December 2019

Table of Contents

1. Executive Summary………………………………………...………………1
2. Introduction………………………………………………………..……….2
3. Project Rationale and Objective…………………………………….………2
3.1 Project Rationale……………………………………………………….…..2
3.2 Project Objectives………………………………………………….………3
3.2.1 General Objective……………………………………………………..…3
3.2.2 Specific objective………………………………………………………...3
4. The Project………………………………………………………………..…3
4.1 Project Site……………………………………………………………..….. 3
4.2 Project description…………………………………………………………..4
5. The market Study……………………………………………………………. 5
5.1 Market Analysis…………………………………………………………...…5
5.2 The Demand-Supply Gap……………………………………………………5
5.3 Future market or Demand of fruits and vegetables…………………………..6
5.4 Target customers------------------------------------------------------------------------6
5.5 Marketing promotion and strategy----------------------------------------------------7
5.6 Competition -----------------------------------------------------------------------------7
6. Technical Analysis-----------------------------------------------------------------------8
6.1 Seedling production---------------------------------------------------------------------8
6.2 Infrastructure Development------------------------------------------------------------8
6.2.1 Deep well-------------------------------------------------------------------------------8
6.2.2 Drip and sprinkler irrigation----------------------------------------------------------8
6.2.3. Animal Barn----------------------------------------------------------------------------9
6.2.4 Nursery office and stores--------------------------------------------------------------9
6.3 Horticulture--------------------------------------------------------------------------------9
6.4 Animal fattening---------------------------------------------------------------------------9
6.5 Crop Production----------------------------------------------------------------------------9
6.6 Feasibility-----------------------------------------------------------------------------------10
7. ORGANIZATIONS AND MANAGEMENT-------------------------------------------10
7.1 Business Form------------------------------------------------------------------------------10
7.2 Organization Structure of the Project----------------------------------------------------10
7.3 Man Power Requirement with Qualification-------------------------------------------11
8. Financial Analysis---------------------------------------------------------------------------11
8.1Investment Cost-----------------------------------------------------------------------------11
8.2 Depreciation cost of fixed assets---------------------------------------------------------14
8.3 Loan Repayment schedule----------------------------------------------------------------14
8.4 Production costs----------------------------------------------------------------------------14
8.5 Administration Cost for one year--------------------------------------------------------17
8.6 Expected Income------------------------------------------------------------18
9. Project Appraisal--------------------------------------------------------------23
Table1. Fixed Cost---------------------------------------------------------------12
Table2. Working capital---------------------------------------------------------13
Table3. Total investment cost---------------------------------------------------13
Table4. Depreciation-------------------------------------------------------------14
Table5. Loan repayment schedule----------------------------------------------14
Table6. Labor Costs--------------------------------------------------------------15
Table7. Land preparation for one hectare--------------------------------------15
Table8. Land Preparation Costs-------------------------------------------------15
Table9.Cost of Seeds and Others------------------------------------------------16
Table10. Agro-chemicals Per Hectare------------------------------------------16
Table11. Cost of agro-chemicals------------------------------------------------16
Table12. Purchase of beef cattle to be fattened--------------------------------16
Table13. Total Production costs-------------------------------------------------17
Table14. Administration cost-----------------------------------------------------17
Table115. Crop and Beef----------------------------------------------------------18
 1. Executive Summary
Project Title: This project will be named as “Mirtama Integrated Farming”
Project Owner: Seven Partners
Project Location: The farm is located in Raya Azebo woreda, southern Zone, Tigray
regional state. This location has been chosen for the following reasons: the production
operation can easily be supervised by the owner; it is near the transportation hub; it is
close to its targeted markets; and only minor investment in building expansion will be
needed.

Project Descriptions: Mirtama Integrated Farming is registered with the country’s

Ministry of Agriculture and Ministry of Industry as a partnership and is located at
Mekoni as its farm. It aims to render electro-mechanical water work service. The
project will produce essential vegetable production which includes tomato, Onion,
melon, pepper, garlic, and green bean. These products can be supplied as green and
fresh, chilled or frozen and packed depending on the market location and requirement.
Many people from the region and the neighboring areas patronize thier farm site

1
because of the wide assortment of their farm production experience, convenient
location, and friendly service.

The total project cost amounts to Local Currency (Birr) 9,531,450.00 and the
proponent proposes to finance this capital requirement by a loan of Birr 7,148,587.50
or 75%,and the balance of Birr 2,382,862.50 or 25% by their own capital.

Project Beneficiaries: The project will employ 16 permanent employees and hundreds
of contract daily laborers, excluding the partners. It aims to raise the quality standards
of the population by providing superior quality farm products. It will also result in
healthy competition by forcing existing farm production related businessmen in the
area to improve their product quality.

Moreover, the project will contribute to the economy in the following ways:
1. It will decrease unemployment rate by creating job opportunity.
2. It will help to generate income for individuals.
3. The owners will contribute to the development of the country’s economy by
paying business income tax.
4. It will promote the advancement of technology.
5. It will contribute to transfer technology to industry.

Project Cost and Sources of Finance: The total financial requirement for the first
years of operation is 9,531,450.00 and about 25% (i.e. Birr 2,382,862.50) of the
financing of the project will be covered from the company while the remaining
balance (i.e. Birr 7,148,587.50) will be covered from bank loans.

2. Introduction
There are encouraging efforts by the regional government of Tigrai for the
improvement of the livelihood of the population. Policies, strategies and institutions
are being developed to promote the development of the region. One of the
encouraging efforts is the creation of the Agricultural Marketing Support Agency,

2
which is the core institution for the development of local and international markets for
products of the region. The facilitation of the market situation has attracted the
interests of many private companies and is investing on various agricultural projects.

