Project Profile on the

Establishment
Of REALE STATE project

Promoter: - Dega Real estate activities plc

Debre Birhan

0
 Table of Contents

1. Executive Summary 3
Demographics 6
1.3.1.Climate 7
1.3.2. Local economy 7
2. Product Description and Application 9
3. Market Study, Plant Capacity and Production Program 12
3.1 Market Study 12
3.1.1 Present Demand and Supply 12
3.1.2 Projected Demand 13
3.1.3 Pricing and Distribution 14
3.2 Plant Capacity 14
3.3 Construction Program 14
4. Raw Materials and Utilities 14
4.1 Availability and Source of Raw materials 14
4.2 Material al Requirement and Cost 15
5 Location and Site 15
6 Technology and Engineering 15
6.1 Construction Process 15
6.2.2 Architectural Design & Layout 16
6.2.3 Structural design 17
6.2.4 Reinforced concrete 17
6.2.5 Foundation Design 18
6.2.6 Construction Plan and process 18
6.3 Utilities 19
6.2 Machinery and Equipment 20
6.3 Civil Engineering Cost 20
7. Human Resource and Training Requirement 25
6.4 Human Resource 25
6.5 Training Requirement 29
8. Financial Analysis 29
8.1. Underlying Assumption 29
8.2. Total Investment cost 30
8.3. Financial evaluation 31
9. Economic and Social Benefit and Justification 32
ANNEXES 33

1
 EXECUTIVE SUMMARY

1.Project Name Real-Estate Development

Project
2.Nationality Ethiopian
3.Project Owner Dega Real estate activities plc
4.contact address
5.Project Location Amhara national regional state,
north shewa zone,debre birhan
town
6.Primeses Required 25 hectare /250,000 m2
7.Total Investment Cost 1,100,000,000 /1.1 billion birr
8.Employment Opportunity The project wills employee a
total of 300 permanent and
6000contract workers will be
employed on temporary bases).
9.Social and Economic Benefit Provide better house, solve
house problem for middle
income earner, foreign
currency generation,
employment opportunities,
generation of income,
stimulates town economy and
benefits local people.
10.Project Composition Residential Real-Estate villa,
Apartment and commercial
center, business offices,
restaurants, swimming pools,
school health institution and
parking lots bar and restaurant,
cafeteria, car wash, car
parking, pension, super market
and bank.
11.background of the investors work experience in
constraction,moll,industries
and different business activities

2
 1. Executive Summary

This project profile deals with real estate development for building houses for rent
in Amhara National Regional State at Debre Birhan town. The following presents
the main findings of the study. Which offers all services such as serviced
residential apartments, business offices, restaurants, cafes, swimming pools,
parking lots and other services required for the project within a safe and
clean environment, due to the need of a particular customers group for a
special real estate product that focuses on quality, location and services?

Demand projection divulges that the domestic demand for home is substantial and
is increasing with time. Accordingly, the planned plant is set to construct above
280 residential homes including other facilities school, health institution and
other facilities. The total investment cost of the project is estimated at Birr
1,100, 000,000 /1.1 billion/ and creates 300 permanent and 6000 temporarily
jobs. The land requirement of its implementation is 25 hectares or 250,000 m2.

The financial result indicates that although the project will generate profit
beginning from the first year of operation the IRR and NPV are not as such
attractive enough to promote the project. That is, the result shows that the
calculated IRR of the project is 19.2% and NPV discounted at 18% of Birr
44,823.85. In addition to this, the project wills payback fully the initial investment
in 5 years’ time.
The major factor for the unattractive result is the relatively high cost of
construction owing to the presence of high material and labor cost in the sector.
Thus, building real estate for rent purpose may not be an attractive business
strategy.

3
Real estate development is the continual reconfiguration of the
built environment to meet society’s needs. It is a complicated
process involving participation of professionals from different
disciplines, and a business, like other businesses, which
generates income and regular cash flow.
Due to their large scale and component integration, mixed-use
development is the most complex type of real estate.
Consequently, feasibility studies are essential for the success of
mixed-use developments. Real estate feasibility is the formal
demonstration of a proposed project’s viability. Although it does
not guarantee a project’s success, it leads to a go/no go decision.
For decision making in complex and large investments such as
mixed-use real estate developments such a study is required.

 Our Philosophies:
a) Commitment:
We, management staffs, are dedicated to perform beyond the contracted and
promised agreement in the sense of partnership. However, at times when
unexpected circumstances happened beyond our control, we then set out to
resolve the difficulty and attend to rectify the situation by notifying our
customers in the right time. Bringing up solutions in a correct, well-considered
and flexible manner is another element of our perception of commitment. We
aspire for and aim at getting it corrected immediately and deliver as promised.
b) Customers:
Dega Real estate activities plc. has developed a loyal client base for
nearly a decade and has established close relationships and good partnership
with suppliers and buyers. These relationships are based on trust, consistence
and performance over many years. We continue to grow with our existing
clients and new ones that we keep adding as we continue to flourish. We always
need the existing customers to go with us long journey and to promote our
business for the new ones. This is happening with our scope, consistency and
performance of supply. We strongly believe that quality in all dimensions is key
factor for good relationships with our clients and suppliers. We provide
unlimited professional technical supports and advices on the nature and
application of our chemicals to our customers.
At Dega Real estate activities plc , we work for our customers to

4
enjoy the highest standards of excellence. We accept 1 00% returns if our items
don’t match with the customers’ requirements. We, at, believe that time is the
all important criterion like quality. We are ready to deliver customer orders not
just on specific date but also at a specified time of the day. Our experience has
helped us to understand the actual operational performances of the sea carriers
as well as inland transporters for practical planning; we always keep the
minimum safety stock in the warehouse for regular supplies for our loyal and
dependent customers. In addition, for the efficient and effective distribution, we
have allied with big, medium and small trucks transporters.
c) Quality
Conformity assessment
Our Company evaluates the supplier competence and good repetition through
sample analysis and Supplier’s Competence Evaluation System. We always
request samples before the bulk order and give trial order for the selected
suppliers which comply to our requirements based on clear specifications.
We take samples from the new arrivals for testing by our own technical staffs,
our customers and the national laboratories (whenever third body conformity
assessment is required), to make sure that the imported chemicals meet the
desired quality requirements.
Technical assistance and after-sales
follow up
Our company provides technical assistance to its customers on the nature
and use of chemicals; and makes after sales follow up to make sure that our
customers are satisfied with the quality of our chemicals. We also provide the
necessary technical assistance to bridge the gap (if any) by providing technical
specification data sheets (TSDS), material safety data sheet (MSDS), certificate
of analysis (COA) and other required information and procedures.
Total Quality Management (TQM)
Our Company is developing total quality management system to build a quality
culture in the company structure that enables us to serve our customers in the
possible optimal way. We are very committed to supply range of chemicals
consistently that meet customers’ requirements first and every time. TQM
helps us to create very good understanding among all actors in the supply chain.

5
 1.1. BACKGROUND OF DEBRE BIRHAN

Debre Berhan (Amharic: ደብረ ብርሃን, romanized: Däbrä Brhan) is a city

in Amhara Region, Ethiopia. Located in the Semien Shewa Zone of the Amhara
Region, about 120 kilometers north east of Addis Ababa on Ethiopian highway 2,
the town has an elevation of 2,840 meters, which makes it the highest town of this
size in Africa. It was an early capital of Ethiopia and afterwards,
with Ankober and Angolalla, was one of the capitals of the kingdom of Shewa.
Today, it is the administrative center of the Semien Shewa Zone of the Amhara
Region.

Demographics
Based on the 2007 national census conducted by the Central Statistical Agency of
Ethiopia (CSA), this town has a total population of 65,231, of whom 31,668 are
men and 33,563 women. The majority of the inhabitants practiced Ethiopian
Orthodox Christianity, with 94.12% reporting that as their religion, while 3.32% of
the population said they were Muslim and 2.15% were Protestants.

