ENGINEERING PART OF ELECTRIC MOTOR PROFILE MOTOR.pdf2010 e.c by alemayehu eshete midi >> esd> ppt...

2010 E.C

BY ALEMAYEHU ESHETE

MIDI >> ESD> PPT

2010 E.C

ENGINEERING PART OF ELECTRIC MOTOR PROFILE

I

Contents

LISTS OF TABLES .................................................................................................................................................. II

LISTS OF FIGURES ................................................................................................................................................ II

1. EXECUTIVE SUMMARY ............................................................................................................................. 1

2. PRODUCT DESCRIPTION AND APPLICATION ....................................................................................... 2

MANUFACTURING OF ELECTRIC MOTOR .................................................................................................... 2

2.1. INTRODUCTION ....................................................................................................................................... 2

2.2. TYPE OF ELECTRIC MOTOR ...................................................................................................................... 3

2.3. APPLICATION OF ELECTRIC MOTOR ........................................................................................................ 3

3. MARKET STUDY .......................................................................................................................................... 4

3.1. PRESENT DEMAND AND SUPPLY ............................................................................................................. 4

3.2. DEMAND PROJECTION ............................................................................................................................. 5

3.3. CUSTOMERS ............................................................................................................................................. 5

3.4. PRICING AND DISTRIBUTION ................................................................................................................... 5

4. RAW MATERIALS, COMPONENTS AND UTILITIES ............................................................................. 6

4.1. RAW MATERIAL ....................................................................................................................................... 6

4.2. COMPONENTS OF ELECTRIC MOTOR ...................................................................................................... 8

4.3. UTILITIES .................................................................................................................................................. 9

5. TECHNOLOGY AND ENGINEERING ...................................................................................................... 10

5.1. PLANT CAPACITY AND PRODUCTION PROGRAM .................................................................................. 10

5.1.1. PLANT CAPACITY ..................................................................................................................... 10

5.1.2. PRODUCTION PROGRAM ......................................................................................................... 10

5.2. MANUFACTURING PROCESS OF ELECTRIC MOTOR ............................................................................... 11

5.2.1. CASTING ...................................................................................................................................... 11

5.2.2. SHAFT MACHINING .................................................................................................................. 11

5.2.3. STATOR AND ROTOR ASSEMBLY ......................................................................................... 11

5.2.4. ASSEMBLY .................................................................................................................................. 12

5.2.5. PAINTING, TESTING AND PACKING ..................................................................................... 13

5.3. MACHINERY AND EQUIPMENT .............................................................................................................. 14

5.4. Office furniture and pre-production expenditure ................................................................................. 15

5.5. ENVIRONMENTAL IMPACT .................................................................................................................... 16

5.6. LAND, BUILDING AND CIVIL WORKS ...................................................................................................... 16

6. HUMAN RESOURCE AND TRAINING REQUIREMENTS..................................................................... 17

6.1. HUMAN RESOURCE REQUIREMENT ...................................................................................................... 17

6.2. TRAINING REQUIREMENT ...................................................................................................................... 17

7. FINANCIAL ANALYSIS ............................................................................................................................. 18

7.1. Bases of the analyses ................................................................................................................................. 18

II

LISTS OF TABLES Table 1 Imported data of electric motors ................................................................................................................ 4

Table 2 Projected demand for electric motor by Net mass (kg) .............................................................................. 5

Table 3 Raw materials & its cost [FC (foreign currency) & LC (local Currency) ............................................... 7

Table 4 Annual Requirement of Utilities and Cost .................................................................................................. 8

Table 5 Production program ................................................................................................................................. 10

Table 6 list of machinery and equipment ............................................................................................................... 14

Table 7 Rate of construction land cost .................................................................................................................. 16

Table 8 Construction cost payment period ............................................................... Error! Bookmark not defined.

Table 9 Human Resource Requirement and Cost .................................................................................................. 17

LISTS OF FIGURES Figure 1 Parts of electric motor .............................................................................................................................. 2

Figure 2 Electric motor rotor (left) and stator (right) ............................................................................................ 8

Figure 3 Frame of motor ....................................................................................................................................... 11

Figure 4 Stator assembly ....................................................................................................................................... 12

Figure 5 Assembling of electric motor .................................................................................................................. 13

1

1. EXECUTIVE SUMMARY

An electric motor is an electrical machine that converts electrical energy into mechanical energy. The

reverse of this is the conversion of mechanical energy into electrical energy and is done by an electric

generator, which has much in common with a motor.

Total net mass of National market demand measured in number for the year 2007 to 2017 is increased

by 37.06% from 1,995,319.02 to 3,170,396.98 .The projected demand also shows that the product will

have enough market in home country.

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 financial analysis has been performed using the model COMFAR III expert of UNIDO the

financial modeling and evaluation of capital investment project. The model projects the statements of

profit and loss and sources and applications of fund. In addition, the criteria of the project are

evaluated, including the internal rate of return (IRR) and the return on equity.