It is this favorable situation that attracted the development of the project for an
investment in Tigray. The project will be located in the Raya Azebo woreda of
Southern zone of Tigray and operate on 100 hectares of land. The activities of the
project are diverse and are in line with the investment policy of the region. The
Company is expected to contribute to the development of the area through
employment and development of capacity of the local communities and job
opportunity. The Company has already an established market, which will also
contribute to the foreign currency earning of the country.

3. Project Rationale and Objective

3.1 Project Rationale

Agriculture is the cornerstone of the development policy of the Government of
Ethiopia. According to the Rural Development Policy and Strategy document, the
basic ingredient and resource the country has for agricultural development is the
abundant land and labor. Most of the western lowlands are endowed with water
resources are virgin and fertile. Up to recently, the areas were not developed due to
lack of capital and technology. Therefore, there is a strong commitment from the
government to make these fertile lands available for investors that have the capital
and technology to develop.

3
The existing promising investment opportunities, the demands of goods needs along
with relatively sound investment support made by the government in such kinds of
feasible projects, compelled the project promoter to initiate the multipurpose oriented
business project to be established. Despite the promising business opportunities, the
trend on such kinds of investment found to not enough.

Therefore, the existing shortage or absence in the supply of these products, along with
its better location and infrastructure access, the escalating trend of urbanization and
business activities, thus it is with such reason that this project is identified and
proposed and assumed to be more profitable.

In general, the country’s privatized and free market economy; good governance
creates a favorable environment for the development of investment for private
investors.

3.2 Project Objectives

3.2.1 General Objective

The major goal of this project is to contribute towards the growth of the Agricultural
sector. Its specific objectives include the following.

3.2.2 Specific objective

The specific objectives of the project are:

 Production of horticultural crops (e.g. dry tomato, Onion, melon, pepper,
garlic etc.) for national and international markets
 Production of cereals and beans for local and international markets
 Production of Spices for national and international markets
 Production of fruits like orange, and other for national markets
 Animal Fattening for national and international market

4. The Project
4.1 Project Site

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The project site is located in Raya Azebo woreda, southern Zone, Tigray region. The
area receives 500mm - 800 mm of rainfall annually and the rainfall pattern is bimodal.
There are many farmers engaged in the production of cereals and cash crops. The area
is suitable for the production of crops such as wheat, barley, and beans as well as
cereals such as sorghum. However, the project believes that animal fattening and the
growing of horticultural crops are also possible in the area if irrigation infrastructure
is established. The site selected for the project has a potential of irrigation with
promising ground water potential, which can serve up to 100 hectares. Preliminary
studies indicated the possibility of irrigation with sinking of deep well is possible.
Currently farmers organized in association have made effort for the production
horticultural crops such as tomato, onion, garlic and other cash crops.
4.2 Project description

Horticulture covers a wide range of products which can be grouped into vegetables,
herbs, mushroom, and flowers. The Southern Zone of Tigray, Raya Azebo Woreda
has great potential and suitable natural resources for the production of these groups of
horticultural crops. In fact, this project refers to only essential vegetable production
which includes tomato, Onion, melon, pepper, garlic, and green bean. These products
can be supplied as green and fresh, chilled or frozen and packed depending on the
market location and requirement. Combining different kinds of vegetable production
create a better opportunity for crop rotational practices and give the advantage of
utilizing common faculties such as washing, cleaning cooling and storage facilities.
Plus marketing vegetables facilitate an increase in marketable volume by attracting
more customers.

5
The Southern Zone of Tigray, Raya Azebo Woreda has large areas and water
resources suitable for the production of vegetables. Compared to cereals, pulses and
oil crops, vegetables are very high in productivity per unit of land which can play a
substantial role to increase the food supply area. With a growing urban population,
which is totally market dependent, and the current food supply shortage, expansion in
fruit and vegetable production will play a significant role in increasing the food
supply of the zone.

On the other hand, unbalanced and inadequate nutritional status of the people is still a
central problem in the Tigray Region. Deficiency of essential food elements, such as
protein, vitamins, and minerals are widely observed as basic food intake is below the
minimum requirement in the area. Increase in blindness due to ΄Vitamin A΄ deficiency
is an alarming circumstance in the country. Therefore, vegetables are important
sources of vitamins and minerals.

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5. The market Study

5.1 Market Analysis

Fresh and Processed Vegetables have a large domestic market in Ethiopia,

significantly higher than the exported volumes. The size of the Ethiopian population
is currently estimated at about 100 million. This is a strong indication of the existence
of large potential demand for fresh fruit and vegetable crops in the country. The other
customer of Ethiopian fresh vegetablesis processing plants, i.e., tomato processing
plants and vegetable canning factories which require tomato and various types of
vegetables for processing. The demand for fruit on the local market is high. This is a
strong indication of the existence of investment opportunities in fruit supply for the
local market

Ethiopia exports fresh vegetables to the international markets. The major markets for
Ethiopian fresh vegetables are the European Union, the Arab countries and the
regional markets. Thus, there is a reliable demand for these Ethiopian products during
a particular period and a great volume. Therefore there is a strong business image for
vegetables and fruit markets.

5.2 The Demand-Supply Gap

There has been a significant growth in the number of local and international trades
across the country. This increase is mainly associated with the stimulation of
economic activist and partly due to an increase in the demand of fruit and vegetable
production. Even though there is a lack of quantitative estimates that depict the actual
demand and also the annual growth rate commercial facilities are scarce in the region.
As a result there is a large gap between the developed and that of the supply for fruit
and vegetable production hence this project would not face any problem of demand
scarcity for it market and it would provide good goods to customers.

