5/19/2016

Project profile | Engineering Service

METAL

INDUSTRY

DEVELOPMENT

INSTITUTE

PROJECT PROFILE ON THREE WHEELER VEHICLE

Table of Contents

Executive Summary………………………………………………………………………………………………………………………………………………1

1. Product Description and Application …………………………………………………………………………………………………………………..3

2. Market study…………………………………….…………………………………………………………………………………………………………………4

2.1. Present Demand and Supply …………………………………………………………………………………………………………………………….4

2.2. Demand Projection …………………………………………………………………………………………………………………………………………..4

3. Plant Capacity and Production Program……………………………………………………………………………………………………………….5

3.1. Plant Capacity……………………………………………………………………………………………………………………………………………….…..5

3.2. Production Program………………………………………………………………………………………………………………………………………….5

4. Raw Material and Utilities ………………………………………………………………………………………………………………………………..6

4.1. Raw material ……………………………………………………………………………………………………………………………………………………6

4.2. Utility ………………………………………………………………………………………………………….....................................................6

5. Technology and Engineering ……………………………………………………………………………………………………………………………6

5.1. Manufacturing Process …………………………………………………………………………………………………………………………………….6

5.2. Machinery and Equipment ……………………………………………………………………………………………………………………………..10

6. Land, Building and Civil Works……………………………………………………………………………………………………………………….10

7. Manpower and Training Requirement ………………………………………………………………………………………………………….11

8. Financial Analysis…………………………………………………………………………………………………………………………………………..12

9. Results of Financial Forecasts………………………………………………………………………………………………………………………..25

Loan payment and financing

Loan needed

Terms of Loan

Loan Repayment

Fixed rate loan payment

Projected demand & Capacity level

Operating expenditure projection

Breakeven analysis

Sales volume analysis

Break even chart

Statement of Cost of Goods Sold

Projected Income Statement

Projected Statement of Cash Flow

Projected Statement of balance sheet

NPV, IRR, PI, & AAR Calculation

Discounted payback period

Financial ratio

Results of Financial Forecasts

Profitability Index

Financial Position

Liquidity

Payback period

Return on investment

Net present value

Financial internal rate of return

Executive Summary

Three-wheeled automobiles can have either one wheel at the back and two at the front, (for Morgan Motor

Company) or one wheel at the front and two at the back (such as the Reliant Robin. Due to better safety

when braking, an increasingly popular form is the front-steering "tadpole" or "reverse trike" sometimes

with front drive but usually with rear drive. A variant on the 'one at the front' layout was the Scott Sociable,

which resembled a four-wheeler with a front wheel missing Three-wheeler cars, including some cycle cars,

bubble cars and micro cars, are built for economic reasons: in the UK for tax advantages, or in the US to

take advantage of lower safety regulations, being classed as Motorcycles. As a result of their light

construction and potential better streamlining, three-wheeled cars are usually less expensive to operate

Three-wheeler transport vehicles known as auto rickshaws are a common means of public transportation in

many countries in the world, and are an essential form of urban transport in many developing countries

such as India and the Philippines. Auto rickshaws are a form of novelty transport in many Eastern countries.

In 1894, Hilde brand & Wolf Muller became the first series production motorcycle, and the first to be called

a motorcycle. In 2012, the three top motorcycle producers globally by volume were Honda, Bajaj Auto, and

Hero Moto Corp.

Total net mass of National market demand measured in kg for the year 2015 is 1,714,820.The projected

demand also shows that the product will have enough market in home country. The total market size of for

the year 2016 will be 3,081,844 and growing each year by 20% and reach 3,864,862 kg for the 2022.

The biggest recognized opportunities include government support such as technical and capacity training

(metal industry development institute) from study up to project implementation, market linkage and the

like.

The Total project capital estimate is 77,861,000 out of the total capital requirements 29,122,198 or 37%

own capital equity and the remaining 63% or 48,738,802 loan will be from government. The government

also will provide different measurement to encourage the project.

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The study has confirmed that the project has the potential to become highly profitable in the market. The

key outcomes to highlight are:

Internal rate of return 20% and cash payback period 0.83 year. The net present value 7,418,114.

Profitability index shows net profit of about birr 18,629,807 in the first year will steadily increase

through time and reaches about birr 35,252,554 at the end of projected year. The project

profitability index is 3.81.

Social impact for employment of the project is 44 permanent job opportunity and also 52 temporary

work opportunity will be gained during project construction period.

In general, the pre- feasibility study indicates that the project is viable with respect to social and economic

consideration.

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THREE WHEELER VEHICLE PRODUCT DESCRIPTIONS

1. PRODUCT DESCRIPTION

Three-wheeled automobiles can have either one wheel at the back and two at the front, (for Morgan Motor

Company) or one wheel at the front and two at the back (such as the Reliant Robin. Due to better safety

when braking, an increasingly popular form is the front-steering "tadpole" or "reverse trike" sometimes

with front drive but usually with rear drive. A variant on the 'one at the front' layout was the Scott Sociable,

which resembled a four-wheeler with a front wheel missing Three-wheeler cars, including some cycle

cars,bubble cars and micro cars, are built for economic reasons: in the UK for tax advantages, or in the US

to take advantage of lower safety regulations, being classed as Motorcycles. As a result of their light

construction and potential better streamlining, three-wheeled cars are usually less expensive to

operateThree-wheeler transport vehicles known as auto rickshaws are a common means of public

transportation in many countries in the world, and are an essential form of urban transport in many

developing countries such as India and the Philippines.Auto rickshaws are a form of novelty transport in

many Eastern countries. In 1894,Hildebrand & WolfMuller became the first series production motorcycle,

and the first to be called a motorcycle. In 2012, the three top motorcycle producers globally by volume

were Honda, Bajaj Auto, and Hero Moto Corp.