As uncertainties can highly affect the outcome of the assessment; Risk analysis methods are presented.

The impact of independent variables such as fixed and variable costs on the dependent variable

revenue is analyzed by Sensitivity analyses.

Sensitivity analysis are also generated on the key variables of the project such as the total revenues, the

operating costs used to evaluate Feasibility engenders many uncertainties. Sensitivity analysis is often

conducted to deal with these uncertainties. This analysis looks at how economic feasibility changes

when each important variable that can affect investment costs such as initial construction costs, fixed

cost, production costs, operating costs, discount rates, etc. changes by a certain degree.

The conclusion is that Net Present Value on Total Capital Invested at 12.00% is 54,419.89.this result

indicate positive NPV so the project is feasible and profitable. Other indicators show that the project is

financially feasible and the project is profitable if the project will be implemented.

2

2. PRODUCT DESCRIPTION AND APPLICATION

MANUFACTURING OF ELECTRIC MOTOR

2.1. INTRODUCTION

An electric motor is an electrical machine that converts electrical energy into mechanical energy. The

reverse of this is the conversion of mechanical energy into electrical energy and is done by an electric

generator, which has much in common with a motor.

Most electric motors operate through the interaction between an electric motor's magnetic field and

winding currents to generate force. In certain applications, such as in regenerative braking with

traction motors in the transportation industry, electric motors can also be used in reverse as generators

to convert mechanical energy into electric power.

Figure 1 Parts of electric motor

3

2.2. TYPE OF ELECTRIC MOTOR

I. AC Motor

An AC electric motor is a type of electric motor operating with an alternating current (AC, Alternating

Current) voltage source. This AC electric motor can be distinguished by its resources as follows.

Synchronous motor is an AC motor working at a fixed speed at a certain frequency system. This

motor requires direct current (DC) for power generation and has a low initial torque, and therefore

synchronous motors are suitable for low-load initial use, such as air compressors, frequency changes

and motor generators. Synchronous motors are able to improve the system power factor, so it is often

used on systems that use a lot of electricity.

Induction motor is an AC power motor that works based on induction magnetic media between rotor

and stator.

II. DC Motor

Direct current electric motor is a type of electric motor that operates with a direct current DC voltage

source (DC, Direct Current). DC direct current electric motor can be distinguished again based on the

following resources.

Separately Excited Motor: - It is a type of DC motor that the field current source is supplied from a

separate source, so the DC electric motor is called a separate DC power source (separately excited).

Motor Self Excited motor: - It is a type of DC motor that the field current source is supplied from the

same source as the electric motor coil, so the DC electric motor is called a self-excited DC power

motor.

2.3. APPLICATION OF ELECTRIC MOTOR

General-purpose motors with highly standardized dimensions and characteristics provide convenient

mechanical power for industrial use. Found in applications as diverse as industrial fans, blowers and

pumps, machine tools, household appliances, power tools. For example lathes, fans, pumps disc and

band saw drive requiring moderate torques, Rolling mills and other loads requiring large momentary

toques. Electric motors are used to produce linear or rotary force (torque) Electric traction, high speed

tools. Industrial uses are hoists, cranes, trolley cars, conveyors, elevators, air compressors, vacuum

cleaners, sewing machines etc.

4

3. MARKET STUDY

3.1. Global Trend

3.2. PRESENT DEMAND AND SUPPLY

The secondary data presented below is used to estimate the effective demand in 2018 G.C. As a result

the linearly fitted regression equation is as follows. Based on the regression equation presented above,

the effective demand estimated results in 3309661.308kg.

As shown in the equation, the regression sum of square ( ) is which implies the data is

enough to show the variation in the dependent variable of the net mass of electric motors.

Imported data of electric motors for 11 continuous years by cross weight (kg), Net mass (kg) and CIF

Value (ETB and USD) is shown in table 1.

Table 1 Imported data of electric motors

Year Gross Wt. (Kg) Net Wt. (Kg) CIF Value (ETB) CIF Value (USD)

2007 2143936.59 1995319.02 70843373.77 7829987.043

2008 2102560.02 1957508.88 121819655.5 12575321.61

2009 1816301.4 1751448.43 137323571.3 11566135.59

2010 2144363.24 2044994.13 175055135.8 12019302.81

2011 2679121.1 2558654.89 292505779.9 17140985.77

2012 2091270.33 1979122.11 236958294.9 13263382.98

2013 2142603.5 2045476.53 285117015.2 15165718.01

2014 3184171.49 2991596.03 456913005 22682787.84

2015 2817522.06 2702257.75 518381199.8 24943759.01

2016 3586651.19 3483180.89 530501506.4 24176123.19

2017 3275439.79 3170396.98 573729553.4 23691288.04

Total 27983940.71 26679955.64 3399148091 185054791.9

Average 2543994.61 2425450.513 309013462.8 16823162.9

Source: from Ethiopian costumes & Revenue authority

5

3.3. DEMAND PROJECTION

The projected demand using a regression formula for the next 12 years of electric motor is shown in

table 2.