The price of vegetables is volatile and seasonal. Generally, vegetables are much
cheaper in rainy seasons. However, even in the rainy seasons the average price of
vegetables at major towns is estimated on average at birr 25 and 15 per kg
respectively. It is based on cost and competitors price.
2009 2010 2011

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 Tomato 951,920Kg 1,509,352 Kg 1,558,240 Kg
Mixtures 339,039 Kg 980,419 Kg 1,237,883 Kg
Source: Ethiopian Customs Authority

5.3 Future market or Demand of fruits and vegetables

The future demand for vegetables is promising due to two main factors. First, an
increase in population in general and urbanization, in particular, is expected to
amplify the domestic consumption of fruits and vegetables. At the same time, an
increase in income inevitably improves the per capita consumption of vegetables in
the future. Consequently, with a conservative growth rate of 3% per annum, the future
demand for vegetables is forecasted as shown below.
Table 1: Future Demand
Year Projected Demand (qts)
2006 100,000
2007 103,000
2008 106,423
2009 109,615
2010 112,904
2011 116,291
2012 119,780
2013 123,373
2014 127,074
2015 130,886
2016 134,698
2017 139,198

5.4 Target customers

The target customers of this envisaged project include:-

 The surrounding community

 District ,regional and federal government
 Agricultural research institutes
 Agricultural technology and equipment suppliers
 Agro-processing factory

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5.5 Marketing promotion and strategy

In order to penetrate and gain considerable market share, one of the major marketing
strategies for the project is consistently rendering quality service to its tenants. Due
emphasis must be placed on improving quality of service. The major marketing
strategies to promote the project and gain considerable market share include:

 Advertising through different means focusing on the existing service and

products.
 Promote in association to the key location and nearby business
 Working on sustained promotional work.
 Working on public relations to reach and influence key personas and
organization with a capacity of making decision.
 Keeping the quality of its service/ product and consistently improving with
changing situations.

 Seasonal discount pricing different others customer centric marketing

strategies will be used by the farm.

5.6 Competition

There are different forms of competition that may face the envisaged vegetable farm.
These are price and non-price based competition. Moreover, there are different
competitors that will compete with the project either directly or indirectly. But the
Fruit and vegetable farm under discussion has diversified marketing strategies that
could enable it to cope up with the different competitors in the market. Moreover, it
will frequently conduct competitors research which focuses on, the strength and the
weaknesses, the different competitors’ strategies, the techniques they use in rendering
the service, their customer handling methods, and others.

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6. Technical Analysis
The project will be involved in animal fattening, horticultural crop production and the
growing of cash crops (spices) and peas and beans. The project intends to start its
operation in the 50 hectares of land during the first year. The whole farm areas
cultivation will be made through drip and sprinkler irrigation. For this purpose 4 deep
wells will be sunk at suitable site which can irrigate by the help of submersible
pumping system. The remaining 50 hectares will be rain fed for the first one years of
operation. The irrigated land will be increased to 100 hectares by year two of
operation while the decision to increase the area served by irrigation will be
determined depending on products to be grown and the cost efficiency of the drip and
well irrigation systems. The major activities are detailed below.

6.1 Seedling production

The project will establish a fruit/horticulture nursery for the production of vegetable
seedlings and fruit trees. The vegetable seedlings will be transplanted to the field
intercropped between the fruit trees until the fruits get matured. The fruit tree
seedlings will also be available for sale to the surrounding communities at a
reasonable price. It is expected that 25% of the seedlings produced will be sold to the
public and the proportion can be increased if demand increases.

An area not less than one hectare is required for this purpose including the
construction of offices, store and working shades.

If in the project area seedlings are available at reasonable price and location
purchasing from the local market will be taken as an option.

6.2 Infrastructure Development

Irrigation infrastructure as well as offices, stores, and house for animal fattening will
be constructed. The construction of all infrastructures including deep well will be
finalized in the first six months of operation. Details are given below.

6.2.1 Deep well

Four deep well will be sink at suitable site to irrigate the 100 hectare of land. The
farm will be served by drip and sprinkler irrigation from the four submersible pumps.
Details on design of the pump irrigation system will be worked out at the beginning of
operation.

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6.2.2 Drip and sprinkler irrigation
The experience with drip and sprinkler irrigation systems in a large scale is at its
infancy in this country. However, some of the efforts in a small scale are promising
that a large-scale application is possible. The project has to use drip and sprinkler
irrigation systems for at least two interlinked reasons. The first is to reduce the loss of
water through evaporation and the second reason is to make water available for a
large area, as water will be limiting for the irrigated agriculture being proposed. Drip
and sprinkler irrigation systems enough to serve the whole farm area will be installed.
The materials used for drip irrigation are produce in Mekele by Biruh Tesfa plastic
factory.

6.2.3. Animal Barn

The fattening component of the project requires a barn for the animals and areas for
feed preparation and storage. Feed storage will be made by constructing open shades
just to protect feed from the rain during the rainy season.
The barn for the animals will be constructed in a 300 square meters of area. Two
rooms will be annexed to the barn to serve for veterinary service and laboratory.

6.2.4 Nursery office and stores

The nursery will have its own offices, stores and toilets. Three offices, 2 stores and 2
toilets will be constructed within the nursery premises. A total area of 150 square
meters will be used for the construction.

6.3 Horticulture
The horticulture activities will includes the production of tomato melon, garlic, onion
and other cash crops. The project will add other horticultural crops and spices in the
near future.

Production will be supported with irrigation and there is a plan to have two production
seasons a year for the first three years. Production of dry tomato garlic and spices will
be made on 50 hectares of land.

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6.4 Animal fattening

The animal fattening component has been included in anticipation of other projects
being involved in the processing and marketing of animal products in the area. The
magnitude of the program will be determined from the demands arising from such
projects in the area.