The 1994 national census reported a total population for Debre Berhan of 38,717 in
8,906 households, of whom 17,918 were men and 20,799 were women. The five
largest ethnic groups reported in the town were the Amhara (90.12%),
the Oromo (3.94%), the Tigrayan (1.81%), the Gurage (1.6%), and
the Argobba (1.2%); all other ethnic groups made up 1.33% of the
population. Amharic was spoken as a first language by 93.81%, Oromiffa was
spoken by 3.04%, and 1.5% spoke Tigrinya; the remaining 1.65% spoke all other
primary languages reported. The majority of the inhabitants practiced Ethiopian
Orthodox Christianity, with 94.59% reporting that as their religion, while 4.05%
were Muslim, and 1.02% Protestant.

6
 1.3.1.Climate
Debre Berhan is one of the coolest cities found in the subtropical zone of Ethiopia. The
city has a typical subtropical highland climate (Köppen Cwb). The average annual
temperature of the city during day and night hour is 20.7 °C and 8.2 °C respectively with
precipitation 964mm.

Climate data for Debre Berhan

Month Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Year
Average 19.7 20.9 19.6 19.1 18.9 20.7
19.5 20.9 22.1 23.8 23.5 19.9 20.5
high °C (67. (69.6 (67.3 (66.4 (66. (69.3
(67.1) (69.6) (71.8) (74.8) (74.3) (67.8) (68.9)
(°F) 5) ) ) ) 0) )
Daily 13.2 15.3 13.5 13.0 12.0 14.5
12.3 14.4 15.5 16.9 16.9 14.6 16.5
mean °C (55. (59.5 (56.3 (55.4 (53. (58.1
(54.1) (57.9) (59.9) (62.4) (62.4) (58.3) (61.7)
(°F) 8) ) ) ) 6) )
Average 6.8 9.8 7.4 7.0 5.1 8.2
5.1 8.0 8.9 10.1 10.3 9.3 10.7
low °C (44. (49.6 (45.3 (44.6 (41. (46.8
(41.2) (46.4) (48.0) (50.2) (50.5) (48.7) (51.3)
(°F) 2) ) ) ) 2) )
Average
21
precipitat 9 57 45 41 72 319 249 104 28 15 4 964
(0.8
ion mm (0.4) (2.2) (1.8) (1.6) (2.8) (12.6) (9.8) (4.1) (1.1) (0.6) (0.2) (38)
)
(inches)

1.3.2. Local economy

Debre Birhan is located along Ethiopian Highway 2, which connects Addis
Abeba with the north of the country. The gravel road between Debre Berhan and
Ankober, 42 kilometers in length, was overhauled in May 2009.

The Debre Berhan Wool Factory, the first wool factory in Ethiopia, started
production was 1 January 1965 with 120 spindles and 6 looms, having the capacity
to process one metric ton of wool daily. In its first six months, the factory produced
7,065 blankets in a single-shift operation with a labor force of about 200, of whom
45% were women. The Derg government announced 3 February 1975 that the

7
Debre Berhan Wool Factory was among 14 textile enterprises to be fully
nationalised.

The city of Debre Birhan, populated mainly by Amhara, was one of the first
capitals of Ethiopia, then capital of the kingdom of Choa, with Ankober. It was
founded in the 15th century by the Negus Emperor Zara Yakob. He thought he saw
a divine light in the sky one evening, and judged that God approved of the killing
of heretics by stoning which he had ordered. He had a local church built on their
killing ground, and later a palace and a second church dedicated to St. Cyriacus.
Unfortunately, no buildings have survived from this period, and the central church
was built in 1906 by Menelik II in place of the old one. The town is famous for its
carpet production, but also for its woollen factory and its production of araki, a
brandy distilled in the backyards which, according to amateurs, are of very good
quality. The town has the particularity of being twinned with the French town of
Blanc-Mesnil (93), a very active twinning that gives rise to many Franco-Ethiopian
exchanges.

Different local and international investors acclaim the potential of a given country
or city as a preferred investment destination citing the availability of suitable
investment incentives, leaders’ commitment, and public engagement.

Regarding this, the commitment of the leaders is highly appreciated and took the
lions to share in coordinating and strengthening the public, private partnership
which paves ways to induce the sense of ownership towards developing Debre
Berhan- the city found traveling 120kms in the northeast of Addis is exemplary
when compared with other Ethiopian cities.

8
 2. Product Description and Application
Housing is one of the basic human requirements, as every family needs a roof.
Providing shelter to every family has become a major issue as a result of rapid
urbanization and higher population growth. On the other hand, the provision of
house has not kept pace with the above phenomenon and resulted in the
deterioration of living condition, increased health hazarded and rapid growth of
squatter settlements. The improvement of such phenomenon and provision of
affordable housing will not only help alleviate the urban and rural poverty but also
increase the productivity of the population through improved public health. At
present the government is committed to give priority to housing sector and has
demonstrated its commitment by allocating significant resources for its
development, which would contribute to the economy in the form of additional
employment. The multiple effects of the housing and construction sector have the
potential to create maximum employment opportunities besides generating
industrial, commerce and trade activities.
Real estate development is considered one of the sectors with transaction of
billions of birr in the market in Ethiopia. A number of investors have involved in
the development of real estate in Ethiopia. According to the data from Addis
Ababa City Administration Land Management and Construction Licensing
Authority which was collected in the 2011/2012 fiscal year, 124 investors have
received business licenses to work in the real estate development sector of Addis
Ababa (የቤቶች ልማት, 2012).
Residential real estate development contributes to the economy of the country and
in alleviating housing problem. However, researches concerning real estates in
Ethiopia mainly in Addis Ababa show that the real estate development sector faces
different problems and challenges. Problems that exist in the real estate

9
development make the environment susceptible to uncertainty.

An uncertain environment involves risk and compared with many other industries,
the construction industry is subject to more risks due to the unique features of
construction activities (Akintoye &MacLeod, 1997; Flanagan & Norman, 1993;
Smith, 2003). In construction projects, risk may be defined as the likelihood of a
detrimental event occurring to the project. Since the objectives of construction
projects are usually stated as targets established for function, cost, time and quality,
the most important risks in construction are the failure to meet these targets (Baloi
& Price, 2003).
Risks and uncertainties are associated with all projects in real estate development
like any other
construction and commercial activity. These risks and uncertainties can strongly
influence all related progresses at all stages of the entire life cycle of properties
(Chen & Khumpaisal, 2009). However, risks are not always associated with
negative outcomes (Baloi & Price, 2003).
Risk management has become increasingly important for any commercial
organizations operating in today’s environment (Groton, Smith, & Risk Allocation
Sub-Committe, 2010; Mead, 2007; Wiegelmann, 2012) where risks are inherent
(Mead, 2007). It is important that risks are identified, understood, anticipated,
assessed, analyzed, and to learn to manage risks (Groton et al., 2010; Wiegelmann,
2012). “Failure to accurately to identify and make appropriate allowance for risks
being assumed under complex commercial and contractual arrangements can have
terrible consequences.” (Mead, 2007) As part of risk management process, risk
analysis establishes the probabilities of occurrence of adverse events and measures
of the potential impact of risk event outcomes (Edwards & Bowen, 1998).
Risks which exist in real estate development have impacts and developers need to
manage risks and minimize their impact on project objectives and their business as
a whole. It is important to know what risks exist in the real estate development

10
projects and their impact on project objectives.
The motive of this research is to identify the major risk factors existing in real

estate development projects of Addis Ababa and examine the impact of risk factors
on project schedule and cost.