Many three-wheelers which exist in the form of motorcycle-based machines are often called trikes and

often have the front single wheel and mechanics similar to that of a motorcycle and the rear axle similar to

that of a car. Often such vehicles are owner-constructed using a portion of a rear-engine, rear-drive in

combination with a motorcycle front end. Other trikes include ATVs that are specially constructed for off

road useIn the developed world, three wheeler use as personal service systemand mainly as a luxury good,

used mostly for recreation, as a lifestyle accessory, or a symbol of personal identity, while in developing

countries motorcycles and three wheeler are overwhelmingly utilitarian due to lower prices and

greater fuel economy. And as such most of the world's motorcycles, 58%, are in the developing countries of

Southern and Eastern Asia, and the Asia Pacific, excluding Japan which is one of the world's major car users

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Part of the engine

2. Market Study

2.1. Present Demand and Supply

Imported data of three wheeler

year Gross weight Net weight CIF(ETB) CIF(USD)

2012 2,895,923 2,455,379 267,013,320 14,945,668

2013 1,935,748 1,662,718 182,969,213 9,844,305

2014 5,931,604 5,189,426 598,833,871 29,728,245

2015 1,939,956 1,714,820 200,401,791 9,798,257

RSQ that determines the up and down (irregularity of the data) in the past R2=1.027% if the rsq nearer to

one that show the consistence of the data in each year. From the above data we observed that rsq is less

than 50% implies that there were high irregularity of the given data basically the correlation factor rsq help

us to suggest that do the consumer use the product in uniform manner or not the matter of fact the above

product show great variation in each year if I were optimistic enough to concludethe product is not yet

reach to their saturation level so that the investor invest on the product with all capacities.

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2.2. Demand projection

Year Net Weight

2016 3,081,844

2017 3,212,347

2018 3,342,850

2019 3,473,353

2020 3,603,856

2021 3,734,359

2022 3,864,862

3. Plant capacity and production program

3.1. Plant capacity

By considering the market and technological situation, together with past demand trend we determine a

plant with a production capacity of 350 Ton of per Year On a single shift of 8 hours basis is selected.

3.2. Production program

The production program is based on the time required for the adjustment of feedstock, labor and

equipment to the technology selected. Accordingly capacity utilization is set as follows:

75% of plant capacity during the 1st year

85% of plant capacity during the 2nd yea

100% of plant capacity during

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4. Raw Material and Utilities

4.1. Raw material

No Description Unit Rate/Kg/Ton Amount Total cost

1 Conventional Steel KG 48 birr 120 ton 5,760 000

2 High Strength Steel Kg 75 birr 40 ton 3,000,000

3 Stainless Steel kg 45 birr 50 ton 2,250,000

4 Sheet iron kg 23 birr 50 ton 1,150,000

5 Aluminum (sheet, coil) ton 3,609.144 /ton 5 ton 18,045.72

6 Rubber Kg 1967 5 ton 9,835,000

7 Plastics/Composites Kg 60 birr 1 ton 60,000

8 Glass ton 1,004 birr 10 ton 10,040

9 Copper and Brass Kg 771 birr 20 ton 15,420,000

10 Powder Metal Parts Kg 670 1 ton 670,000

11 Fluids and Lubricants - 50,000 - 50,000

12 Other Materials - 120,000 - 120,000

Total costs 32,583,086

4.2. Utility

The major utility requirement of the plant is electricity and water. The required quantity and cost of utility

is shown in the following Table.

Table 4; Annual utilities requirement and cost

No. Item Quantity Unit cost Cost (Birr)

1 Water ( m3) 7,800 0.58 4,524

2 Electric power (kWh) 1,660 11.60 19,256

Total 23,780

5. Technology and Engineering

5.1. Manufacturing process

Raw materials as well as parts and components arrive at the manufacturing plant by truck or rail, typically

on a daily basis. As part of the just-in-time delivery system on which many plants are scheduled, the

materials and parts are delivered at the place where they are used or installed. Components are formed out

of tubular metal and/or hollow metal shells fashioned from sheet metals.

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Metal fabrication involves the shaping of metal components. A typical large-scale production of these items

starts with molten metal (ferrous or nonferrous) containing the correct metallurgical properties. Once the

metal has been produced, it is cast into a shape that can enter the rolling process, Shearing and forming

operations are then performed to cut materials into a desired shape and size and bend or form materials

into specified shapes.

Shearing (or cutting) operations include punching, piercing, blanking, cutoff, parting, shearing, and

trimming. Basically, these are operations that produce holes or openings, or that produce blanks or parts.

The most common hole-making operation is punching. Piercing is similar to punching, but produces a

raised-edge hole rather than a cut hole. Cutoff, parting, and shearing are similar operations with different

applications: parting produces both a part and scrap pieces; cutoff and shearing produce parts with no

scrap; shearing is used where the cut edge is straight; and cutoff produces an edge shape other than

straight. Trimming is performed to shape or remove excess material from the edges of parts.

Forming operations shape parts by forcing them into a specified configuration, and include bending,

forming, extruding, drawing, rolling, spinning, coining, and forging. Bending is the simplest forming

operation; the part is simply bent to a specific angle or shape. Bending operations normally produce flat-

shapes, while forming produces both two-and three-dimensional shapes.

Extruding is the process of forming a specific shape from a solid blank by forcing the blank through a die of

the desired shape. Complicated and intricate cross-sectional shapes can be produced by extruding. Rolling

is a process that passes the material through a set or series of rollers that bend and form the part into the

desired shape. Coining is a process that alters the form of the part by changing its thickness; it produces a

three-dimensional relief on one or both sides of the part, as found on coins.

Drawing and spinning form sheet stock into three-dimensional shapes. Drawing uses a punch to force the

sheet stock into a die, where the desired part shape is formed in the space between the punch and die. In

spinning, pressure is applied to the sheet while it spins on a rotating form so that the sheet acquires the

shape of the form.

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Forging operations produce a specific part shape, much like casting. The forging process is used in the

automotive industry when manufacturing parts such as pistons, connecting rods, and the aluminum and

steel portion of the wheels. However, rather than using molten materials, forging uses externally applied

pressure that either strikes or squeezes a heated blank into a die of the required shape. Forging operations

use machines that apply repeated hammer blows to a red-hot blank to force the material to conform to the

shape of the die opening. Squeezing acts in much the same way, except it uses pressure to squeeze rather

than strike the blank. Forging uses a series of die cavities to change the shape of the blank in increments.

The blank is moved from station to station in the die to form the part. Depending on the shape, a forging

die can have from one to over a dozen individual cavities.