The bi-product of the animals can be used as organic fertilizer for the crops to be
grown in the project area.

6.5 Crop Production

Soil varieties for all sites consist of clay, fertile soil, silt loam and other silt types.
Farming by far is the main means of livelihood of the majority of the population in the
wereda and is dominated by smallholding farmers where the farm lands are
characterized by high fragmentation, which result in continuing decline of agricultural
productivity. The crops most often cultivated in the project areas include Teff,
sorghum, barley, wheat, beans and other field crops. Average production and
productivity per hectare ranges from 5 to 10 quintals for some of the crops. If
intensive farming is practiced and inputs are introduced crop production can be
improved to 20q/ha for most of the cereal crops.

The crops to be produced by rain fed agriculture will include sorghum, maize and dry
beans. These crops have an established demand already. This cereal crop production
could be used for crop rotation. Other crops will be included if demand exists.

6.6 Feasibility

The major constraints limiting the success of investments in the agriculture sector are
the availability of markets, input and skilled manpower. The project has done enough
preparation and these factors will not be of major concern for the project as the
marketing aspect of the potential products from the company has been explored
already, and the market situation looks promising as presented in Table above.

Availability of the required inputs particularly the planting material has been
confirmed. The company that buys the products supplies some of the planting
materials for ensuring quality. The project has already started collecting some of the
planting materials required.
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 7. ORGANIZATIONS AND MANAGEMENT

7.1 Business Form

The form of business is selected as partnership because this form help as drive our
idea and to share the limitation of finance.

7.2 Organization Structure of the Project

General Manager

Cashier & Accountant Farm Supervisor Store

Technician Technician
7.3 Man Technician
Power Requirement Technician
with Qualification Production Production

The project will employ professionals with adequate experience required for the high
quality products grown. The conducive working environment, competitive
remuneration, and good benefits will attract high quality professionals. Professionals
will also provide training programs for the workers regularly. The project has also
established an advisory body to oversee the whole operation. The project will employ
qualified professionals for the different fields to be created. Initially, the project will
have three fields. The number of permanent employees will be approximately 16

13
 while temporary employment will be accessible for hundreds of people from the
locality. Table 2 shows the manpower requirement of the project.

No. Position Monthly Salaries

1 Project Manager 7,500.00
2 Veterinary 4,000.00
3 Foremen 2,500.00
4 Drivers 2,500.00
5 Secretaries 2,500.00
6 Cleaners and messenger 1300.00
7 Daily Laborers 2,400.00

8. Financial Analysis
8.1 Investment Cost

TABLE1. FIXED COST

No. Description Quantity Unit Price Total Price Remarks

1 LAND

Land clearing 100 ha 25,000.00 250,0000.00

Fence with broad 12 KM 23,000.00 276,000.00
Wire
Rent land 100 ha 300 30000.00
Sub Total 556,000.00
2 BUILDING

Store L.sum 100,000.00 100,000.00

Power supply 150,000.00 150,000.00
installation
Power house 1 25,000.00 25000.00
OFFICE L. sum 260,000.00 260,000.00
GUARD HOSE 1 25000.00 25000.00
Sub Total 560,000.00
3 INFRASTRUCTUR
E
BOREHOLE 4 250,000.00 1,000,000.00
Drip system 100 ha 30,000.00 3,000,000.00
Power supply 10 5,000.00 50,000.00
installation
14
No. Description Quantity Unit Price Total Price Remarks
Pipe and fitting 200 pcs 500.00 100,000.00 1-1.5 inch
Sub Total 4,150,000.00
VEHICLES
4 Trucks 0 0 0
Tractor with 0 0 0
accessories
4-wheel drive vehicles 1 500,000.00 500,000.00
pickup
Sub Total 500,000.00
HAND TOOLS L .sum 25,000.00
Thresher 1 0
6 Office equipment
and furniture
computer 1 10,500.00 10,500.00
printer 1 5000.00 5000.00
chair 4 300.00 1,200.00
table 2 3000.00 6000.00
shelf 2 1500.00 3000.00
Cupboard 1 500.00 500.00
Desk 2 700.00 1,400.00
subtotal 27,600.00
7 Preproduction
cost
Study and Design L. sum 150,000.00
Sub Total 150,000.00
Total 5,968,600.00
N.B. L.sum stands for Lump-sum

Table2. Working capital Cost

Total Working Capital Cost

S. Item Year
No 0 1 2 3 4 5

.
1 Labour 2,302,00 1,921,60 2,338,00 1,885,60 2,222,80 2,302,00
0 0 0 0 0 0
2 Admin.
cost 564,400 564,400 564,400 564,400 564,400 564,400
3 Animal 0 0 900,000 900,000 900,000 900,000
4 Land 136,000 133,250 138,700 130,550 130,550 136,000

15
 preparatio
n
5 Seed 87,950 80,250 89,450 78,750 85,450 87,950
6 Agro
chemical 472,500 465,150 465,150 472,500 472,500 472,500
  Total 3,562,85 3,164,65 4,495,70 4,031,80 4,375,70 4,462,85
0 0 0 0 0 0

Table 3.Total Investment cost

S Item Year
0 1 2 3 4 5
.No

5,968,600.0
1 Fixed Cost 0 0 0 0 0
0

Working 4,495,70 4,031,80 4,375,70

2
Capital 3,562,850 3,164,650 0 0 0 4,462,850
Total 9,531,450.0
0

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8.2 Depreciation cost of fixed assets
TABLE4. DEPRECIATION