11
 3. Market Study, Plant Capacity and Production
Program

3.1 Market Study

3.1.1 Present Demand and Supply

Housing plays a significant role in the economic growth of our country. Moreover,
it is a source of jobs and capital investment as well as an essential contributor to
personal happiness. Nonetheless, there is severe housing problem in the country
where the region of Amhara is not an exception.

As the Housing and Population Census conducted in June 2010 has not yet
publicized, there is no exact and recent figure that details the number and condition
of residential houses in the Amhara National Regional State. As a result, the extent
of housing problem in the respective zonal and woreda capitals could not be
concretely established. But this does not conceal the present housing shortage that
exists in the region.

It is true that after the decentralization of the country’s government and

administrative apparatus, many offices, agencies and other institutions are
established at the regional zonal, woreda and kebele level. Consequently,
thousands of employees have been deployed in these new regional government
offices. In addition, due to the increase and expansion of schools and health posts,
additional teachers and health personnel are assigned in different localities of the
Region. Besides, due to expansion of urban economic activities such as trade and
commerce, woreda and zonal towns and other urban centers have expanded

12
thereby increasing their population. At the same time a number of aid and
development agencies do have their branch offices in many rural towns of the
region. In general the fact that a number of regional government and non-
government employees has increased in all urban centers while there is a general
increase in urban population throughout the Amhara region, put a tremendous
pressure in the housing problem. As a result, it created extreme shortage of houses
to be rented in every urban center of the Region. This is one of the most difficult
problems facing employees of various offices (governmental and non-
governmental) operating in the region.

Due to the shortage of houses, the employees are forced to live in sub-standard
houses. This in turn has created a discouraging factor for people to work at the
zonal and woreda level. As a result some employees are even forced to stay in
hotels throughout the year indicating the degree of the problem. All this suggest
the presence of huge demand for construction of homes for rent and/or sale. One
possible solution for this major problem is to encourage investors to build low cost
houses for rent for people working in zonal and woreda capital.

3.1.2 Projected Demand

In order to quantitatively forecast the future housing demand in the respective

urban centers of the region, data regarding the current number of houses and their
physical condition should be known. Otherwise, it is impossible to project the
annual additional housing requirement. However, as explained in the previous
section, the housing census conducted in mid-2007 is not published yet and hence,
it is impossible to put numbers and project the future demand. Nonetheless, it is
evident that there is huge demand for housing so that the houses that are proposed
in this profile will be occupied by individuals and families in the respective towns.

13
 3.1.3 Pricing and Distribution

The rent fee for a residence is set to be Birr 10,200 per month. This is the
minimum possible price that makes the envisaged project feasible. The estimated
selling price of the real estate house is 50,000,000 birr.

3.2Plant Capacity

Given the expected demand for residential houses as presented earlier, the planned
technology and capacity, the envisaged plant is set to construct 280 residences
within school ,health institution, playing game and other service that require for
each real estate infrastructure. Each home shall have two bed rooms, one living
room, one kitchen and one toilet.

3.3Construction Program

The construction of the envisaged project will be completed within 12-18 months.
This includes excavation and earth work as well as erecting the building (i.e.,
concrete and masonry works). Once the homes are build it is assumed that all of
them will be rented. In other words, it is assumed that the proposed plant will
operate at 100 percent capacity starting from the first year of operation.

4. Raw Materials and Utilities

4.1 Availability and Source of Raw materials

The major raw materials in constructing the residences are sand, cement, HCB,
steel, toilet fittings, sewerage and water pipes, crushed stone, lighting accessories,
PVC pipes, wires, steel door and windows, paints and corrugated iron sheet. While
the envisaged plant produces its own HCB, other materials such as crushed stone

14
and sand will be purchased from sources available in the different parts of the
region.

4.2 Material al Requirement and Cost

The material requirement and the associated cost while constructing 280 homes is
detailed under section 6.3

5 Location and Site

The envisioned project will locate in Debre Birhan town, North showa zone, in
Amaharas national regional state, which is located in central Ethiopia, in Amaharas
national regional state, North showa zone at a distance of 130 kms from Addis
Ababa.A site in the region which very close to the real estate building and other
infrastructures are available.

6 Technology and Engineering

6.1 Construction Process

The production process includes the following steps.

 Procurement of Land
 Architecture Design
 Materials Procurement
 Erection of Foundations
 Construction of Structure
 Installation of Electrical Wire Pipes
 Construction of roof.
 Plaster of cement
 Sewerage and water pipe installation
 Construction of floors and bathrooms
 Paints and electrification

15
The alternative approach is the use of mud in the construction. This will entail
below standard output and entails huge maintenance cost in the future. Hence such
alternative is not recommended.

The construction project is proposed to be started on July 2022, and is expected to

be finished on July 2032. As seen in the abbreviated construction schedule above, a
majority of the schedule’s time is made up of five major activities; concrete,
building Enclosure, masonry, mechanical and Electrical install. Concrete activities
include processes such as placing foundations and slab on deck. The Building
Enclosure Phase includes erecting the scaffolding that will allow for exterior
sheathing installation and bricklaying.

Mechanical and Electrical install coincide with each other due to the need for
coordination between the two divisions. There are several periods of construction
during the schedule in which there are multiple construction activities occurring at
the same time.

The construction site must be organized accordingly as these processes take place.
As with any construction project, the goal of the schedule will to complete all
construction activities before the required Date of completion.

This date of completion is practical based on the time of year in which the building
will be completed. The team allowed a two week contingency for any setbacks.
Typically, winter construction tends to cause unforeseen delays that negatively
impact a construction project. These conditions can and will almost undoubtedly
impact the project schedule by causing unforeseen delays and project inefficiency.

6.2.2 Architectural Design & Layout

Although functional spaces for the project were laid out in significant detail, the
rest of the building had designated spaces but set layouts. It was at the discretion of
the project promoter to devise typical layouts for the non-detailed commercial and

16
office spaces. To make sure that the building’s layouts were practical, the project
owner researched typical architectural layouts for laboratory and executive office
spaces. The walls and partitions throughout the floor will congruent with the
structural frame and column locations.

6.2.3 Structural design

One of principle deliverables of the project is the structural design of the building.
The structural bays were coordinated with the layout of the building adjustments
will be made to the bays if specific layouts are necessary. The frame will be made
up of a grid with repeating standard structural bays. Included in the structural
system are bay sizes, shape and size of structural members, floor compositions and
curtain walls. These elements were established to resist gravity ad lateral loads as
appropriate.

The gravity load design will completed for two frames; one of structural steel and
one of reinforced concrete. The structural steel frame will chose for further design
based on cost per square foot, local availability of material and construct ability
considerations, such as erection and fabrication. The steel system will then
designed for lateral loading with necessary adjustment being made to framing.

6.2.4 Reinforced concrete

The project group prepared hand structural design calculations for a typical bay of
a reinforced concrete frame. In all reinforced concrete bay designs, a superimposed
dead load of 8 pounds per square foot will be assumed for mechanical equipment,
floor coverings and ceilings.

Similarly, the design of the typical bay accounted for the use of different
commercial space, in which a live load of 1000 pounds per square was assumed.
Loads will be calculated based on the requirements of the minimum Design loads
for Buildings and other Structures.

17
6.2.5 Foundation Design

The design of a superstructure may be accurate, have considered all possibilities

and still fail because the substructure is incapable of distributing the applied loads
to the supporting soil.

Foundation design takes more into consideration than merely the loading from the
columns. While the main part of the project focused on the structural frame and its
alternate designs, a preliminary foundation plan was designed based upon
maximum load carried from the superstructure through the columns. The
foundation design conducted by the project team consisted of the selection of
foundation type, determination of the bearing capacity and the design for typical
interior and exterior spread footings.

6.2.6 Construction Plan and process

The construction process for this project is normally a disjointed three mages
development by which the conceptualized need of the promoter of this project is
translated into a functional facility that will meet their needs in terms of time, cost
and quality.