In the weld department with computer controlled fabrication of the frame from high strength frame

materials. Typically, includes casting, forging, extrusion, stamping, molding, and welding. The various

sections are welded together. This process involves manual, automatic, and robotic equipment. In the

plastics department, small plastic resin pellets are melted and injected into molds under high pressure to

form various plastic body trim parts. This process is known as injection molding. Plastic and metal parts and

components are painted in booths in the paint department using a process known as powder-coating (this

is the same process by which automobiles are painted). A powder-coating apparatus works like a large

spray-painter, dispersing paint through a pressurized system evenly across the metal frame. Painted parts

are sent via overhead conveyors or tow motor (similar to a ski lift tow rope) to the assembly department

where they are installed on the frame of the motorcycle.

Cast metal products which play a key role in the production of three-wheeler vehicles and motor vehicle

equipment. Even though aluminum and other metals are used increasingly in the production of

automobiles and their parts, iron and steel are still the major metal components of an automobile.

The main steps in producing cast iron motor vehicle products are as follows;

Pattern design and production

Sand formulation

Mold and core production

Metal heating and alloying

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Metal molding

Mold shakeout

Product finishing and heat treating

Inspection.

The process begins with the mixing of moist silica sand with clay (3 to 20 percent) and water (two to five

percent) to produce the "greensand," which forms the basis of the mold. Other additives, including organics

such as sea coal or oat hulls, may be added to the green sand to help prevent casting defects. The core is

then created using molded sand and often includes binders, such as resins, phenol, and/or formaldehyde.

The core is the internal section of a casting used to produce the open areas needed inside such items as an

engine or a drive train. After the core has been molded, it is baked to ensure its shape, and then combined

with the rest of the casting mold in preparation for casting. At the same time the core is being created, iron

is being melted. The iron charge, whether it be scrap or new iron, is combined with coal (as a fuel) and

other additives such a calcium carbide and magnesium, and fed into a furnace, which removes sulfur,

(usually an electric arc, an electric induction, or a cupola furnace).

Calcium carbide may be added for certain kinds of iron casting, and magnesium is added to produce a more

ductile iron. Once the iron reaches the appropriate temperature, it is poured into the prepared mold. The

mold then proceeds through the cooling tunnel and is placed on a grid to undergo a process called

"shakeout." During shakeout the grid vibrates, shaking loose the mold and core sand from the casting. The

mold and core are then separated from the product which is ready for finishing.

The finishing process is made up of many different steps depending upon the final product. The surface

may be smoothed using an oxygen torch to remove any metal snags or chips, it may be blast-cleaned to

remove any remaining sand, or it may be pickled using acids to achieve the correct surface. If necessary, the

item may be welded to ensure the tightness of any seams or seals. After finishing, the item undergoes a

final heat treatment to ensure it has the proper metallurgical properties. The item is then ready for

inspection. Inspection may take place in any number of ways be it visually, by x- or gamma ray, ultrasonic,

or magnetic particle. Once an item passes inspection, it is ready to be shipped to the assembly area.

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5.2. Machinery and equipment

6. Land, building and civil works

The Plant requires a Total of 2,000 Area of land out of which 1,500 is built-up area, which includes

manufacturing area, raw material stock area, offices etc. Assuming Construction Rate of Birr 2,500 per m2,

the total cost of construction is estimated to be Birr 3,750,000.the total cost, for a period of 80 years with

cost of Birr 11.60 per m2,is estimated at Birr 1,856,000.The total investment cost for land, building and civil

works is estimated at Birr 5,606,000.

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No DESCRIPTION Quantity Unity Unit cost Total cost

1 Forging machine 2 set 564,000 1,128,000

2 Cutting machine( computer controlled machine) 4 set 800,000 3,200,000

3 Die casting machine 3 set 756,000 2,268,000

4 Welding equipment 3 set 140,000 420,000

5 Hand tools 3 set 15,000 45,000

6 Molding machine 4 Set 40,000 160,000

7 Riveting machine 2 Set 145,000 290,000

8 Roller conveyor 2 set 30,000 60,000

9 Steel cutter 2 set 268,000 536,000

10 Bending machine 2 set 216,000 432,000

11 Forming machine 2 set 257,500 515,000

12 automated stamp press 2 set 160,000 320,000

13 power press and dyers 2 set 98,500 197,000

14 tube threading machine 1 set 264,000 264,000

15 sheering machine 1 set 279,727 279,727

16 drilling 1 set 120,000 120,000

17 powder coating machine 1 set 35,000 35,000

18 punching machine 1 set 1,100,000 1,100,000

19 generator 1 set 80,000 80,000

20 Furnace 1 set 271,380 271,380

21 Automated Spray-Painting Machine 2 set 40,000 80,000

22 computerized testing equipment 3 set 600,000 1,800,000

Total costs 6,280,107 13,601,107

7. Manpower and Training Requirement

Total manpower requirement, including skilled and unskilled labor is 41 persons. Correspondingly, total

annual labor costs estimated at Birr 11,173,200.Below shows the list of manpower required and the

estimated annual labor costs.

7.1. Manpower Requirement

Table 6; List of Man Power Requirement and Labor cost

Sr. No.

Description Req. No.

Salary Total Monthly

Salary (Birr)

Annual Salary (Birr)

1 Manager 1 25,000 00 25,000 00 300,000 00

2 Production and Technical head 2 15,000 00 30,000 00 360,000 00

3 Supervisor 4 8,500 00 8,500 00 408,000 00

4 Skilled Person 5 8,000 00 40000 00 480,000 00

5 Semi-Skilled Person 3 6,000 00 18000 00 216,000 00

6 Un Skilled 8 4,000 00 32,000 00 384,000 00

7 Labor 5 3,000 00 15,000 00 180,000 00

Total cost 28 69,500 00 194,000 00 2,328,000 00

Table 7; indirect labor costs

Sr. No.

Description Req. No.