S. Project life (year)

Description of assets 0 1 2 3 4 5 B
No.
1 Fencing 276,000.00 55,200 55,200 55,200 55,200 55,200
2 BUILDING 560,000.00 112,000 112,000 112,000 112,000 112,000
3 INFRASTRUCTURE 4,150,000.0
276,667 276,667 276,667 276,667 276,667
0
4 VEHICLES 500,000.00 100,000 100,000 100,000 100,000 100,000
5 HAND TOOLS 25,000.00 5,000 5,000 5,000 5,000 5,000
7 Office equipment and
27,600.00 5,520 5,520 5,520 5,520 5,520
furniture

Total 554,387 554,387 554,387 554,387 554,387

8.3 Loan Repayment schedule

Table5. Loan Repayment schedule

Loan Repayment Schedule

Year Annual Beginning Principal Interest Ending
payment balance (11.5%) balance
1

2,251,805.06 7,148,587.50 1,429,717.50 822,087.56 5,718,870.00

2

2,087,387.55 5,718,870.00 1,429,717.50 657,670.05 4,289,152.50

3

1,922,970.04 4,289,152.50 1,429,717.50 493,252.54 2,859,435.00

4

1,758,552.53 2,859,435.00 1,429,717.50 328,835.03 1,429,717.50

 5

1,594,135.01 1,429,717.50 1,429,717.50 164,417.51 -

 8.4 Production costs
LABOR REQUIREMENT
Labour requirement of the proposed crops and cost per hectare.

- Tomato . - 744 pd/ha x 80 birr/day = 59,520 birr.

- Onion - 721.5 pd/ha x 80 birr/day = 57,720 birr.
- Peppers - 636 pd/ha x 80 birr/day = 50,880 birr.
- Green bean. - 792 pd/ha x 80 birr/day = 63,360 birr.
- Melon - 496 pd/ha x 80 birr/day =39,680 birr
- Feed - 150 pd/ha x 80 birr/day =12,000 birr.

TABLE 6. LABOUR COSTS

No Description Cost/h total costs in birr

Year-1 Year-2 Year-3 Year-4 Year-5
a
In birr
1 Tomato &
cherry 59,520
tomato 595,200 396,800 595,200 396,800 595,200
2 Onion 57,720 577,200 384,800 577,200 384,800 577,200
3 Peppers 50,880 254,400 169,600 254,400 169,600 254,400
4 Green bean 63,360 316,800 475,200 316,800 475,200 237,600
5 melon 39,680 198,400 99,200 198,400 99,200 198,400
6 Feed 12,000 360,000 396,000 396,000 360,000 360,000

Daily labour 2,302,000 1,921,600 2,338,000 1,885,600 2,222,800

Adm. cost 564,400 564,400 564,400 564,400 564,400
Total 2,866,400 2,486,000 2,902,400 2,450,000 2,787,200

Land preparation
Land preparation for the first year will be by hiring tractor, and the costs are presented
below as follows.

Table7. Land preparation (for one ha).

No Description cost in birr Remark

1 Ploughing 540.00

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 3 Disking 200.00
3 Land levelling 150.00
4 Furrowing 200.00
Total 1,090.00

TABLE8. LAND PREPARATION COST

No Description Cost/ha total costs in birr

Year-1 Year-2 Year-3 Year-4 Year-5
In birr
1 Tomato & 2725 27,250 32,700 27,250 32,700 27,250
Cherry
tomato
2 Onion 3270 32,700 21,800 32,700 21,800 32,700
3 Peppers 3270 16,350 10,900 16,350 10,900 16,350
4 Green bean 4360 21,800 32,700 21,800 32,700 16,350
5 Melon 2180 10,900 5,450 10,900 5,450 10,900
6 Feed 900 27,000 29,700 29,700 27,000 27,000
Total 136,000 133,250 138,700 130,550 130,550

Consumable inputs
These include seeds, agro chemicals, fuels, oils, items required for camp and so on.

TABLE 9. COST OF SEEDS AND OTHERS

No Description Unit Unit Total cost in birr

cost/ha
Yr-1 Yr-2 Yr-3 Yr-4 Yr-5
1 Tomato & Kg 1350 13,500 16,200 13,500 16,200 13,500
cherry tomato
2 Green bean Kg 1000 10,000 15,000 10,000 15,000 7,500
3 Onion Kg 9000 45,000 30,000 45,000 30,000 45,000
4 Peppers Kg 390 1950 1,300 1,950 1,300 1,950
5 Melon kg 500 2,500 1,250 2,500 1,250 2,500
5 Feed Kg 500 15,000 16,500 16,500 15,000 15,000
Total 87,950 80,250 89,450 78,750 85,450

Table10. Agro chemicals per hectare

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 No Description Vegetables Feed
1 Dap 2 qt x 730 = 1,460 Birr 1 qt x 730 = 730 Birr
2 Urea 2qt x 740 = 1,480 Birr. 1qt x 740 = 740 Birr.
3 Pesticide 700 Birr 700 Birr
Total 3,640 Birr 2,170 Birr

Table 11. Cost of agrochemicals.

No Description Unit Year-1 Year-2 Year-3 Year-4 Year-5

cost/ha
1 Vegetables 9,100 364,000 345,800 345,800 364,000 364,000
2 Feed 3,616.67 108,500 119,350 119,350 108,500 108,500
Total 472,500 465,150 465,150 472,500 472,500

TABLE12. PURCHASE OF BEEF CATTLE TO BE FATTENED.