Table 2 Projected demand for electric motor by Net mass (kg)

Year (G.C) Net Wt. (Kg)

2019 3457029.773

2020 3604398.239

2021 3751766.705

2022 3899135.171

2023 4046503.637

2024 4193872.103

2025 4341240.568

3.4. CUSTOMERS

Electric motors used in applications as diverse as industrial fans, blowers and pumps, conveyors,

machine tools, household appliances, power tools. So, the main customers are industries, metal &

wood workshops and factories.

3.5. PRICING AND DISTRIBUTION

The price of piece of motors is varies according to use, design, size and other factors. The product will

be distributed to the distributors and directly sold to the end user.

6

4. RAW MATERIALS, COMPONENTS AND UTILITIES

4.1. Supply Condition of Raw material

4.2. RAW MATERIAL and COMPONENT

The

The principal raw materials are aluminum for cases, covers and fan, copper for rotor bars, rings and stator

windings, high quality iron sheet for stator and rotor laminations and steel bar for shafts.

Miscellaneous items required include ball or roller bearings for shafts, fasteners for covers, and various

materials for fixing and securing electrical leads to stator windings and junction box terminals. Finally,

impregnation and paint materials and labels are required for finishing the completed product.

Aluminum scraps for cases, covers

High quality iron sheet for stator

and rotor lamination

Steel bar for shafts

Enameled Copper wire

Ball Bearing

Painting chemical

impregnating material

Fan blade

Screws

7

Table 3 Raw materials & its cost [FC (foreign currency) & LC (local Currency)

No. Description Units Unit price Annual

consumption FOB

Service cost Annual total cost

(‘000)

CIF Total tax 5.5% CIF (Bank Charge, Port

handling & Inland Transport) FC LC

1 Aluminum scraps Ton 18,500

ETB 750 13,875 --- --- ---

13,875

2 Steel sheet Ton $500 1400 700 731.5 308.33 40.23

1080.060 ---

3 Steel bar Ton $600 100 60 62.7 26.43 3.45

100.508 ---

4 Enameled Copper wire Ton $800 500 400 418 176.19 22.99

590.739 ---

5 Ball bearings Piece $0.20 16,000 3.2 3.344 1.41 0.18

4.726 ---

6 Painting chemical Liter $1.50 500 0.75 0.78 0.33 0.04

1.058 ---

7 impregnating material Meter $0.08 10,000 0.75 0.78 0.33 0.04

1.157 ---

8 Fan blade Piece $2 8,000 16 16.72 4.93 0.92

22.572 ---

9 Screw Piece $0.01 200,000 2 2.09 0.88 0.11

3.086 ---

Total 1803.905 13,875

8

4.3. COMPONENTS OF ELECTRIC MOTOR

a. Rotor

In an electric motor, the moving part is the rotor, which turns the shaft to deliver the mechanical

power. The rotor usually has conductors laid into it that carry currents, which interact with the

magnetic field of the stator to generate the forces that turn the shaft. However, some rotors carry

permanent magnets, and the stator holds the conductors.

b. Stator

The stator is the stationary part of a rotary system, found in electric motor. Energy flows through a

stator to or from the rotating component of the system. The stator core is made up of many thin metal

sheets, called laminations. Laminations are used to reduce energy losses that would result if a solid

core were used. In an electric motor, the stator provides a rotating magnetic field that drives the

rotating armature. Depending on the configuration of a spinning electromotive device the stator may

act as the field magnet, interacting with the armature to create motion, or it may act as the armature,

receiving its influence from moving field coils on the rotor.

The stator of these devices may be either a permanent magnet or an electromagnet. Where the stator is

an electromagnet, the coil which energizes it is known as the field coil or field winding.

Figure 2 Electric motor rotor (left) and stator (right)

c. Bearings

The rotor is supported by bearing, which allow the rotor to turn on its axis. The bearings are in turn

supported by the motor housing. The motor shaft extends through the bearings to the outside of the

motor, where the load is applied. Because the forces of the load are exerted beyond the outermost

bearing, the load is said to be overhung. Because this tool produces rotation, it is necessary a special

component that will be used as a pad for a smooth round. This is the function of the bearing, as a

bearing between the shaft surface and the motor housing.

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d. Air gap

The distance between the rotor and stator is called the air gap. The air gap has important effects, and is

generally as small as possible, as a large gap has a strong negative effect on the performance of an

electric motor. It is the main source of the low power factor at which motors operate. The air gap

increases the magnetizing current needed. For this reason, the air gap should be minimal. Very small

gaps may pose mechanical problems in addition to noise and losses.

e. Windings

Windings are wires that are laid in coils, usually wrapped around a laminated soft iron magnetic core

so as to form magnetic poles when energized with current.