Salary Total Monthly

Salary (Birr)

Annual Salary (Birr)

1 Finance and Human Resource Head 2 12,000 00 24,000 00 288,000 00

2 Accountant 2 10,000 00 20,000 00 240,000 00

3 Secretary 2 4,500 00 9,000 00 108,000 00

4 Cashier 2 4,000 00 8,000 00 96,000 00

5 Property management head 1 8,500 00 8,500 00 102,000 00

6 Property management officer 1 7,400 00 7,400 00 88,800 00

7 Human resource clerk 2 4,800 00 9600 00 115,200 00

8 Cleaner 2 2,500 00 5,000 00 60,000 00

9 Guard 2 3,000 00 6,000 00 72,000 00

Total cost 13 56,700 00 97,500 00 1,170,000 00

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8. Financial Analysis

8.1. Financial assumptions

Sales price per units -283

Variable cost increases - 3 % per year

Depreciation expense is computed in a straight line basis with an estimated useful life of 10 years

for building, machinery &equipment, vehicle, office furniture &fixture &office equipment.

Construction period- one year

Source of finance -37 % equity 63% loan

Bank interest- 10%

Discount cash flow- 10%

Accounts receivable -30 days

Raw material, local 30 days

Raw material, import 90 days

Work in progress -5 days

Finished products - 30 days

Cash in hand - 2 days

Accounts payable- 30 days

Working days on one shifts -300 days

Production capacity – 350,000 kg/year

Salvage value - 3,372,050

8.2. Initial capital requirement

Table 8 investment costs and source of Finance (Birr)

Description Ratio Invested Amount

Own Investment 37% 29,122,198

Bank Loan 63% 48,738,802

Total 100% 77,861,000

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8.3. Direct production cost

Direct Production Cost 57,874,203

Fixed Charge cost

Depreciation 1,690,981

taxes 442,757

Insurance 199,241

rent 110,689

Fixed Charge cost 2,443,668

Plant Overhead Costs

Distribution&selling cost 3,858,280

principal payment 3,360,259

Interest payment 4,873,880

Packaging 1,164,000

factory supplies 184,834

Overhead cost 13,441,254

Manufacturing Costs 73,759,125

General Expenses

Administrative costs

Indirect cost 1,170,000

office supplies 89,700

Office Furniture & Fixture 189,500

Office Equipment 241,250

Contigency 2,411,425

Administrative costs 4,101,875

TOTAL PRODUCT COST 77,861,000

8.4. Maintenance and Repair

Repair and maintenance value(in birr) percent Maintenance&Repair

building &civil works 3,750,000 2% 75,000

Machinery & equipment 13,601,107 7% 952,077

vehicle 2,500,000 7% 175,000

Office Furniture & Fixture 189,500 7% 13,265

Office Equipment 241,250 7% 16,888

Total 20,281,857 1,232,230

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8.5. Fixed Capital

Land 1,856,000

Building & civil works 3,750,000

Machinery & Equipment 13,601,107

vehicle 2,500,000

Office Furniture & Fixture 189,500

Office Equipment 241,250

Total Fixed Capital 22,137,857

8.6. Depreciation Expense

8.7. Loan payment and Financing

Loan needed

Based on project financial budget, this project will require a loan of birr 48,738,802 from external sources such as

development bank of Ethiopia or commercial bank of Ethiopia to cover the purchase of production machinery ,

equipment and raw materials and inputs for producing of the product.

8.8. Terms of Loan

Disbursement

The loan needed for the project assumed to be disbursed in three phases for implementing the project.

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Item cost Useful life depreciat ion Expense

2017 2018 2019 2020 2021 2022 2023 2024 2025 2026

Office Furniture & Fixture 189,500 10 18,950 37,900 56,850 75,800 94,750 113,700 132,650 151,600 170,550 189,500

Office Equipment 241,250 10 24,125 48,250 72,375 96,500 120,625 144,750 168,875 193,000 217,125 241,250

vehicle 2,500,000 10 160,955 321,910 482,865 643,820 804,775 965,730 1,126,685 1,287,640 1,448,595 1,609,550

building 3,750,000 10 250,920 501,840 752,760 1,003,680 1,254,600 1,505,520 1,756,440 2,007,360 2,258,280 2,509,200

machinery&equipment 13,601,107 10 1,236,031 2,472,061 3,708,092 4,944,123 6,180,154 7,416,184 8,652,215 9,888,246 11,124,276 12,360,307

Total cost 20,281,857 1,690,981 3,381,961 5,072,942 6,763,923 8,454,904 10,145,884 11,836,865 13,527,846 15,218,826 16,909,807

Loan Repayment

a. Principal Repayment

The principal amount of birr 48,738,802 shall be repaid in 108 equal monthly installments.

b.Interest payment

10% of loan per annum on the outstanding balance payable on yearly basis together with the principal repayment

amount of birr 48,738,802. .

c. Grace period is one year from the date of the loan disbursement.

d. Repayment will begin after one year of production period.

e. Number of repayments: 108 equal constant principal monthly installments.

8.9. Fixed rate loan payment

amount 48,738,802 monthly payment 280,022

interest rate 10% monthly rate 0.83%

term 9 monthly interest 406,157

Annual principal repayment 3,360,259 Total principal 30,242,335

Annual interest payment 4,873,880 Total interest 43,864,922

period 1

8.10. Projected demand & Capacity level

Accordingly capacity utilization is set as follows:

• 75% of plant capacity during the 1st year

• 85% of plant capacity during the 2nd year

• 100% of plant capacity during the 3rd year

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sales Income capacity level

Types of product 75% 85% 100% 100% 100% 96% 96% 90% 85% 80%

1 Three wheeler 262,500 297,500 350,000 350,000 350,000 336,000 336,000 315,000 297,500 280,000

2 sales capacity 74,376,150 84,292,970 99,168,201 99,168,201 99,168,201 95,201,472 95,201,472 89,251,380 84,292,970 79,334,560

Sr no

8.11. Operating expenditure projection

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No Description Cost amount 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026

1 Land lease rent 23,200 23,200 23,200 23,200 23,200 23,200 23,200 23,200 23,200 23,200 23,200

2 Raw Material 32,583,086 32,583,086 33,560,579 34,567,396 35,604,418 36,672,550 37,772,727 38,905,909 40,073,086 41,275,279 42,513,537

3 Utilities 23,780 23,780 24,493 25,228 25,985 26,765 27,568 28,395 29,246 30,124 31,028

4 Maintenance&Repair 1,232,230 1,232,230 1,232,230 1,232,230 1,232,230 1,232,230 1,232,230 1,232,230 1,232,230 1,232,230 1,232,230