Based on a general program of the project owners the consultant who is going to be
hired makes site studies, develops structural designs, prepares drawings and
specifications, determines quantities involved and estimated the resultants costs.
All these activities will be done in the first phase of the project which is the design
stage after the document are produced by the designers have been received, and the
works secured the project is supposed to enter the tendering stage. At this stage
contractors study the project document analyze and subsequently determine the
construction methods, built up their unit rates and submit their bids for the works.
The promoter of this project intends to compare the bids and award the contract for the lowest
responsible bidder. This, is of course, presupposes that the favorable proposal does not exceed
the allocated budget.

18
After the award is made and the contract signed between this project owners and
the contractor, the project constructor is expected to prepare and submits a detailed
construction program which includes material schedule, manpower requirement
and cash flow forecast.

After the award is made and the contract signed between this project owner and the
contractor, the project constructor is expected to prepare and submits a detailed
construction program which includes material schedule, manpower requirement
and cash flow forecast.

6.3 Utilities

A number of utilities world be put in place in order to ensure smooth functioning

of the project. These utilities include:

Table 4: Utilities
Qty Cost
No Description . Unit cost (Birr)
100,00 1.30*10,00
1 Electricity supply, kWh 0 0 130,000
2 Water Supply m3 50,000 10*500,000 500,000

3 Telephone and Internet

Broadband 20,000

4
Fuel, Oil and lubricant 2000 19*2000 38,000

Total 1,188,000

19
 6.2 Machinery and Equipment

The machineries and equipment required for constructing homes is detailed in table
1 below Table 1: Machinery and Equipment

Machinery and Equipment Quantity

Mixer 2
Vibrator 1
Wheel Barrow 100
HCB making equipment As required
Various Hand Tools As required
Miscellaneous Equipments As required

To minimize the investment cost, the envisaged plant shall obtain the above stated
machineries and equipment’s on rent basis. The cost of the rent is included in the
construction cost.

6.3 Civil Engineering Cost

The total site area for the construction of 280 residences is estimated to be 250,000
m2. The structure and construction is designed in such a way that each home will
share 2 walls with its adjacent homes so as to minimize construction cost. The
following table details the estimate of the construction cost.

20
 Table 2: Summery of Cost Estimate for One Home

No Description Total price

A. SUB-STRACTURE
1 excavation and earth works
279,570.67
2 concrete work 236,546.34
Sub total 516,117.01
B. SUPER STRACTURE
1 Concrete work
353,358.45
2 Block work
551,534.40
3 Roofing
171,108.00
4 Carpentry and joinery
323,760.00
5 Metal works
820,860.00
6 Finishing
111,379.44
7 Painting
275,798.88
8 Electrical installation
236,330.00
9 Sanitary installation
151,022.00
Subtotal
2,995,151.17
A+B 3,511,268.18
Grand total
3,511,268.18

According to table 2 the total construction cost for one house is estimated to be
Birr 3,511,268.18 This cost includes all costs associated to construction. The detail
brake down is presented in the following.

21
Table 3: Detailed Quantity and Cost Estimate for One House
DESCRIPTION UNI
T QTY U.RATE AMOUNT
A. SUB STRUCTURE
1. EXCAVATION & EARTH WORK
1.1 Clear the site to remove the top soil to a depth not
exceeding 200mm. m3 10.00 2.98 29.75
1.2 Trench excavation in ordinary soil starting from
stripped ground level to a depth not exceeding
1000mm, including working space allowance of 200
mm on both sides. m3 18.20 15.30 278.46
1.3 Back fill around masonry foundation wall in borrow
selected non expansive material well rammed and
compacted in layers not exceeding 200mm.
m3 5.20 51.00 265.20
1.4 15cm thick Back fill under hard core in borrow
selected non expansive material well rammed and
compacted in layers not exceeding 200mm.
m3 4.50 51.00 229.50
1.5 Cart away surplus excavated material and deposit at
a distance not exceeding 1 km away from site.
m3 23.00 25.50 586.50
1.6 25cm thick trachytic or equivalent hardcore well
rolled, consolidated and blinded with crushed stone.
m2 26.00 29.75 773.50
TOTAL CARRIED TO SUMMARY 22162.91
2.CONCRETE WORK
2.1 50mm thick lean concrete in C-5 with minimum
cement content of 150kg/m3 under Masonry
foundation wall.. m2 1.30 21.25 27.63
Reinforced concrete class in C-20 with minimum
cement content of 320 kg/m3 cast in to formwork &
vibrated around reinforcement bars. Formwork &
reinforcement bars are measured separately.

2.2 In grade beam.

m3 1.14 850.00 972.40
Reinforced concrete class in C-20 with minimum
cement content of 320 kg/m3 cast in to formwork &
vibrated around reinforcement bars. Formwork &
reinforcement bars are measured separately.

2.3 In 100mm thick ground slab. m2 25.60 76.50 1958.40

Supply, cut and fix in position Zigba wood or
equivalent formwork.
2.4 To grade beam. m2 10.40 63.75 663.00
Steel reinforcement according to structural drawings
price shall include cutting, bending, placing in
position and tying wires.
2.5 Diameter 8mm deformed bar. kg 36.87 11.05 407.38
2.6 Diameter 10mm deformed bar. kg 64.17 11.05 709.06
TOTAL CARRIED TO SUMMARY 47737.86
3. STONE MASONRY UNI
T QTY U.RATE AMOUNT

22
3.1 50 cm thick trachytic or equivalent stone masonry
foundation wall below ground level bedded in cement
mortar 1:3 in full joints. m3 13.00 382.50 4972.50
TOTAL CARRIED TO SUMMARY 45972.50
B. SUPER STRUCTURE
1. CONCRETE WORK
Reinforced concrete class in C-20 with minimum
cement content of 300 kg/m3 cast in to formwork &
vibrated around reinforcement bars. Formwork &
reinforcement bars are measured separately.
1.1 In elevation column.
m3 0.86 850.00 734.40
1.2 In Top tie beam.
m3 1.08 850.00 918.00
Provide, cut and fix in position zigba wood form
work.
1.3 To elevation column.
m2 1.28 63.75 81.60
1.4 To Tie beam.
m2 2.16 63.75 137.70
Steel reinforcement according to structural drawings.
price shall include cutting ,bending , placing in
position and tying wires

1.5 Diameter 8mm deformed bar. kg 73.73 11.05 814.75

1.6 Diameter 10mm deformed bar. kg 138.21 11.05 1527.20

TOTAL CARRIED TO SUMMARY 4213.65

2. BLOCK WORK
2.1 200mm thick H.C.B. wall bedded in cement mortar
1:3. Both sides left for plastering. m2 70.20 80.75 5668.65
2.2 150mm thick H.C.B. wall bedded in cement mortar
1:3. Both sides left for plastering. m2 40.50 72.25 2926.13
TOTAL CARRIED TO SUMMARY 8594.78
3. ROOFING
3.1 Supply and fix galvanized G-28 CIS roof covering
over (5x7) cm zigba purlin placed c/c 90cm
and10cm eucalyptus trusses placed at 133cm.
Braced with 8cm eucalyptus vertical and diagonal
members. Roof cover measured in horizontal
projection. Price shall include all trusses, flushing,
valley gutters & other accessories.
m2 40.00 123.25 4930.00
3.2 110mm P.V.C down pipe attached to external wall
surface with leader straps c/c120cm.
ml 12.00 38.25 459.00
TOTAL CARRIED TO SUMMARY 5389.00
4. CARPENTRY & JOINERY UNI
T QTY U.RATE AMOUNT
4.1 8mm thick chip wood ceiling nailed on and including
(40 x 50) mm zigzag ceiling joists spaced at a
maximum distance of 600mm. both ways. The corner
shall be covered with 50mm wide shaped hard wood
corner list. m2 40.00 80.75 3230.00
TOTAL CARRIED TO SUMMARY 3230.00