Electric machines come in two basic magnet field pole configurations: salient-pole machine and non-

salient-pole machine. In the salient-pole machine the pole's magnetic field is produced by a winding

wound around the pole below the pole face. In the non-salient-pole, or distributed field, or round-rotor,

machine, the winding is distributed in pole face slots. A shaded-pole motor has a winding around part

of the pole that delays the phase of the magnetic field for that pole.

f. Shaft

The main shaft is a metal component that extends as a place to attach some components. In addition to

the coil rotor, the component attached to this shaft is a drive external component. Generally the main

shaft is made of stainless steel which is anti-rust. In addition, this component must also be stable at

high rotation and temperature.

g. Case/ Frame

Outside of the electric motor we will see an iron plate that is used to protect all parts of the electric

motor. In addition, motor housing also serves to protect us as the user of very high rotation rotors.

4.4. UTILITIES

Industrial water of 4,500 m3 and electric power of 80,000 kWh are consumed in this plant per annum.

The total cost of utilities is estimated to be Birr 98,600 birr. Details of which are shown in Table.

Table 4.Annual Requirement of Utilities and Cost No Utility Unit price Annual consumption Annual Cost (’000 birr)

1. Electricity 0.58 birr/kwh 80,000 kwh 46.4

2. Water

11.60 birr/m3

4,500 M3 52.2

Total 98.6

10

5. TECHNOLOGY AND ENGINEERING

5.1. PLANT CAPACITY AND PRODUCTION PROGRAM

5.1.1. PLANT CAPACITY

According to the market study, the rated capacity of the plant is proposed to be 3,000 tons of electric motor

per annum. Based on demand projection shown is Table 2, and capital requirement, the envisaged AC

motor manufacturing plant will have a capacity of producing 8,000 pieces of AC motors. The selected

production capacity is based on 300 working days per annum. There is one working shift of eight hours

each per day. The rest of calendar days are left for cleaning and maintenance.

5.1.2. PRODUCTION PROGRAM

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

equipment to the technology selected. In order to provide adequate time for developing the skill of

producing AC motors and penetrate the market, it would be advisable to start production at a lower level

and gradually build up the scale of production. The plant will start operation at 50% of its production

capacity during the first year of operation, and then raise up production to 75%, 90% and lastly to 100%

during the next succeeding years. Table 5 below shows the production program. Accordingly capacity

utilization is set as follows:

50% of plant capacity during the 1st year.

75% of plant capacity during the 2nd year

90% of plant capacity during the 3rd year and

100% of plant capacity during the 4th year

Table 5 Production program

Year Plant capacity Production capacity /piece

1st year 50%

4000

2nd

year 75% 6000

3rd

year 90% 7200

4th

year 100% 8000

11

5.2. MANUFACTURING PROCESS OF ELECTRIC MOTOR

A motor consists of a housing (usually cast and machined from Aluminum), a stator assembly, a rotor

assembly and the end shields. The key manufacturing processes are summarized below:

5.2.1. CASTING

5.2.1.1. Housing:

Housing/case is casted from aluminum scraps. After that it will be rough machined, at which point

casting defects such as blow holes and porosities are detected. The machining of the housing will be

takes place in all faces and the bore and several holes for fastening with special purpose machines or

sometimes CNC machines. Even with such machines, there is a limit to the size variety that can be

machined at a single work-station.

Figure 3 Frame of motor

5.2.1.2. End shields and other supports

There are a number of other cast components which have to be machined to support and enclose the

motor assembly from either side. These follow the same type of operations as the housing. The end

shields are circular and there are other castings such as the terminal box and base plate, which are of

other shapes.

5.2.2. SHAFT MACHINING

Motor shafting general processing includes cutting, turning, grooving, end milling, tapping, keywaying

& hopping.

5.2.3. STATOR AND ROTOR ASSEMBLY

In most motors, the inner assembly is the rotating one and the outer one is the stationary one, called the

stator assembly. The stator assembly is made of laminations matching the rotor sections. The

conducting material in this case is copper wire, which is wound in the cavities of the lamination. The

precise control of the number of turns, the polarity and the connections of the winding is critical for the

12

electrical and magnetic properties of the motor. The stator assembly is also immersed in varnish and

heat treated, for better properties.

The stator is the stationary part of the motor’s electromagnetic circuit. The stator core is made up of

many thin metal sheets, called laminations. Laminations are used to reduce energy loses that would

result if a solid core were used. Stator laminations are stacked together forming a hollow cylinder.

Coils of insulated wire are inserted into slots of the stator core.

When the assembled motor is in operation, the stator windings are connected directly to the power

source. Each grouping of coils, together with the steel core it surrounds, becomes an electromagnet

when current is applied.

Figure 4 Stator assembly

Generally the main processes that perform in order to get stator and rotor are un-coiled steel sheet,

punching & cutting the sheet, stake the each lamination & weld them and winding.

5.2.4. ASSEMBLY

The assembly operation for motors involves putting the rotor assembly inside the stator assembly,

fixing bearings to the shaft, adding the end shield covers and attaching the electrical connections and

installation elements. A fan and fan cover for cooling the housing is also attached. This operation

performs by manual.