5 Packaging 1,164,000 1,164,000 1,198,920 1,234,888 1,271,934 1,310,092 1,349,395 1,389,877 1,431,573 1,474,520 1,518,756

6 Direct labor 2,328,000 2,328,000 2,397,840 2,469,775 2,543,868 2,620,185 2,698,790 2,779,754 2,863,146 2,949,041 3,037,512

7 Indirect labor 1,170,000 1,170,000 1,205,100 1,241,253 1,278,491 1,316,845 1,356,351 1,397,041 1,438,952 1,482,121 1,526,585

8 factory Supplies 184,834 184,834 190,380 196,091 201,974 208,033 214,274 220,702 227,323 234,143 241,167

9 office supplies 89,700 89,700 92,391 95,163 98,018 100,958 103,987 107,106.49 110,320 113,629 117,038

10 Depreciation of building 250,920 250,920 250,920 250,920 250,920 250,920 250,920 250,920 250,920 250,920 250,920

11 Depreciation of machinery&equipment 1,236,031 1,236,031 1,236,031 1,236,031 1,236,031 1,236,031 1,236,031 1,236,031 1,236,031 1,236,031 1,236,031

12 Depreciation of vehicle 160,955 160,955 160,955 160,955 160,955 160,955 160,955 160,955 160,955 160,955 160,955

13 Depreciation of furniture&fixture 18,950 18,950 18,950 18,950 18,950 18,950 18,950 18,950 18,950 18,950 18,950

14 Depreciation of office equipment 24,125 24,125 24,125 24,125 24,125 24,125 24,125 24,125 24,125 24,125 24,125

15 taxes 442,757 442,757 442,757 442,757 442,757 442,757 442,757 442,757 442,757 442,757 442,757

16 Rent 110,689 110,689 110,689 110,689 110,689 110,689 110,689 110,689 110,689 110,689 110,689

17 Insurance 199,241 199,241 199,241 199,241 199,241 199,241 199,241 199,241 199,241 199,241 199,241

18 Distribution&Selling Costs 3,858,280 3,858,280 3,974,029 4,093,249 4,216,047 4,342,528 4,472,804 4,606,988 4,745,198 4,887,554 5,034,181

19 Financing(interest) 4,873,880 4,873,880 4,873,880 4,873,880 4,873,880 4,873,880 4,873,880 4,873,880 4,873,880 4,873,880 4,873,880

18 principal repayment 3,360,259 3,360,259 3,360,259 3,360,259 3,360,259 3,360,259 3,360,259 3,360,259 3,360,259 3,360,259 3,360,259

19 Contigency 2,411,425 2,411,425 2,483,768 2,558,281 2,635,029 2,714,080 2,795,503 2,879,368 2,965,749 3,054,721 3,146,363

Total operating expenditure 55,746,343 55,746,343 57,060,737 58,414,561 59,809,001 61,245,274 62,724,635 64,248,377 65,817,831 67,434,369 69,099,403

8.12. Breakeven analysis

Sales price per unit 283

Sales volume per period 350,000

Total sales amount 99,168,201

Raw Material 93

Utilities 0.07

Packaging 3.33

Direct labor 6.65

Indirect labor 3.34

Factory Supplies 0.53

Office supplies 0.26

Distribution&Selling Cost 11.02

Contigency 6.89

Total variable costs per unit 125

Total variable costs per period 43,813,106

contribution per unit 125

gross margin 43,813,106

fixed costs per period

Building & civil works 3,750,000

Machinery & Equipment 13,601,107

vehicle 2,500,000

Office Furniture & Fixture 189,500

Office Equipment 241,250

tax 442,757

rent 110,689

Land lease rent 23,200

Maintenance&Repair 1,232,230

Depreciation of building 250,920

Depreciation of machinery&equipment 1,236,031

Depreciation of vehicle 160,955

Depreciation of furniture&fixture 18,950

Depreciation of office equipment 24,125

Insurance 199,241

Interest payment 4,873,880

principal repayment 3,360,259

Total Fixed costs 32,215,095

Net profit(loss) 11,598,011

Breakeven point(units) 203,690

17

8.13. Sales volume analysis

18

Units sold per period 0 40,000 80,000 120,000 160,000 200,000 240,000 280,000 320,000 360,000 400,000 440,000 480,000

Sales price per unit 193 193 193 193 193 193 193 193 193 193 193 193 193

Fixed costs per period 32,215,095 32,215,095 32,215,095 32,215,095 32,215,095 32,215,095 32,215,095 32,215,095 32,215,095 32,215,095 32,215,095 32,215,095 32,215,095

Variable costs 0 5,007,212 10,014,424 15,021,636 20,028,848 25,036,060 30,043,273 35,050,485 40,057,697 45,064,909 50,072,121 55,079,333 60,086,545

Total costs 32,215,095 37,222,307 42,229,519 47,236,731 52,243,943 57,251,155 62,258,367 67,265,579 72,272,791 77,280,003 82,287,215 87,294,428 92,301,640

Total sales 0 7,706,786 15,413,572 23,120,357.60 30,827,143 38,533,929 46,240,715 53,947,501 61,654,287 69,361,073 77,067,859 84,774,645 92,481,430

Net profit(loss) (32,215,095) (29,515,521) (26,815,947) (24,116,373) (21,416,799) (18,717,226) (16,017,652) (13,318,078) (10,618,504) (7,918,931) (5,219,357) (2,519,783) 179,791

-35000000

-30000000

-25000000

-20000000

-15000000

-10000000

-5000000

0

5000000

1 2 3 4 5 6 7 8 9 10 11 12 13

Units sold per period

Net profit(loss)

8.14. Statement of Cost of Goods Sold

Three Wheeler

Statement of Cost of Goods Sold

For the year ended Dec 31, 2017to 25, 2026

19

Description/year 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026

Beg.Inventory - - - - - - - - - -

Add:

Purchase of Raw Materials 32,583,086 33,234,748 33,899,443 34,577,432 35,268,980 35,974,360 36,693,847 37,427,724 38,176,278 38,939,804

Direct labor cost 2,328,000 2,374,560 2,422,051 2,470,492 2,519,902 2,570,300 2,621,706 2,674,140 2,727,623 2,782,175