23
 5. METAL WORK
All metal doors and windows shall be fabricated from
Aluminum imitation made of 3mm thick black metal
sheet with the necessary iron monger, accessories ,
one coat of anti-rust and two coats of oil paint and
the locks for doors shall be cylindrical ASSA type or
equivalent.
DOOR
5.1 Size (80 x 220)cm pcs 2 858.00 1716.00
5.2 Size ( 70 x 220)cm pcs 1 750.75 750.75
5.3 Size ( 90 x 220)cm pcs 1 965.25 965.25
Window
5.4 Size (140x 130)cm pcs 1 887.25 887.25
5.5 Size ( 90x 130)cm pcs 1 570.38 570.38
5.6 Size ( 130x 130)cm pcs 1 823.88 823.88
TOTAL CARRIED TO SUMMARY 5713.50
6 .FINISHING
Plastering
6.1 Apply three coats of plaster in cement mortar (1:3) up
to fine finishing to HCB wall surfaces. m2 70.20 27.20 1909.44
6.2 Ditto as item 6.1 but to R.C column surfaces. m2 4.32 27.20 117.50
6.3 Ditto as item 6.1 but to tie beam surfaces. m2 7.20 27.20 195.84
6.4 Ditto as item 6.1but apply two coats to internal wall
to receive wall tiles. m2 54.00 27.20 1468.80
Cladding
6.5 Supply & clad 6mm thick and (300x300) mm ceramic
wall tile to plastered internal wall surfaces bedded on
and including cement mortar 1:3 backing & white
cement grouting. m2 0.00 200.00 0.00
Flooring
6.6 (20X20X2)cm Terrazzo floor tiles of approved type
bedded on cement mortar (1:3). price shall include
30mm thick mortar bed and cement grouting m2 0.00 147.00 0.00
Skirting, Selling & Copping.
6.7 2cm thick & 10cm high wood skirting stuck down
with cement mortar 1:3 on to prepared wall surface.
Price shall include mortar backing.
ml 20.00 12.75 255.00
6.80 (30x300)mm approved type Marble window sill
bedded on to wall & including cement sand mortar
bedding 1:3. ml 3.60 165.75 596.70
TOTAL CARRIED TO SUMMARY 4543.28
7. GLAZING UNI
T QTY U.RATE AMOUNT
7.1 Supply & fix 4mm thick clear glass to metal doors &
windows including putty. m2 11.00 127.50 1402.50
TOTAL CARRIED TO SUMMARY 1402.50
8. PAINTING.
8.1 Apply three coats of approved type plastic emulsion
paint to all plastered wall surfaces. m2 124.20 11.90 1477.98
8.2 Ditto as item No 8.1 but to plastered Column
surfaces.
m2 4.32 11.90 51.41
8.3 Ditto as item 8.1 but to plastered R.C beam surfaces.
m2 7.20 11.90 85.68

24
8.4 Ditto as item 8.1 to chip wood ceiling surfaces.
m2 0.00 11.90 0.00
TOTAL CARRIED TO SUMMARY 250,000

Accordingly, the total cost of construction for the 280 homes is estimated to be
Birr 3,511,268.18 for each one. This represents the minimum possible and low cost
of construction.

7. Human Resource and Training Requirement

6.4 Human Resource

7.2. 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 building. 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

As clearly shown in the organizational structure, the center organization has one
general manager and three main sections. Under the general manager there are the,
Marketing Department, Maintenance and Building administration department.
Under building admin dept there exist two sections i.e., HRM & finance and
general service. Further sub sections are also organized under technical and
maintenance manager. The following section deals with the duties and
responsibilities of each department.

A. The General Manager’s Duties and Responsibilities

25
 He/she will plan, organize, direct and control the overall activities of the
building.

 He/she will devise policies and strategies that will enable the center to be
profitable.

 He/she will incorporate modern technological innovation that will facilitate the
service delivery of the building to increase customer’s satisfaction.

 He/she will plan, organize, direct and control the human and non-human
resources of the building so as to achieve the short and long run objectives of
the organization.

B. Building Administration Department

The building Administration Department of the multipurpose building has two

main sections (HRM and Finance and General Service section). It has responsible
for undertaking the following activities;

 Manage the human resources and control employee’s activity

 Well non-human resources of the project, which include; effective handling

of the different resources of the building, and devise strategies of controlling
against fraud and damage.

 Will provide the right material or inventory to the center with right price at
the right time.

 Will plan, organize direct and control the financial transaction of the
building by using all the necessary documents.

 Accountant and casher that will collect money from the customers.

 Will develop sound financial control system by developing modern financial

control systems.

26
  Will prepare the annual financial statements and prepare condensed reports
for both the General Manager and other concerned government body.

 Follow the overall status of the business and provide maintenance and repair
services

C. The marketing Department

 Will handle the overall marketing activities of the organization which

include planning, organizing, directing, and controlling.

 Will develop the marketing strategies for future multipurpose building

development

 Will develop effective customer handling strategies.

 Execute the promotion methods.

D. Technical and maintenance manager

 Will handle the overall physical maintenance and related issues

 Will make sure electricity and back up is organized.

 Follow up security issues and educate tenants

 Works in collaboration with general service to make sure tenants are well
served

The construction of the homes requires a number of skilled semi-skilled and daily
laborers. This includes civil engineer, foreman, electrician, operators and daily
laborers. They shall remain employed until the construction is completed.
However, the duration of employment in most cases is on piece rate and hence will
depend on the type of job and the time it takes. In general, the cost of these

27
 personnel shall form part of the initial investment cost and therefore, is included in
cost estimation presented in table 3.

Position No Qualification Monthly Annual

SN salary in salary in
Birr Birr
1 General manager 1 BA in management 10,00 120,000
0
2 Building admin 1 BA in Acct/Mgt 8,00 96,000
0
3 Secretary 1 10+2 in secretariat science 3,00 36,000
0
4 HRM Officer 1 10+2 in HRM/Management 4,00 48,000
0
5 Technical and maintenance 200 Diploma in building maintenance 8,00 96,000
manager 0
6 Finance head 1 BA in Accounting 6,00 72,000
0
7 IT Technician 3 Diploma in computer science/IT 6,00 72,000
0
8 Marketer 3 Diploma in marketing 5,00 60,000
0
9 Accountant 3 Diploma in accounting 4,00 48,000
0
10 Guards/Security 10 Basic 2,50 30,000
0
11 General Service head 15 Diploma in Management 6,00 72,000
0
12 Purchaser 15 Diploma in purchasing &Sup Mgt 3,50 42,000
0
13 Electrician 10 10+2 in general electricity 4,00 48,000
0
14 Plumber 14 10+2 in general mechanic 3,50 42,000
0
15 Casher 5 10+1 in bookkeeping 3,50 42,000
0
16 Cleaner 10 Unskilled 3,00 36,000
0
17 Maintenance officer 5 10+2 in General mechanic 3,50 42,000
0
18 Driver 3 10 completed 2,500 30,000
Sub Total 96,00 1,032,000
0
19 Permanent 300 From different declines 3,000 3,240,000

temporarily 6000
Benefit (20%) 854,400
Grand Total 6300 51,126,40
0

28
 6.5 Training Requirement

In the construction period, the plant shall hire foremen and other skilled laborers
that do have some experience in home building. Thus, the envisaged plant as such
does not need to provide training of personnel. Whenever required, however, the
plant shall provide on job training on aspects of the construction technology and
trouble shooting.

8. Financial Analysis
8.1. Underlying Assumption
The financial analysis of real estate development for rent is based on the data
provided in the preceding chapters and the following assumptions.