13

Figure 5 Assembling of electric motor

5.2.5. PAINTING, TESTING AND PACKING

These are routine operations, although the testing operation can be quite rigorous and lengthy

depending on the type of performance features demanded of the motor. A trend worldwide is that

painting quality for anticorrosion and other properties, and packing, especially for withstanding

transportation damages is becoming more and more of a process concern. This operation performs by

manual.

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5.3. MACHINERY AND EQUIPMENT

The list of machinery and equipment required for the manufacture is given in Table below. Total cost of machinery and equipment is estimated at $124,157.

Table 6 list of machinery and equipment

S.N Machine name Quantity

FOB

Service cost Annual total cost

(‘000)

CIF Total tax Installation 5.5% CIF (Bank Charge, Port

handling & Inland Transport) FC LC

1 Furnace for melting 2 0.1 0.10 0.04 0.01 0.006 0.152

2 Milling And Boring Machine 1 12.5 13.06 4.68 0.52 0.718 18.98

3 Sheet metal un coiler machine 1 3.5 3.66 1.31 0.15 0.201 5.32

4 Punching machine 1 40 41.8 12.33 1.67 2.299 58.102

5 Press machine 1 10 10.45 3.74 0.42 0.575 15.186

6 Coil winding machine 2 2 2.09 0.75 0.08 0.115 3.037

7 Hack sawing machine 1 0.05 0.05 0.019 0.01 0.003 0.076

8 Universal center Lathe machine 1 10 10.45 3.74 0.42 0.575 15.19

9 Cylindrical Grinding Machine 1 4.5 4.70 1.68 0.19 0.259 6.83

10 Overhead crane 1 0.75 0.78 0.28 0.031 0.043 1.139

11 welding machine 1 0.1 0.10 0.04 0.004 0.006 0.145

Total 111.253 0

15

5.4. Office furniture and pre-production expenditure

Table 7 list of Auxiliary and service plant and Pre-production expenditure

S.N Description Quantity Unit price Total price

1 Auxiliary and service plant 1.1 computer 2 10 00 20 00

1.2 printer and photo copy 1 15 00 15 00

1.3 table 6 4 16 25 00

1.4 chair 11 2 27 25 00

1.5 vehicle 1 16 81 16 81

2 Pre-production expenditure

2.1 Leasing costs 1 440 70 440 70

2.2 preliminary expenditure 1 125 00 125 00

2.3 pre-operative expenditure 1 125 00 125 00

3 contingencies 1 70 00 70 00

Total cost 808 94 808 94

16

5.5. ENVIRONMENTAL IMPACT

The Production activity of the plant involves the melting, casting, punching, welding, painting,

assembling. In which almost all the process are environmentally friendly.

5.6. LAND, BUILDING AND CIVIL WORKS

The manufacturing projects will be located in industrial zones located in expansion zones of Addis

Ababa. Land is required to accommodate plant building, management offices, social building for

workers, stores, internal roads, adequate space for expansion and other industry related activities. The

total land area for the envisaged plant is estimated at 6,000 m2. Floor price of plots located in

expansion zone is adopted which is 299 Birr. So the total land cost is 1,794,000 birr.

The factory built-up area is estimated at 3,000 m2. At building rate of Birr 1000 per m

2 the cost of

building and civil works will be 3,000,000 Birr. And other built up areas are office building, restaurant

and management office the total land area for envisaged is estimated 2,000m2. At building rate of birr

2500 per m2 the cost of building and civil works will be 5,000,000 birr. The remaining area used for

internal road and green areas and for other related industries activities.

Table 8 Rate of construction land cost

No Descriptions cost/sq.(Birr) Land area Total cost (Birr)

1

Factory building and related constructions 1,000 3,000 M2 3,000,000

2 Office building 2,500 2,000 M2

5,000,000

Total 6,000 M2

8,000,000

For the purpose of this project 20 years payment completion period and 10% down payment is used.

The land lease period for industry is 70 years. Accordingly, the total land lease cost estimated at

1,794,000 Birr of which 10% or 179,400 Birr will be paid in advance. The remaining Birr 1,614,600

will be paid in equal installments within 20 years i.e. Birr 80,730 annually.

17

6. HUMAN RESOURCE AND TRAINING REQUIREMENTS

6.1. HUMAN RESOURCE REQUIREMENT

The plant will require about 56 workers will be engaged in the production activities and administration

unit. The plant manager will have to be a mechanical engineer having sufficient experience in the field.

The detail of human resource requirement is given in Table 9.

Table 10 Human Resource Requirement and Cost

Sr. No Description Req. No. Salary Monthly for

one worker (Birr)

Total Annual Salary

(’000 Birr)

A. Production area

1 Plant Manager 1 12,000 144

2 Supervisor 3 8,000 288

3 Skilled workers 13 5,000 780

4 Un-Skilled workers 20 2,000 480

Sub Total 37 1692

Workers Benefit 15% of basic Salary 253.8

Total 1945.8

B. Administration

5 Finance and

administration head

1 7000 84

6 Human resource 1 3,500 42

7 Store Man 2 4,000 96

8 Sales Man 1 4,000 48

9 Secretary 1 2,500 30

10 Accountant 1 3,500 42

11 Messenger & cleaner 6 1,200 86.4

12 Driver 2 2,500 60

13 Security guard 4 1,200 57.6

Sub Total 19 546

Workers Benefit 15% of basic Salary 81.9

Total 627.9

Grand Total 56 2573.7

6.2. TRAINING REQUIREMENT

All operators need basic training so that they can be acquainted to the operation. This can be done

during the commissioning period of the plant. The cost of such training is estimated at Birr 100,000.