No Description Unit Year- Year-2 Year-3 Year-4 Year-5

cost 1
Oxen
3,000 0 900,000 900,000 900,000 900,000
Total
0 900,000 900,000 900,000 900,000

Table 13: Total Production Costs

Total Production Costs

No Description total costs in birr
Year-1 Year-2 Year-3 Year-4 Year-5
1 Labour cost 2,866,400 2,486,000 2,902,400 2,450,000 2,787,200
2 Land preparation
cost 133,250 138,700 130,550 130,550 136,000
3 Seed costs 80,250 89,450 78,750 85,450 87,950
4 Cost of Agro
chemicals 472,500 465,150 472,500 472,500 472,500
5 Cost of beef cattle 0 900,000 900,000 900,000 900,000
Total 3,552,400 4,079,300 4,484,200 4,038,500 4,383,650

20
8.5 Administration Cost for one year
TABLE14. ADMINISTRATION COST
No. Item cost Number Salaries Total
1 Manpower
Project Manager 1 7,500.00 90,000.00
veterinary 1 4,000.00 48,000.00
Foremen 5 2,500.00 150,000.00
Drivers 1 2,500.00 30,000.00
Dump truck driver 0 0 0
Secretaries 1 2,500.00 30,000.00
Cleaners and messenger 1 1300.00 15,600.00
Guards 3 1300.00 46,800.00
Tractor operator 0 0 0
Per Diem L. sum 20,000.00
Sub Total 13 430,400.00
2 Utility Cost
Electric power L .sum 20,000.00
Telephone 6,000.00
Miscellaneous Cost 30,000.00
3 Repair and maintenance L. sum 18,000.00
Fuel and lubricant L. sum 60,000.00
Sub Total 134,000.00
TOTAL 564,400.00

21
 8.6 Expected Income
The expected income from the products and services of the project is shown on Table 15.

Expected Revenue in birr

TABLE15. CROP AND BEEF

NO Description Price Year-1 Year-2 Year-3 Year-4 Year-5

Revenue Yiel Revenue Yiel Revenue Yiel Revenue Yiel Revenue
Birr/ Yiel
d d d d
qt d in
In qt In qt In qt In qt
qt
/no.
1 Tomato 1000 4000 4,000,000 4000 4,000,000 4000 4,000,000 4000 4,000,000 4000 4,000,000
2 Green bean 1000 400 400,000 400 400,000 400 400,000 400 400,000 400 400,000
3 Peppers 2,00 150 300,000 150 300,000 150 300,000 150 300,000 150 300,000
(dry) 0
4 Cherry 1000 450 450,000 450 450,000 450 450,000 450 450,000 450 450,000
tomato
5 Onion 1,40 1250 1,750,000 1250 1,750,000 1250 1,750,000 1250 1,750,000 1250 1,750,000
0
6 Melon 700 2500 1,750,000 2500 1,750,000 2500 1,750,000 2500 1,750,000 2500 1,750,000
5 Beef (in 3500 300 1,050,000 300 1,050,000 300 1,050,000 300 1,050,000 300 1,050,000
number)
Total
Revenue 9,700,000 9,700,000 9,700,000 9,700,000 9,700,000
 Projected Income Statement
Year 1 2 3 4 5
Sales 9,700,000.00 9,700,000.00 9,700,000.00 9,700,000.00 9,700,000.00
Less Production and
Administration costs 3,562,850 4,064,650 5,095,700 4,631,800 4,975,700
operating profit 6,137,150.00 5,635,350.00 4,604,300.00 5,068,200.00 4,724,300.00
Less Depreciation
cost 554,387 554,387 554,387 554,387 554,387
Earning before 5,582,763.00 5,080,963.00 4,049,913.00 4,513,813.00 4,169,913.00
interest and tax
Less interest 822,087.56 657,670.05 493,252.54 328,835.03 164,417.51
Earning before tax 4,760,675.44 4,423,292.95 3,556,660.46 4,184,977.97 4,005,495.49

23
Less Tax(35%) 1,666,236.40 1,548,152.53 1,244,831.16 1,464,742.29 1,401,923.42
Net income 3,094,439.04 2,875,140.42 2,311,829.30 2,720,235.68 2,603,572.07

Projected Cash Flow Statement

24
 Pre- Years        
Particulars Operating
Period 1 2 3 4 5
CASH INFLOW            
Equity - - - - -
2,382,862.50
Borrowings - - - - -
7,148,587.50
Cash Sales -
9,700,000.00 9,700,000.00 9,700,000.00 9,700,000.00 9,700,000.00
Total Cash Inflow
9,531,450.00 9,700,000.00 9,700,000.00 9,700,000.00 9,700,000.00 9,700,000.00
CASH OUTFLOW            
Pre-operating expenses - - - - - -
Purchase of fixed - - - - -
assets 5,968,600.00
Seed
87,950.00 80,250.00 89,450.00 78,750.00 85,450.00 87,950.00
Agro-chemical
472,500.00 465,150.00 465,150.00 472,500.00 472,500.00 472,500.00
Direct Labour
2,302,000.00 1,921,600.00 2,338,000.00 1,885,600.00 2,222,800.00 2,302,000.00
Operational -
overheads* 42,000.00 44,100.00 46,305.00 48,620.25 51,051.26

25
 Land preparation
136,000.00 133,250.00 138,700.00 130,550.00 130,550.00 136,000.00
Animal Purchase
- - 900,000.00 900,000.00 900,000.00 900,000.00
Administrative
expenses* 564,400.00 564,400.00 564,400.00 564,400.00 564,400.00 564,400.00
Interest expenses - 822,087.56 657,670.05 493,252.54 328,835.03 164,417.51
Loan amortisation -
1,429,717.50 1,429,717.50 1,429,717.50 1,429,717.50 1,429,717.50
Total Cash Outflow
9,531,450.00 5,458,455.06 6,627,187.55 6,001,075.04 6,182,872.78 6,108,036.27
NET CASH INFLOW -
(OUTFLOW) 4,241,544.94 3,072,812.45 3,698,924.96 3,517,127.22 3,591,963.73
Cash Balance Beginning - -
4,241,544.94 7,314,357.39 11,013,282.35 14,530,409.57
Cash Balance Ending -
4,241,544.94 7,314,357.39 11,013,282.35 14,530,409.57 18,122,373.30
PVIF(12%),n=5 0.8 0.7 0.71 0.6 0.56
- 93 97 2 36 7
PV
- 3,787,093.70 2,449,627.27 2,632,821.72 2,235,197.93 2,038,176.68