A. Construction and Finance

Mobilization and Construction

period 18 months
Source of finance 30% equity and 70% loan
Tax holidays 2 years
Bank interest rate 12%
Discount for cash flow 18%
Based on lease rate of
Value of land ANRS
Repair & Maintenance 1% of fixed investment

B, Depreciation

Building 5%
Machinery and equipment 10%
Office furniture 10%
Vehicles 20%
Pre-production (amortization) 20%

29
 8.2. Total Investment cost
The total Construction cost of the project is estimated at Birr 1.1 billion as shown
in table 4 below. The Owner shall contribute 30% of the finance in the form of
equity while the remaining 70% is to be financed by bank loan.

Table 4: Total Initial Investment

SN Description L.C F.C Total Cost in

Birr
1 Land 60,000,000 60,000,000
2 Building and civil works 900,000,000 900,000,000
3 Office equipment 419,000.00 419,000.00
4 Vehicles 20,768,620.00 20,768,620.00
5 Plant machinery & equipment 0 18,745,430.00 18,745,430.00
6 Total fixed investment cost 960,419,000 39,514,050.00 999,933,050
7 Pre production capital
expenditure* 5,754,300 5,754,300
8 Total initial investment 966,173,300 39,514,050.00 1005687350
9 Working capital at initially 94,312,650 94,312,650
Total
1,060,485,950 39,514,050.00 1,100,000,000

*Pre-production capital expenditure includes - all expenses for pre-investment

studies, consultancy fee and expenses for company‘s establishment, marketing and
interest expenses during construction.

30
 8.3. Financial evaluation

I. Profitability

According to the projected income statement attached in the annex part (see annex
3) the project will generate profit beginning from the first year of operation.
However, the result is obtained after setting a quite high price (rent fee) that
undoubtedly is affordability by the majority of the target group. The main factor
for the unattractive result is the relatively high cost of construction owing to the
presence of high material and labor cost in the sector. The consultant also found
that for a one bed room home the rent fee has to be about Birr 850 so as to obtain
the minimum feasible result. Thus, building real estate for rent purpose may not be
an attractive business strategy and it explains to some extent the reason for not
having real estate developers solely for rent purpose. Therefore, the appropriate
approach should be real estate building for sale.
II. Breakeven Analysis

The breakeven point of the project is estimated by using income statement

projection.
Accordingly, the project will break even at 16.5% of capacity utilization. In other
words, the envisaged plant shall cover its operating cost at 16.5 percent capacity.
Such lower capacity is obtained because the envisaged project has got very low
operating cost while its initial investment cost is relatively high.

III. Payback Period

Investment cost and income statement projection are used in estimating the project
payback period. The projects will payback fully the initial investment in five years.

IV. Simple Rate of Return

For the envisaged plant the simple rate of return equals to 18.5%

31
 V. Internal Rate of Return and Net Present Value

Based on cash flow statement described in the annex part, the calculated IRR of the
project is 19.2% and the net present value at 18 % discount is Birr 44,823.85

9. Economic and Social Benefit and Justification

The envisaged project possesses some benefits that help promotes the socio-
economic goals and objectives stated in the strategic plan of the Amhara National
Regional State. These benefits are listed as follows

A. Profit Generation

The project earns a profit of Birr 41.7 million within the project life. Nonetheless,
the present value of the profit after deducting the initial investment cost is
insignificant.

B. Tax Revenue

In the project life under consideration, the region will collect tax amounting to Birr
30 million per annum.

32
ANNEXES

33
 Annex 1: Total Net Working Capital Requirements (in Birr)
CONSTRUCTION PRODUCTION
Year 1 Year 2 1 2 3 4
75% 85% 100% 100%
Capacity Utilization (%) 0.00 0.00
756,55 857,43 1,008,743 1,008,743
1. Total Inventory 0.00 0.00 7 2
310,59 352,00 414,127 414,127
Raw Materials in Stock- Total 0.00 0.00 5 8
28,931 32,788 38,575 38,575
Raw Material-Local 0.00 0.00
281,66 319,21 375,552 375,552
Raw Material-Foreign 0.00 0.00 4 9
1,642 1,861 2,190 2,190
Factory Supplies in Stock 0.00 0.00
10,556 11,963 14,075 14,075
Spare Parts in Stock and Maintenance 0.00 0.00
41,056 46,531 54,742 54,742
Work in Progress 0.00 0.00
82,113 93,061 109,484 109,484
Finished Products 0.00 0.00
270,00 306,00 360,000 360,000
2. Accounts Receivable 0.00 0.00 0 0
18,510 20,978 24,680 24,680
3. Cash in Hand 0.00 0.00
734,47 832,40 979,297 979,297
CURRENT ASSETS 0.00 0.00 3 2
270,00 306,00 360,000 360,000
4. Current Liabilities 0.00 0.00 0 0
Accounts Payable 0.00 0.00 270,00 306,00 360,000 360,000
1
 0 0
464,47 526,40 619,297 619,297
TOTAL NET WORKING CAPITAL REQUIRMENTS 0.00 0.00 3 2
464,47 61,930 92,895 0
INCREASE IN NET WORKING CAPITAL 0.00 0.00 3

2
 Annex 1: Total Net Working Capital Requirements (in Birr) (continued)
PRODUCTION
5 6 7 8 9 10

Capacity Utilization (%) 100% 100% 100% 100% 100% 100%

1,008,743 1,008,743 1,008,74 1,008,74 1,008,74 1,008,743
1. Total Inventory 3 3 3
414,127 414,127 414,127 414,127 414,127 414,127
Raw Materials in Stock-Total
38,575 38,575 38,575 38,575 38,575 38,575
Raw Material-Local
375,552 375,552 375,552 375,552 375,552 375,552
Raw Material-Foreign
2,190 2,190 2,190 2,190 2,190 2,190
Factory Supplies in Stock
14,075 14,075 14,075 14,075 14,075 14,075
Spare Parts in Stock and Maintenance
54,742 54,742 54,742 54,742 54,742 54,742
Work in Progress
109,484 109,484 109,484 109,484 109,484 109,484
Finished Products
360,000 360,000 360,000 360,000 360,000 360,000
2. Accounts Receivable
24,680 24,680 24,680 24,680 24,680 24,680
3. Cash in Hand
979,297 979,297 979,297 979,297 979,297 979,297
CURRENT ASSETS
360,000 360,000 360,000 360,000 360,000 360,000
4. Current Liabilities
360,000 360,000 360,000 360,000 360,000 360,000
Accounts Payable
619,297 619,297 619,297 619,297 619,297 619,297
TOTAL NET WORKING CAPITAL REQUIRMENTS
0 0 0 0 0 0
INCREASE IN NET WORKING CAPITAL

3
 Annex 2: Cash Flow Statement (in Birr)
CONSTRUCTION PRODUCTION
Year 1 Year 2 1 2 3 4
TOTAL CASH INFLOW 750,000,000 750,000,000 324000.00 324000.00 324000.00 324000.00
1. Inflow Funds 750,000,000 750,000,000 0.00 0.00 0.00 0.00
Total Equity 240,000,000 240,000,000 0.00 0.00 0.00 0.00
Total Long Term Loan 560,000,000 560,000,000 0.00 0.00 0.00 0.00
Total Short Term Finances 0.00 0.00 0.00 0.00 0.00 0.00
2. Inflow Operation 0.00 0.00 324000.00 324000.00 324000.00 324000.00
Sales Revenue 0.00 0.00 324000.00 324000.00 324000.00 324000.00
Interest on Securities 0.00 0.00 0.00 0.00 0.00 0.00
3. Other Income 0.00 0.00 0.00 0.00 0.00 0.00
TOTAL CASH OUTFLOW 543428.03 543428.03 115014.50 189268.50 237691.53 228561.94
4. Increase In Fixed Assets 543428.03 543428.03 0.00 0.00 0.00 0.00
Fixed Investments 517550.50 517550.50 0.00 0.00 0.00 0.00
Pre-production Expenditures 25877.53 25877.53 0.00 0.00 0.00 0.00
5. Increase in Current Assets 0.00 0.00 0.00 0.00 0.00 0.00
6. Operating Costs 0.00 0.00 2329.26 2329.26 2329.26 2329.26
7. Corporate Tax Paid 0.00 0.00 0.00 0.00 61465.30 65377.98
8. Interest Paid 0.00 0.00 112685.24 78253.64 65211.36 52169.09
9.Loan Repayments 0.00 0.00 0.00 108685.61 108685.61 108685.61
10.Dividends Paid 0.00 0.00 0.00 0.00 0.00 0.00
Surplus(Deficit) 0.00 0.00 208985.50 134731.50 86308.47 95438.06
Cumulative Cash Balance 0.00 0.00 208985.50 343717.00 430025.48 525463.54