18

7. FINANCIAL ANALYSIS

7.1. Bases of the analyses

a) Planning horizon

The economic life of electric motor manufacturing plan is the period over which the project would

generate net gains, depends basically on the technical or technological life cycle of the main

machineries that produce electric motor.in addition to that duration of building and equipment, rate of

technical progress, materials availability and demand for the product.so that, The planning horizon

comprises two years of construction and 15 years of production. Planning during construction is

yearly.

Table 11 planning horizon

Begin End Length

Construction phase 1/01 12/01 12

1/02 12/02 12

Production phase 1/03 12/03 12

... ... 12

1/17 12/17 12

b) Project classification

This electric motor manufacturing project is a new project and the construction phase will take 2 years

and the production phase 15 years.

c) Products

The planned product is electric motor used for different purposes such as industrial fans, blowers and

pumps, machine tools, household appliances, power tools. General-purpose motors with highly

standardized dimensions and characteristics provide convenient mechanical power for industrial use.

Local market will be the main target for the product. The product will be produced at different rated

capacity of different tonnes per year with a product indicated as follows.

Table 12 Products

No Name Start End Nominal capacity

1 Electric motor 1/03 12/17 8,000.00

d) Currencies

This new industrial project will need local and foreign currency. A fund in local currency is required for

local purchases, and foreign currency is required for imports of goods and foreign services. The local

currency is the ETB. The foreign currency is the US dollar (USD) with an official exchange rate of

27.7836 Per ETB. Machinery, equipment and raw materials are purchased in United States dollars

19

(US$) with an OER of 27.7836 per ETB. All reports are expressed in the accounting currency,

thousands ETB.

e) Discounting

The opportunity cost of capital for the total investment and for the equity is 12%.To determine the

MIRRs the re-investment and borrowing rates are assumed to be 12% and 8%, respectively, for both

the total investment and equity. The number of years for the short NPV on equity is 10.

f) Fixed Investment Cost

Fixed investment costs are shown in the following table with depreciation conditions, scrap value and

the investment in each of the two years of construction.

Table 13: Fixed investment costs

Description Market Currency No. years Scrap- Costs, Project year

(thousands) Depreciation 1a

value a 1 2

Land Local ETB -

Land lease advance ETB - 100.00% 979.40

Civil works, buildings

Factory building and related constructions Local ETB 20 50.00% 2,000.00 1,0000.00

Office building Local ETB 20 50.00% 3,000.00 2,000.00

Plant machinery & equipment Foreign US$ 10 10.00% 111.25

Auxiliary and service plant equipment

Computer Local ETB 10 0.00% 20.00

Printer and photo copy Local ETB 10 0.00% 15.00

Table Local ETB 10 0.00% 25.00

Chair Local ETB 10 0.00% 25.00

Vehicle Foreign US$ 15 20.00% 16.80

Pre-prod. expenditure Local ETB

preliminary expenditure Local ETB 3 0.00% 62.50 62.50

pre-operative expenditure Local ETB 3 0.00% 62.50 62.50

Contingency Local ETB 3 0.00% 35.00 35.00

Fixed investment such as plant machinery and equipment and auxiliary and service plant

equipment such as table, chair, vehicle, computer and printer and photo copy will be replaced

after depreciation.

g) Production costs

a Depreciation type: linear to scrap, all items.

20

All production costs are entered as Standard production costs. Initial stocks of raw materials and

factory supplies which are purchased in the second construction year are entered as Annual

adjustments (see below).

Table14: Production costs

ANNUAL COST (thousands)

ITEM FOREIGN (US$)

LOCAL (TETB)

VARIABLE (%)

FIXED (%)

Raw materials-local

Local 13,875.0000 100.00% 0.00%

imported 1,803.9000 100.00% 0.00%

Utility

Electricity 46.4000 100.00% 0.00%

Water 52.2000 100.00% 0.00%

Repair, maintenance, material 75.0000 0.00% 100.00%

Labour 100.00% 0.00%

skilled 1212.0000 100.00% 0.00%

Unskilled 480.0000 100.00% 0.00%

Labor overhead costs (taxes etc.) 100.00% 0.00%

Benefits 335.7000 100.00% 0.00%

Factory overhead costs 67.5000 100.00% 0.00%

Administrative costs 100.00% 0.00%

supportive staff salary 498.0000 100.00% 0.00%

Leasing costs 440.7000 0.00% 100.00%

Direct marketing costs 48.0000 100.00% 0.00%

h) Annual Production

Maximum capacity will be attained in operating year 4.

i) Period of the Analyses

The project is analysed over a period of 17 years starting from year one, with the first two years

corresponding to the construction period by 15 years of operation.

j) Sales Programme

The proposed sales programme for the products are shown in the following table (note that sales

programme must correspond to ensure comparability). All production is for local market consumption

and is paid in ETB.