NPV 3,611,467.31

26
 Projected Balance Sheet
Particulars YEAR
ASSETS 1 2 3 4 5
Current Assets          
Cash 4,241,544.94 7,314,357.39 11,013,282.35 14,530,409.57 18,122,373.30
Raw Material Inventory 1,657,898 1,445,400 1,454,600 1,451,250 1,457,950
Account Receivable - - - - -
Total Current Assets
5,899,442.44 8,759,757.39 12,467,882.35 15,981,659.57 19,580,323.30
Fixed Assets          
Land
556,000.00 556,000.00 556,000.00 556,000.00 556,000.00
Fencing 276,000.00 276,000.00 276,000.00 276,000.00 276,000.00
Building 560,000.00 560,000.00 560,000.00 560,000.00 560,000.00
Infrastructure 4,150,000.00 4,150,000.00 4,150,000.00 4,150,000.00 4,150,000.00
Vehicles 500,000.00 500,000.00 500,000.00 500,000.00 500,000.00
Hand Tools 25,000.00 25,000.00 25,000.00 25,000.00 25,000.00

27
Office Equipment & Furniture 27,600.00 27,600.00 27,600.00 27,600.00 27,600.00
Less: Accumulated
Depreciation 554,387 554,387 554,387 554,387 554,387
Net Fixed Assets
4,984,213.00 4,984,213.00 4,984,213.00 4,984,213.00 4,984,213.00
Total Fixed Assets
5,540,213.00 5,540,213.00 5,540,213.00 5,540,213.00 5,540,213.00
TOTAL ASSETS
11,439,655.44 14,299,970.39 18,008,095.35 21,521,872.57 25,120,536.30
LIABILITIES          
Current Liabilities          
Accounts Payable - 483,658.40 - - -
Loans Payable 1,429,717.50 1,429,717.50 1,429,717.50 1,429,717.50 1,429,717.50
Taxes Payable 1,666,236.40 1,548,152.53 1,244,831.16 1,464,742.29 1,401,923.42
Salaries Payable 2,866,400 2,486,000 2,902,400 2,450,000 2,787,200
Total Current Liabilities
5,962,353.90 5,947,528.43 5,576,948.66 5,344,459.79 5,618,840.92
Long Term Liabilities          
Loans Payable -  
2,259,153.35 3,214,150.56 4,272,234.27
Total Long Term - -
Liabilities 2,259,153.35 3,214,150.56 4,272,234.27
Total LIABILIES
5,962,353.90 5,947,528.43 7,836,102.01 8,558,610.35 9,891,075.19
OWNER’S EQUITY          

28
 Capital Beginning 2,382,862.50 2,382,862.50 2,382,862.50 2,382,862.50 2,382,862.50
Accumulated Capital
2,382,862.50 5,477,301.54 7,860,164.04 10,243,026.54 12,625,889.04
Add: Net Profit after Tax 3,094,439.04 2,875,140.42 2,311,829.30 2,720,235.68 2,603,572.07
Total Owner’s Equity
5,477,301.54 8,352,441.96 10,171,993.34 12,963,262.22 15,229,461.11
TOTAL LIABILITIES AND
EQUITY 11,439,655.44 14,299,970.39 18,008,095.35 21,521,872.57 25,120,536.30

9. Project Appraisal

Net Present Value

Its Net Present Value (NPV) at 10% discount rate is 3,611,467.31 = ((3,787,093.70 + 2,449,627.27 + 2,632,821.72 + 2,235,197.93 +
2,038,176.68) - 9,531,450.00)

29
Since the Net Present Value is greater than zero, thus the project is financially viable and it should be accepted accordingly.

Internal Rate of Return

Internal Rate of Return (IRR) of the project is calculated as follows

A B C D E F G H I
1 Year 0 1 2 3 4 5
Annual Cash
2 flow - 9,531,450.00 4,241,544.94 3,072,812.45 3,698,924.96 3,517,127.22 3,591,963.73 26.78%

Using computers: If we have a computer, we can use Excel application software to find the IRR of the cash flows of any project. For example,
if the range C2 to H2 contains the streams of the cash flows, we can find the IRR of a project by writing the following formula in cell I2 to.
=IRR(C2:H2);

Entering the above formula in the cell I2 gives the value of 26.78% in the same cell. Discounting the cash flow of each year using the
26.78%, the IRR of the project gives the present value of the cash flow for each respective year. Then summing these present values
from year zero to year five gives the NPV of zero.

30
Its Internal Rate of Return (IRR) is 26.78%, since the internal rate of return is greater than the discount rate, thus the project is viable and
should be accepted accordingly.

Benefit Cost Ratio

Benefit Cost Ratio

PVCI
BCR  =3,787,093.70 + 2,449,627.27 + 2,632,821.72 + 2,235,197.93 + 2,038,176.68
I
9,531,450.00
= 13,142,917.30
9,531,450.00
= 1.379

31
Since the Benefit Cost Ratio (BCR) is greater than one, thus the project is viable and it should be accepted accordingly.