Overhead

Land lease 23,200 23,200 23,200 23,200 23,200 23,200 23,200 23,200 23,200 23,200

Utilities 23,780 24,256 24,741 25,236 25,740 26,255 26,780 27,316 27,862 28,419

building maintenace and repair 75,000 75,000 75,000 75,000 75,000 75,000 75,000 75,000 75,000 75,000

machinery maintenace and repair 952,077 952,077 952,077 952,077 952,077 952,077 952,077 952,077 952,077 952,077

depreciation factory building 250,920 250,920 250,920 250,920 250,920 250,920 250,920 250,920 250,920 250,920

depreciation factory machinery&equipment 1,236,031 1,236,031 1,236,031 1,236,031 1,236,031 1,236,031 1,236,031 1,236,031 1,236,031 1,236,031

taxes 442,757 442,757 442,757 442,757 442,757 442,757 442,757 442,757 442,757 442,757

Insurance 199,241 199,241 199,241 199,241 199,241 199,241 199,241 199,241 199,241 199,241

Packaging 1,164,000 1,198,920 1,234,888 1,271,934 1,310,092 1,349,395 1,389,877 1,431,573 1,474,520 1,518,756

factory supplies 184,834 188,531 192,302 196,148 200,071 204,072 208,154 212,317 216,563 220,894

overhead cost 4,551,841 4,590,933 4,631,156 4,672,544 4,715,129 4,758,948 4,804,037 4,850,432 4,898,172 4,947,296

Cost of Good manufactured 39,462,927 40,200,241 40,952,650 41,720,467 42,504,012 43,303,608 44,119,590 44,952,296 45,802,073 46,669,275

8.15. Projected Income Statement

Three Wheeler

Income Statement

For the year ended Dec 31, 2017 to 25, 2026

20

Description/year 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026

Sales 74,376,150 84,292,970 99,168,201 99,168,201 99,168,201 95,201,472 95,201,472 89,251,380 84,292,970 79,334,560

less:Cost of Good Sold 39,462,927 40,200,241 40,952,650 41,720,467 42,504,012 43,303,608 44,119,590 44,952,296 45,802,073 46,669,275

Gross Income 34,913,224 44,092,730 58,215,550 57,447,733 56,664,189 51,897,864 51,081,883 44,299,085 38,490,897 32,665,285

Less:Operating Expense

Distribution&selling cost 3,858,280 3,974,029 4,093,249 4,216,047 4,342,528 4,472,804 4,606,988 4,745,198 4,887,554 5,034,181

principal repayment 4,873,880 4,873,880 4,873,880 4,873,880 4,873,880 4,873,880 4,873,880 4,873,880 4,873,880 4,873,880

Financing(interest) 3,360,259 3,360,259 3,360,259 3,360,259 3,360,259 3,360,259 3,360,259 3,360,259 3,360,259 3,360,259

Indirect labor 1,170,000 1,205,100 1,241,253 1,278,491 1,316,845 1,356,351 1,397,041 1,438,952 1,482,121 1,526,585

Maintenace and repair ,vehicle 175,000 175,000 175,000 175,000 175,000 175,000 175,000 175,000 175,000 175,000

Maintenace and repair ,furniture&fixture 13,265 13,265 13,265 13,265 13,265 13,265 13,265 13,265 13,265 13,265

Maintenace and repair ,office equipment 16,888 16,888 16,888 16,888 16,888 16,888 16,888 16,888 16,888 16,888

depreciation ,vehicle 160,955 160,955 160,955 160,955 160,955 160,955 160,955 160,955 160,955 160,955

depreciation ,Office Furniture & Fixture 18,950 18,950 18,950 18,950 18,950 18,950 18,950 18,950 18,950 18,950

depreciation,office equipment 24,125 24,125 24,125 24,125 24,125 24,125 24,125 24,125 24,125 24,125

rent 110,689 110,689 110,689 110,689 110,689 110,689 110,689 110,689 110,689 110,689

office supplies 89,700 92,391 95,163 98,018 100,958 103,987 107,106 110,320 113,629 117,038

Contigency 2,411,425 2,483,768 2,558,281 2,635,029 2,714,080 2,795,503 2,879,368 2,965,749 3,054,721 3,146,363

Total operating expenditure 16,283,417 16,509,299 16,741,958 16,981,596 17,228,423 17,482,656 17,744,515 18,014,230 18,292,037 18,578,178

Income Before Tax 18,629,807 27,583,431 41,473,593 40,466,137 39,435,765 34,415,208 33,337,368 26,284,854 20,198,861 14,087,108

Less: Sales Tax 2,794,471 4,137,515 6,221,039 6,069,921 5,915,365 5,162,281 5,000,605 3,942,728 3,029,829 2,113,066

Net Income 18,629,807 23,445,916 35,252,554 34,396,217 33,520,401 29,252,927 28,336,762 22,342,126 17,169,032 11,974,042

8.16. Projected Statement of Cash Flow

Three Wheeler

Cash flow

For the year ended Dec 31, 2017 to 25, 2026

21

Description/year 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026

Cash Inflows

cash Beg 93,807,026 117,363,631 152,726,874 187,233,780 220,864,870 250,228,487 278,675,938 301,128,754 318,408,475

Own Investment 29,122,198 - - - - - - - -

Bank Loan 48,738,802 - - - - - - - - -

Sales 74,376,150 84,292,970 99,168,201 99,168,201 99,168,201 95,201,472 95,201,472 89,251,380 84,292,970 79,334,560

Total Cash Inflows 152,237,151 178,099,996 216,531,832 251,895,075 286,401,981 316,066,343 345,429,959 367,927,319 385,421,724 397,743,035

Less:Cash Outflows

Purchase of Fixed Asset

Purchase of Raw Materials 32,583,086 33,234,748 33,899,443 34,577,432 35,268,980 35,974,360 36,693,847 37,427,724 38,176,278 38,939,804

Direct labor cost 2,328,000 2,374,560 2,422,051 2,470,492 2,519,902 2,570,300 2,621,706 2,674,140 2,727,623 2,782,175

