
Based on the cash flow statement, the calculated IRR of the project is 12 % and the net present
value at 8.5% discount rate is Birr 20 million.

C. ECONOMIC BENEFITS

The project can create employment for 35 persons. In addition to supply of the domestic needs,
the project will generate Birr 18.38 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.

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