Table 15 : Sales programme

Project year (Two years construction)

3 4 5 6 7..17

Percentage capacity 50 75 90 100 100

Sales level (pieces)

Electric motor 4,000.00 6,000.00 7,200.00 8,000.00 8,000.00

21

k) Revenue Assumptions The revenues are projected on the basis of annual sales of the total quantities produced of each

product. Sales of finished products are assumed to be for local consumption at the following

equivalent prices:

Electric motor : 2.14

l) Working Capital

Working capital requirements during the production phase are defined in terms of Minimum days

coverage (Mdc) as shown in the following table. The Coefficient of turnover (Coto) is the number of

rotations per annum (360/days coverage).

The working capital is the amount of cash which must be available to cover accounts payable,

accounts receivable, and maintain a constant inventory of supplies and spare parts, raw material

either in the production facility, being processed or finished products in storage, and other cash

requirements, including cash-in-hand.

COMFAR MODEL assumes that when possible, the working capital requirements will be funded by

internal cash flow. When the capital requirements are not met, a revolving short-term domestic loan

facility is used. This type of loan is paid back immediately as surplus cash becomes available.

The criterion used for the calculation of the working capital requirements is as follows:

22

Table16: Working capital requirements

Days Coefficient

coverage of turnover

INVENTORY

ELECTRIC MOTOR --- ---

Raw materials --- ---

Raw materials-local 90.00 4.00

Raw materials-imported 120.00 3.00

Utilities --- ---

Electricity 30.00 12.00

Water 30.00 12.00

Work in progress 5.00 72.00

Finished product 30.00 12.00

ACCOUNTS RECEIVABLE

ELECTRIC MOTOR 30.00 12.00

CASH-IN-HAND

Cash-in-hand-local 30.00 12.00

Cash-in-hand-foreign 30.00 12.00

thereof short-term deposits (%) 0.00

Interest rate (%) 0.00

ACCOUNTS PAYABLE

ELECTRIC MOTOR --- ---

Raw materials --- ---

Raw materials-local 0.00

Raw materials-imported 0.00

Utilities --- ---

Electricity 0.00

Water 0.00

Repair, maintenance, material 0.00

Labour --- ---

Labour-skilled 0.00

Labour-unskilled 0.00

Labour overhead costs (taxes etc.) --- ---

Labour overhead costs (taxes etc.)-Benefits 0.00

Factory overhead costs 0.00

Administrative costs --- ---

supportive staff salary 0.00

Leasing costs 0.00

Direct marketing costs 0.00

23

m) Capital Structure and data entry

The analysis assumes that 75% of the investments costs shall be financed through long term debt

while the remaining 25% shall be contributed by owner equity.

The debt financing cost is assumed to be an average of 8.5%, based on a mix of favourable financing

through Ethiopian development banks or other financial institutions &commercial supplier credits. The

interest is capitalised during the 2 year construction period and fully amortised over 15 years as for

the rest of long-term debt with a 2 year grace period. The repayment method is based on an annual

constant payment of interest and principal.

The financial condition for the project is as follows:

Debt/equity

By agreement of the parties, the proportions of debt and equity are to be 75/25, respectively, of the

initial investment in each of the two years of construction.

Loan

The development bank provides 75% of the initial investment with a loan at an interest rate of 8.5% to

be repaid in 15 equal instalments on 31/12 of years 3-17. Each year's requirements are covered by

two disbursements on 1/1 and 1/7 of each year. Interest during the construction phase is to be

capitalized.

Table 17: Equity and loan in project

Project year (Two years construction)

1 2

surplus/deficit 6,139.400 6,802.68998

foreign surplus(deficit) - 3,557.68998

local surplus(deficit) 6,139.400 3,245.0000

equity 1,534.8400 1,700.6701

development bank loan 4,604.5500 5,102.0174

Opportunity cost of capital

The cost of capital is 12% for both the total investment and for equity. For calculation of the MIRR, the

reinvestment rate is 12% and the borrowing rate is 8%.

Corporate taxes

Investors engaged in manufacturing of electric motor are entitled to income tax exemptions for a

period ranging between 4 and 5 years outside Addis Ababa and Special Zone of Oromia Surrounding

Addis Ababa. However, if the investors want to invest in Addis Ababa and surrounding area the tax

exemptions will be ranging between 2 to 4 years.

This project assumed that Profits are taxed at a flat 30% of net income. A five-year tax holiday has

been granted to the project as an incentive if it will be implemented in the region.