The Payback Period can be calculated as follows:

Year 0 1 2 3 4 5
Annual Cash -9,531,450.00 4,241,544.94 3,072,812.45 3,698,924.96 3,517,127.22 3,591,963.73

32
 Flow
Cumulative -
Cash Flow -9,531,450.00 5,289,905.06 -2,217,092.61 1,481,832.35 4,998,959.57 8,590,923.30

2,217,092.61
Payback Period (2  ) years2.60Years Or 2 years and 7.19 months = or 2 years and 7 months and 6 days
3,698,924.96 =

Return On Investment (ROI)

The ROI for this project is as follows:

33
 Annual Net Profit 3,094,439.04
= x 100

Total Capital Requirement 9,531,450.00

= 32.5%

ROI is, therefore, 32.5%.

The return on owner’s investment (ROI) is:

Annual Net Profit 3,094,439.04

= x 100 = 129.9%

Owner’s Investment 2,382,862.5

34
 ROI is, therefore, 129.9%.

Sensitivity Analysis

Assume that owing to the uncertainty of actual needs and prices of equipment, investment could vary in the range of 9,531,450.00 to
11,000,000 dinars Hence, a total investment of 4,377,651 Birr could be used as an optimistic estimate, and a total investment of 5,000,000 Birr
as a pessimistic estimate The calculations of the net present value would change accordingly as follows

Optimistic Estimate

Year Annual Discount Factor at Present Value

Investment 10%
T0 4,531,450.00 1.00 4,531,450.00
T1 5,000,000.00 0.91 4,550,000.00
Present value of 9,081,450.00
investment
Present value of net cash 11,778,813
inflow .76
Net Present Value 2,697,363.76
(NPV)

35
Pessimistic Estimate
Year Annual Discount Factor at Present Value
Investment 10%
T0 5,000,000.00 1.00 5,000,000.00
T1 6,000,000.00 0.91 5,460,000.00
Present value of 10,460,000.00
investment
Present value of net cash 11,778,813.76
inflow
Net Present Value 1,318,813.76
(NPV)

Therefore, the net present value of the project is sensitive to changes in investment requirements It ranges from 1,318,813.76 Birr under
pessimistic assumptions to 2,697,363.76 Birr under optimistic ones Yet the project still has positive NPV under the worst expected
circumstances in terms of investment costs.

Environmental and Social Impact Analysis.

36
The project does not have negative impact on society if the project is implemented. And it has positive externality to the society on nearby. The
project will improve the quality of life by rendering quality farm products to the society.

The project will contribute its indispensable share on income distribution in terms of employment creation for the youth and natural resource
employment thus it will backup the response to national objectives.

Both locally and internationally, the project is coherent to the regulations and laws on governing the effects of undertakings on the environment.
The project is going to have positive effect on the physical environment; water, air, soil.
As a result of the project there will not be noise pollution.

Thus considering the products’ better features, the conservative estimates in sales, realistic cost estimates, the entrepreneur’s
proven track record, and the sound financial, technical and economical projections; and environmental and social impact
aanalysis, the project is considered very viable.

37
38
Annex1

Crop disbursement
The type of crops that are going to be produced for export purpose and their holdings
are:

TABLE4. CROP PRODUCTION DISBURSEMENTS

N Description year -1 year – 2 year – 3 year - 4 year – 5

o.
1 tomato 10 ha 10 ha 10 ha 10 ha 10 ha
2 green bean 10 ha 10 ha 10 ha 10 ha 10 ha
3 peppers 5 ha 5 ha 5 ha 5 ha 5 ha
4 Onion 5 ha 5 ha 5 ha 5 ha 5 ha
5 Cherry Tomato 5 ha 5 ha 5 ha 5 ha 5 ha
Fruits 5 ha
6 Melon 5 ha 5 5 ha 5 5 ha
5 feed hay 15 ha 15 ha 15 ha 15 ha 15 ha
grain 15 ha 15 ha 15 ha 15 ha 15 ha
total 40 ha 40 ha 40 ha 40 ha 40 ha
Remark: - Assumption three harvests per year. The production of feed is during the
raining season.

- The grains will be Sorghum and Maize to be used to fatten the cattle’s and the
average yield of both crops is 70 qt/ha, per season in a year.

Annex 2
Beef cattle fattening

Beef cattle fattening is one component of the project, and also manure from the cattle
will be the second benefit out of it.

TABLE5. BEEF CATTLE FATTENING

Item Unit Description No of beef cattle to be fattened in a year

Yr-1 Yr-2 Yr-3 Yr-4 Yr-5
Beef cattle No 3000 birr/ox - 300 300 300 300
Yield of the
Qt 750 900 900 750 750
grains
Consumed Grain Qt Qt/Oxen to be 675 1,125 1,125 1,125
per year fattened
 Annex1
Estimated production
Yield is estimated according to the information given from the customers because, seed will be provided by them. The estimated yield is per the
proposed area in this document is in quintal.

TABLE 14. ESTIMATED YIELD

n description Yield year-1 year-2 year-3 year-4 year-5

area Total Area Total Area Total yield Area in ha Total yield in Area in ha Total yield in
o per ha in
yield in in ha yield in in ha in qui qui qui
qui
qui qui
1 tomato 400 10 4000 10 4000 10 4000 10 4000 10 4000
2 green bean 40 10 400 10 400 10 400 10 400 10 400
3 peppers 30 5 150 5 150 5 150 5 150 5 150
Cherry 90 5 450 5 450 5 450 5 450 5 450
tomato
4 onion 250 5 1250 5 1250 5 1250 5 1250 5 1250
Melon 500 5 2500 5 2500 5 2500 5 2500 5 2500
5 Feed hay 25 25 25 25 25
Feed grain 30 15 450 15 450 15 450 15 450 15 450
Total

General Assumptions
Discount Rate = 11.5% plus risk factor 0.5%= 12%
Annual Interest Rate on loan = 11.5%