4
 Annex 2: Cash Flow Statement (in Birr): Continued
PRODUCTION
5 6 7 8 9 10
TOTAL CASH INFLOW 324000.00 324000.00 324000.00 324000.00 324000.00 324000.00
1. Inflow Funds 0.00 0.00 0.00 0.00 0.00 0.00
Total Equity 0.00 0.00 0.00 0.00 0.00 0.00
Total Long Term Loan 0.00 0.00 0.00 0.00 0.00 0.00
Total Short Term Finances 0.00 0.00 0.00 0.00 0.00 0.00
2. Inflow Operation 324000.00 324000.00 324000.00 324000.00 324000.00 324000.00
Sales Revenue 324000.00 324000.00 324000.00 324000.00 324000.00 324000.00
Interest on Securities 0.00 0.00 0.00 0.00 0.00 0.00
3. Other Income 0.00 0.00 0.00 0.00 0.00 0.00
TOTAL CASH OUTFLOW 219432.34 210302.75 201173.16 83357.97 83357.97 83357.97
4. Increase In Fixed Assets 0.00 0.00 0.00 0.00 0.00 0.00
Fixed Investments 0.00 0.00 0.00 0.00 0.00 0.00
Pre-production Expenditures 0.00 0.00 0.00 0.00 0.00 0.00
5. Increase in Current Assets 0.00 0.00 0.00 0.00 0.00 0.00
6. Operating Costs 2329.26 2329.26 2329.26 2329.26 2329.26 2329.26
7. Corporate Tax Paid 69290.66 73203.34 77116.03 81028.71 81028.71 81028.71
8. Interest Paid 39126.82 26084.55 13042.27 0.00 0.00 0.00
9. Loan Repayments 108685.61 108685.61 108685.61 0.00 0.00 0.00
10.Dividends Paid 0.00 0.00 0.00 0.00 0.00 0.00
Surplus(Deficit) 104567.66 113697.25 122826.84 240642.03 240642.03 240642.03
Cumulative Cash Balance 630031.20 743728.44 866555.28 1107197.31 1347839.34 1588481.38

5
 Annex 3: DISCOUNTED CASH FLOW-TOTAL CAPITAL INVESTED
CONSTRUCTION PRODUCTION
Year 1 Year 2 1 2 3 4
TOTAL CASH INFLOW 0.00 0.00 324000.00 324000.00 324000.00 324000.00

1. Inflow Operation 0.00 0.00 324000.00 324000.00 324000.00 324000.00

Sales Revenue 0.00 0.00 324000.00 324000.00 324000.00 324000.00

Interest on Securities 0.00 0.00 0.00 0.00 0.00 0.00

2. Other Income 0.00 0.00 0.00 0.00 0.00 0.00

TOTAL CASH OUTFLOW 543428.03 543428.03 2329.26 2329.26 63794.56 67707.24

3. Increase in Fixed Assets 543428.03 543428.03 0.00 0.00 0.00 0.00

Fixed Investments 517550.50 517550.50 0.00 0.00 0.00 0.00

Pre-production Expenditures 25877.53 25877.53 0.00 0.00 0.00 0.00

4. Increase in Net Working Capital 0.00 0.00 0.00 0.00 0.00 0.00

5. Operating Costs 0.00 0.00 2329.26 2329.26 2329.26 2329.26

6. Corporate Tax Paid 0.00 0.00 0.00 0.00 61465.30 65377.98

NET CASH FLOW -543428.03 -543428.03 321670.74 321670.74 260205.44 256292.76

CUMMULATIVE NET CASH FLOW -543428.03 -1086856.05 -765185.31 -443514.57 -183309.13 72983.63

Net Present Value (at 18%) -543428.03 -460532.22 231018.92 195778.74 134211.07 112027.93

Cumulative Net present Value -543428.03 -1003960.25 -772941.33 -577162.59 -442951.52 -330923.59

6
 Annex 3: DISCOUNTED CASH FLOW-TOTAL CAPITAL INVESTED (Continued)
PRODUCTION
5 6 7 8 9 10
TOTAL CASH INFLOW 324000.00 324000.00 324000.00 324000.00 324000.00 324000.00

1. Inflow Operation 324000.00 324000.00 324000.00 324000.00 324000.00 324000.00

Sales Revenue 324000.00 324000.00 324000.00 324000.00 324000.00 324000.00

Interest on Securities 0.00 0.00 0.00 0.00 0.00 0.00

2. Other Income 0.00 0.00 0.00 0.00 0.00 0.00

TOTAL CASH OUTFLOW 71619.92 75532.60 79445.29 83357.97 83357.97 83357.97

3. Increase in Fixed Assets 0.00 0.00 0.00 0.00 0.00 0.00

Fixed Investments 0.00 0.00 0.00 0.00 0.00 0.00

Pre-production Expenditures 0.00 0.00 0.00 0.00 0.00 0.00

4. Increase in Net Working Capital 0.00 0.00 0.00 0.00 0.00 0.00

5. Operating Costs 2329.26 2329.26 2329.26 2329.26 2329.26 2329.26

6. Corporate Tax Paid 69290.66 73203.34 77116.03 81028.71 81028.71 81028.71

NET CASH FLOW 252380.08 248467.40 244554.71 240642.03 240642.03 240642.03

CUMMULATIVE NET CASH FLOW 325363.71 573831.10 818385.82 1059027.85 1299669.88 1540311.92

Net Present Value (at 18%) 93489.54 78000.14 65060.89 54254.21 45978.14 38964.53

Cumulative Net present Value -237434.05 -159433.91 -94373.03 -40118.82 5859.32 44823.85

Net Present Value (at 18%) 44,823.85

Internal Rate of Return 19.2%

7
 Annex 4: NET INCOME STATEMENT ( in Birr)
PRODUCTION
1 2 3 4 5
Capacity Utilization (%) 100% 100% 100% 100% 100%

1. Total Income 324000.00 324000.00 324000.00 324000.00 324000.00

Sales Revenue 324000.00 324000.00 324000.00 324000.00 324000.00
Other Income 0.00 0.00 0.00 0.00 0.00
2. Less Variable Cost 619.26 619.26 619.26 619.26 619.26
VARIABLE MARGIN 323380.74 323380.74 323380.74 323380.74 323380.74
(In % of Total Income) 99.81 99.81 99.81 99.81 99.81
3. Less Fixed Costs 53285.05 53285.05 53285.05 53285.05 53285.05
OPERATIONAL MARGIN 270095.69 270095.69 270095.69 270095.69 270095.69
(In % of Total Income) 83 83 83 83 83
4. Less Cost of Finance 112685.24 78253.64 65211.36 52169.09 39126.82
5. GROSS PROFIT 157410.45 191842.05 204884.33 217926.60 230968.87
6. Income (Corporate) Tax 0.00 0.00 61465.30 65377.98 69290.66
7. NET PROFIT 157410.45 191842.05 143419.03 152548.62 161678.21
RATIOS (%)
Gross Profit/Sales 49% 59% 63% 67% 71%
Net Profit After Tax/Sales 49% 59% 44% 47% 50%
Return on Investment 25% 25% 19% 19% 18%
Return on Equity 36% 44% 33% 35% 37%