Land lease 23,200 23,200 23,200 23,200 23,200 23,200 23,200 23,200 23,200 23,200

Utilities 23,780 24,256 24,741 25,236 25,740 26,255 26,780 27,316 27,862 28,419

building maintenace and repair 75,000 75,000 75,000 75,000 75,000 75,000 75,000 75,000 75,000 75,000

machinery maintenace and repair 952,077 952,077 952,077 952,077 952,077 952,077 952,077 952,077 952,077 952,077

depreciation factory building 250,920 250,920 250,920 250,920 250,920 250,920 250,920 250,920 250,920 250,920

depreciation factory machinery&equipment 1,236,031 1,236,031 1,236,031 1,236,031 1,236,031 1,236,031 1,236,031 1,236,031 1,236,031 1,236,031

taxes 442,757 442,757 442,757 442,757 442,757 442,757 442,757 442,757 442,757 442,757

Insurance 199,241 199,241 199,241 199,241 199,241 199,241 199,241 199,241 199,241 199,241

Packaging 1,164,000 1,198,920 1,234,888 1,271,934 1,310,092 1,349,395 1,389,877 1,431,573 1,474,520 1,518,756

factory supplies 184,834 188,531 192,302 196,148 200,071 204,072 208,154 212,317 216,563 220,894

Distribution&selling cost 3,858,280 3,974,029 4,093,249 4,216,047 4,342,528 4,472,804 4,606,988 4,745,198 4,887,554 5,034,181

principal payment 4,873,880 4,873,880 4,873,880 4,873,880 4,873,880 4,873,880 4,873,880 4,873,880 4,873,880 4,873,880

Financing(interest) 3,360,259 3,360,259 3,360,259 3,360,259 3,360,259 3,360,259 3,360,259 3,360,259 3,360,259 3,360,259

Indirect cost 1,170,000 1,205,100 1,241,253 1,278,491 1,316,845 1,356,351 1,397,041 1,438,952 1,482,121 1,526,585

Maintenace and repair ,vehicle 175,000 175,000 175,000 175,000 175,000 175,000 175,000 175,000 175,000 175,000

Maintenace and repair ,furniture&fixture 13,265 13,265 13,265 13,265 13,265 13,265 13,265 13,265 13,265 13,265

Maintenace and repair ,office equipment 16,888 16,888 16,888 16,888 16,888 16,888 16,888 16,888 16,888 16,888

depreciation ,vehicle 160,955 160,955 160,955 160,955 160,955 160,955 160,955 160,955 160,955 160,955

depreciation ,Office Furniture & Fixture 18,950 18,950 18,950 18,950 18,950 18,950 18,950 18,950 18,950 18,950

depreciation,office equipment 24,125 24,125 24,125 24,125 24,125 24,125 24,125 24,125 24,125 24,125

office supplies 89,700 92,391 95,163 98,018 100,958 103,987 107,106 110,320 113,629 117,038

Contigency 2,411,425 2,483,768 2,558,281 2,635,029 2,714,080 2,795,503 2,879,368 2,965,749 3,054,721 3,146,363

Sales Tax 2,794,471 4,137,515 6,221,039 6,069,921 5,915,365 5,162,281 5,000,605 3,942,728 3,029,829 2,113,066

Total operating expenditure 58,430,125 60,736,365 63,804,957 64,661,295 65,537,111 65,837,856 66,754,021 66,798,565 67,013,250 67,249,830

Cash Balance,End 93,807,026 117,363,631 152,726,874 187,233,780 220,864,870 250,228,487 278,675,938 301,128,754 318,408,475 330,493,205

8.17. Projected Balance sheet

Three Wheeler

Balance sheet

For the year ended Dec 31, 2017 to 25, 2026

22

Description/year 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026

current Assets

cash 93,807,026 117,363,631 152,726,874 187,233,780 220,864,870 250,228,487 278,675,938 301,128,754 318,408,475 330,493,205

prepaid leases

Total current asset 93,807,026 117,363,631 152,726,874 187,233,780 220,864,870 250,228,487 278,675,938 301,128,754 318,408,475 330,493,205

Non current assets

Land 1,856,000 1,856,000 1,856,000 1,856,000 1,856,000 1,856,000 1,856,000 1,856,000 1,856,000 1,856,000

Building & civil works 3,750,000 3,750,000 3,750,000 3,750,000 3,750,000 3,750,000 3,750,000 3,750,000 3,750,000 3,750,000

Machinery & Equipment 13,601,107 13,601,107 13,601,107 13,601,107 13,601,107 13,601,107 13,601,107 13,601,107 13,601,107 13,601,107

vehicle 2,500,000 2,500,000 2,500,000 2,500,000 2,500,000 2,500,000 2,500,000 2,500,000 2,500,000 2,500,000

Office Furniture & Fixture 189,500 189,500 189,500 189,500 189,500 189,500 189,500 189,500 189,500 189,500

Office Equipment 241,250 241,250 241,250 241,250 241,250 241,250 241,250 241,250 241,250 241,250

Total non current assets 22,137,857 22,137,857 22,137,857 22,137,857 22,137,857 22,137,857 22,137,857 22,137,857 22,137,857 22,137,857

acc depr.office Furniture & Fixture 18,950 37,900 56,850 75,800 94,750 113,700 132,650 151,600 170,550 189,500

acc depr.office Equipment 24,125 48,250 72,375 96,500 120,625 144,750 168,875 193,000 217,125 241,250

acc depr.vehicle 160,955 321,910 482,865 643,820 804,775 965,730 1,126,685 1,287,640 1,448,595 1,609,550

acc depr.building 250,920 501,840 752,760 1,003,680 1,254,600 1,505,520 1,756,440 2,007,360 2,258,280 2,509,200

acc depr.machinery&equipment 1,236,031 2,472,061 3,708,092 4,944,123 6,180,154 7,416,184 8,652,215 9,888,246 11,124,276 12,360,307

Total Accumulated Depreciation 1,690,981 3,381,961 5,072,942 6,763,923 8,454,904 10,145,884 11,836,865 13,527,846 15,218,826 16,909,807

Total non current asset 20,446,876 18,755,896 17,064,915 15,373,934 13,682,954 11,991,973 10,300,992 8,610,011 6,919,031 5,228,050

Total assets 114,253,902 136,119,527 169,791,789 202,607,714 234,547,824 262,220,459 288,976,930 309,738,765 325,327,505 335,721,255