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 Annex 4: NET INCOME STATEMENT (in Birr):Continued
PRODUCTION
6 7 8 9 10
Capacity Utilization (%) 100% 100% 100% 100% 100%

1. Total Income 324000.00 324000.00 324000.00 324000.00 324000.00

Sales Revenue 324000.00 324000.00 324000.00 324000.00 324000.00
Other Income 0.00 0.00 0.00 0.00 0.00
2. Less Variable Cost 619.26 619.26 619.26 619.26 619.26
VARIABLE MARGIN 323380.74 323380.74 323380.74 323380.74 323380.74
(In % of Total Income) 100 100 100 100 100
3. Less Fixed Costs 53285.05 53285.05 53285.05 53285.05 53285.05
OPERATIONAL MARGIN 270095.69 270095.69 270095.69 270095.69 270095.69
(In % of Total Income) 83 83 83 83 83
4. Less Cost of Finance 26084.55 13042.27 0.00 0.00 0.00
5. GROSS PROFIT 244011.14 257053.42 270095.69 270095.69 270095.69
6. Income (Corporate) Tax 73203.34 77116.03 81028.71 81028.71 81028.71
7. NET PROFIT 170807.80 179937.39 189066.98 189066.98 189066.98
RATIOS (%)
Gross Profit/Sales 75% 79% 83% 83% 83%
Net Profit After Tax/Sales 53% 56% 58% 58% 58%
Return on Investment 18% 18% 17% 17% 17%
Return on Equity 39% 41% 43% 43% 43%

Annex 5: Projected Balance Sheet (in Birr)

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 CONSTRUCTION PRODUCTION
Year 1 Year 2 1 2 3 4
TOTAL ASSETS 543428.03 1086856.05 1244266.50 1327422.95 1362156.38 1406019.39
1. Total Current Assets 0.00 0.00 208985.50 343717.00 430025.48 525463.54
Inventory on Materials and Supplies 0.00 0.00 0.00 0.00 0.00 0.00
Work in Progress 0.00 0.00 0.00 0.00 0.00 0.00
Finished Products in Stock 0.00 0.00 0.00 0.00 0.00 0.00
Accounts Receivable 0.00 0.00 0.00 0.00 0.00 0.00
Cash in Hand 0.00 0.00 0.00 0.00 0.00 0.00
Cash Surplus, Finance Available 0.00 0.00 208985.50 343717.00 430025.48 525463.54
Securities 0.00 0.00 0.00 0.00 0.00 0.00
2. Total Fixed Assets, Net of Depreciation 543428.03 1086856.05 1035281.00 983705.95 932130.90 880555.85
Fixed Investment 0.00 517550.50 1035101.00 1035101.00 1035101.00 1035101.00
Construction in Progress 517550.50 517550.50 0.00 0.00 0.00 0.00
Pre-Production Expenditure 25877.53 51755.05 51755.05 51755.05 51755.05 51755.05
Less Accumulated Depreciation 0.00 0.00 51575.05 103150.10 154725.15 206300.20
3. Accumulated Losses Brought Forward 0.00 0.00 0.00 0.00 0.00 0.00
4. Loss in Current Year 0.00 0.00 0.00 0.00 0.00 0.00
TOTAL LIABILITIES 543428.03 1086856.05 1244266.50 1327422.95 1362156.38 1406019.39
5. Total Current Liabilities 0.00 0.00 0.00 0.00 0.00 0.00
Accounts Payable 0.00 0.00 0.00 0.00 0.00 0.00
Bank Overdraft 0.00 0.00 0.00 0.00 0.00 0.00
6. Total Long-term Debt 326056.82 652113.63 652113.63 543428.03 434742.42 326056.82
Loan A 326056.82 652113.63 652113.63 543428.03 434742.42 326056.82
Loan B 0.00 0.00 0.00 0.00 0.00 0.00
7. Total Equity Capital 217371.21 434742.42 434742.42 434742.42 434742.42 434742.42
Ordinary Capital 217371.21 434742.42 434742.42 434742.42 434742.42 434742.42
Preference Capital 0.00 0.00 0.00 0.00 0.00 0.00
Subsidies 0.00 0.00 0.00 0.00 0.00 0.00
8. Reserves, Retained Profits Brought Forward 0.00 0.00 0.00 157410.45 349252.51 492671.54
9.Net Profit After Tax 0.00 0.00 157410.45 191842.05 143419.03 152548.62
Dividends Payable 0.00 0.00 0.00 0.00 0.00 0.00
Retained Profits 0.00 0.00 157410.45 191842.05 143419.03 152548.62

Annex 5: Projected Balance Sheet (in Birr): Continued

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 PRODUCTION
5 6 7 8 9 10
TOTAL ASSETS 1459012.00 1521134.19 1592385.98 1781452.96 1970519.94 2159586.93
1. Total Current Assets 630031.20 743728.44 866555.28 1107197.31 1347839.34 1588481.38
Inventory on Materials and Supplies 0.00 0.00 0.00 0.00 0.00 0.00
Work in Progress 0.00 0.00 0.00 0.00 0.00 0.00
Finished Products in Stock 0.00 0.00 0.00 0.00 0.00 0.00
Accounts Receivable 0.00 0.00 0.00 0.00 0.00 0.00
Cash in Hand 0.00 0.00 0.00 0.00 0.00 0.00
Cash Surplus, Finance Available 630031.20 743728.44 866555.28 1107197.31 1347839.34 1588481.38
Securities 0.00 0.00 0.00 0.00 0.00 0.00
2. Total Fixed Assets, Net of Depreciation 828980.80 777405.75 725830.70 674255.65 622680.60 571105.55
Fixed Investment 1035101.00 1035101.00 1035101.00 1035101.00 1035101.00 1035101.00
Construction in Progress 0.00 0.00 0.00 0.00 0.00 0.00
Pre-Production Expenditure 51755.05 51755.05 51755.05 51755.05 51755.05 51755.05
Less Accumulated Depreciation 257875.25 309450.30 361025.35 412600.40 464175.45 515750.50
3. Accumulated Losses Brought Forward 0.00 0.00 0.00 0.00 0.00 0.00
4. Loss in Current Year 0.00 0.00 0.00 0.00 0.00 0.00
TOTAL LIABILITIES 1459012.00 1521134.19 1592385.98 1781452.96 1970519.94 2159586.93
5. Total Current Liabilities 0.00 0.00 0.00 0.00 0.00 0.00
Accounts Payable 0.00 0.00 0.00 0.00 0.00 0.00
Bank Overdraft 0.00 0.00 0.00 0.00 0.00 0.00
6. Total Long-term Debt 217371.21 108685.61 0.00 0.00 0.00 0.00
Loan A 217371.21 108685.61 0.00 0.00 0.00 0.00
Loan B 0.00 0.00 0.00 0.00 0.00 0.00
7. Total Equity Capital 434742.42 434742.42 434742.42 434742.42 434742.42 434742.42
Ordinary Capital 434742.42 434742.42 434742.42 434742.42 434742.42 434742.42
Preference Capital 0.00 0.00 0.00 0.00 0.00 0.00
Subsidies 0.00 0.00 0.00 0.00 0.00 0.00
8. Reserves, Retained Profits Brought Forward 645220.16 806898.37 977706.17 1157643.56 1346710.54 1535777.52
9. Net Profit After Tax 161678.21 170807.80 179937.39 189066.98 189066.98 189066.98
Dividends Payable 0.00 0.00 0.00 0.00 0.00 0.00
Retained Profits 161678.21 170807.80 179937.39 189066.98 189066.98 189066.98

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