Current liability

Lease payable 1,856,000 1,856,000 1,856,000 1,856,000 1,856,000 1,856,000 1,856,000 1,856,000 1,856,000 1,856,000

Bank loan payable - 8,234,140 8,234,140 8,234,140 8,234,140 8,234,140 8,234,140 8,234,140 8,234,140 8,234,140

Equity

own equity,capital 112,397,902 126,029,387 159,701,650 192,517,575 224,457,684 252,130,320 278,886,791 299,648,626 315,237,366 325,631,116

Total liability&Equity 114,253,902 136,119,527 169,791,789 202,607,714 234,547,824 262,220,459 288,976,930 309,738,765 325,327,505 335,721,255

8.18. NPV, IRR, PI, & AAR Calculation

TIME CASH FLOW NI RRR 10%

0 (77,861,000) Payback 3

1 93,807,026 18,629,807 Required AAR 33%

2 117,363,631 23,445,916

3 152,726,874 35,252,554 NPV $7,418,114

4 187,233,780 34,396,217 IRR 20%

5 220,864,870 33,520,401 Payback 0.83

6 250,228,487 29,252,927 PI 3.81

7 278,675,938 28,336,762 PI-1 2.81

8 301,128,754 22,342,126 AAR 74%

9 318,408,475 17,169,032

10 330,493,205 11,974,042

8.19. Discounted payback period

years cash flow PV(CF)

0 (77,861,000) (77,861,000)

1 93,807,026 93,807,026

2 117,363,631 117,363,631

3 152,726,874 152,726,874

4 187,233,780 187,233,780

5 220,864,870 220,864,870

6 250,228,487 250,228,487

7 278,675,938 278,675,938

8 301,128,754 301,128,754

9 318,408,475 318,408,475

10 330,493,205 330,493,205

cutoof period 3 year

Discounted Payback period0.830012463

15946025.28

(0.17)$

23

8.20. Financial ratio

24

Description/year 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026

Net income 18,629,807 23,445,916 35,252,554 34,396,217 33,520,401 29,252,927 28,336,762 22,342,126 17,169,032 11,974,042

Sales 74,376,150 84,292,970 99,168,201 99,168,201 99,168,201 95,201,472 95,201,472 89,251,380 84,292,970 79,334,560

Profit Margin 25.05% 27.81% 35.55% 34.68% 33.80% 30.73% 29.77% 25.03% 20.37% 15.09%

Intial Investment 77,861,000 48,432,395 48,432,395 48,432,395 48,432,395 48,432,395 48,432,395 48,432,395 48,432,395 48,432,395

Return on Investment 4.18 2.07 1.37 1.41 1.44 1.66 1.71 2.17 2.82 4.04

Total Liability&Equity 114,253,902 136,119,527 169,791,789 202,607,714 234,547,824 262,220,459 288,976,930 309,738,765 325,327,505 335,721,255

Return on Total Asset 153.6% 161.5% 171.2% 204.3% 236.5% 275.4% 303.5% 347.0% 385.9% 423.2%

Return on Equity 153.62% 161.48% 171.22% 204.31% 236.52% 275.44% 303.54% 347.04% 385.95% 423.17%

Gross income 34,913,224 44,092,730 58,215,550 57,447,733 56,664,189 51,897,864 51,081,883 44,299,085 38,490,897 32,665,285

Total Non Current Asset 20,446,876 18,755,896 17,064,915 15,373,934 13,682,954 11,991,973 10,300,992 8,610,011 6,919,031 5,228,050

Fixed Asset Turn Over 59% 43% 29% 27% 24% 23% 20% 19% 18% 16%

Total Asset Turn Over 0.31 0.32 0.34 0.28 0.24 0.20 0.18 0.14 0.12 0.10

9. Results of Financial Forecasts

9.1. Profitability Index

The project income statement reveals that the project is profitable all through its life. The annual net profit of about

birr 18,629,807 in the first year will steadily increase through time and reaches about birr 35,252,554 and

continuously decline at the end of projected year. The project profitability index is 3.81.

9.2. Financial Position

The projected balance sheet shows quite good financial position in related to liquidity risk, financial risk, credit risk

and business risks. The net worth, birr 114,253,902million at the end of first year will increase to about birr

335,721,255 millionat the end of projected years.

9.3. Liquidity

The cash flow projection indicates an overall liquidity of the project. The cumulative cash balance at the end of the

projected years would be about birr 330,493,205million.

To examine the financial viability of project common methods of evaluating financial viability of a project

Payback period

Return on investment

Net present value

Internal rate of return

9.4. Payback period

To recover the initial investment cost the project requires/needs only 0.83 years will be required. The payback period

is the time taken to gain a financial return equal to the initial investment. The payback period is a length of time from

the beginning of the project until the net cash flows of the incremental production reaches the total of the initial

investment.

Payback period =initial investment ÷accumulated annual cash flows

25

9.5. Return on investment

To examine the return on investment in economic terms, it is relating profits in relation to capital invested. ROI is the

benefit/profit to the investor resulting from an investment of same resources in the business. A high ROI means the

investment gains compare favorably to investment cost.it is also evaluate the efficiency of project. If 10 years here

the project average return on investment would be 228.7%.

9.6. Net present value

Another method to calculate the profitability of is net present value or NPV which indicate the present value of the

total benefits and costs which is achieved by discounting the future value of each cash flow. NPV can determine

whether the project investment will result in a net profit or a loss. A positive NPV results in profit, while a negative

results in a loss. The NPV of is 7,418,114 birr which is positive and profitable.

Formula’s used to calculate NPV

Net present value=-CO+C1÷1+r+C2÷ (1+r) 2+…. +CT÷ (1+r) T

-CO=initial investment

C=cash flow

r=discount rate

T=time

NPV=-CO+∑ ( )

Note that -Co is the initial investment, which is a negative cash flow showing that money is going out as opposed to

coming in. considering that the money going out is subtracted from the discounted sum of cash flows coming in, the

net present value would need to be positive in order to be considered a valuable investment.

9.7. Financial internal rate of return

This indicator measures the power of the project to generate return by comparing the result either with opportunity

cost of capital or the bank interest rate. The project discounted cash flow has resulted in20% IRR. This result indicates

a very attractive rate of return and implies the capacity of the business to accommodate any adverse situation.

26