24

Full convertibility is assumed so that all loans can be expressed in local currency (Thousand ETB.).

n) Investment Costs

The model includes all capital costs estimates as summarized as follows:

Initial Capital Expenditures Disbursement schedule is assumed over the construction period as

follows:

- Year 1: 28.17% of total project cost;

- Year 2: 71.83% of total project cost.

Table 18 Investment Costs

Total

construction

Total

production

Total

investment

Total fixed investment costs 12,692.09 3,175.93 15,868.02

Total pre-production expenditures 1,285.13 0.00 1,285.13

Pre-production expenditures (net of interest)

250.00 0.00 250.00

Interest 1,035.13 0.00 1,035.13

Increase in net working capital 0.00 32,456.68 32,456.68

TOTAL INVESTMENT COSTS 13,977.22 35,632.61 49,609.83

o) Regulatory and Tax Issues

Import duty: All foreign sourced machinery and equipment are duty-exempt.

Value added tax (VAT) is 15% on the product sales price.

Corporate tax calculation: A constant tax rate of 30% on taxable income has been assumed

with a tax exemption for the first five (5) years after production start-up.

Capital goods and accessories: Can be imported duty free by manufacturing industries.

Spare parts: Up to 15% of the total value of the capital goods can be imported duty free.

Motor vehicles: During construction, a maximum of 2 pickup trucks can be imported duty free.

After getting business license and commencement of operation or export, a maximum of 3

minibuses, 2 cargo trucks, 2 SUVs, 3 hybrid SUVs and buses required to transport permanent

employees can be imported duty free. Also, special purpose trucks such as crane trucks,

garbage trucks, ambulances, fire trucks, refrigerated trucks etc. can be imported duty free in

line with the specific investment needs and for own use.

25

p) Depreciation and Amortisation

Depreciation of plant and machinery and amortisation of pre-operating expenses and capitalised

interests during construction have been calculated on the Straight Line Method (SLM) based on the

life indicated below. There is no consideration for equipment replacement of the period of the

analysis.

Table 19 Depreciation and Amortization

Description Length

Civil works, buildings

Factory building and related constructions 20

Office building 20

Plant machinery & equipment 10

Auxiliary and service plant equipment

Computer 10

Printer and photo copy 10

Table 10

Chair 10

Vehicle 15

Pre-prod. expenditure

preliminary expenditure 3

pre-operative expenditure 3

Contingency 3

q) Discount Factor

The discounted cash flow has been calculated using a discounting rate of 12%. This rate is higher

than the interest cost and will give a conservative Net Present Value for the project for the purpose of

decision making on the investment and project implementation.

r) Inflation and Escalation

A 0% inflation rate and escalation rate have been assumed throughout the years of the financial

evaluation. The analyses are done based on constant money terms.

26

2.1. financial analysis

2.1.1. Sensitivity Analysis

The purpose of this pre- feasibility study is to evaluate the profitability of electric motor manufacturing

based on the technical data and costs elements developed during the study.

The financial analysis has been performed using the model COMFAR III expert financial modelling

and economic evaluation of capital investment project.

Sensitivity analyses are also generated on the key variables of the project such as the total revenues,

the operating costs, the investment costs and the calculation of benefits and costs in economic

analysis used to evaluate Feasibility engenders many uncertainties. Sensitivity analysis is often

conducted to deal with these uncertainties. This analysis looks at how economic feasibility changes

when each important variable that can affect investment costs or economic feasibility like initial

construction costs, fixed cost, production costs, operating costs, discount rates, etc. changes by a

certain degree.

The line graph bellow illustrates the variation of the three main variables namely sales revenue,

increase in fixed assets and operating costs. The red line indicates by sales revenue, the green line is

increase in fixed assets and the blue line is operating costs.

The y-axis shows internal rate of return (IRR) from -20% to 80% and the x-axis shows the variation in

sales revenue, increase in fixed assets and operating costs from -20 to 20%.

According to the graph, sales revenue and IRR is positively related. On the base case or 0.00%

variation the internal rate of return is 38.46 %.when the sales revenue decrease by 4%, the IRR value

become 30.66 % which is 7.8% lower than the base case and a considerable impact on the

profitability of the business, continuously decline and reach 1.81 % as sales revenue variation by -

20%.on the other hand, 4% variation on sales revenue from the base, makes internal rate of return

increased by 7.78 %.this describes that sales revenue and IRR are positively related and a potential

of the project investment’s profitability.

The graph also shows increase in fixed asset and operating costs have different impact on the results

of IRR. A 4% decrease in fixed asset cost change IRR from 38.46% to 39.28% which is 0.86 %

different from the base case.as we see from the table a 4 % variation and decrease in fixed asset

cost insignificant and slight change on IRR. On the other hand, a 4% decline on operating cost

change IRR from 38.46% to 44.57% which is 6.11% difference from the base case so that a 4%

variation and decrease in operating cost has a significant impact on the results of IRR.

A 4% increase in fixed assets and operating costs shows0.77% and 6.12% variance from the base

result of IRR respectively. A 20% increase in operating cost decrease IRR from 38.46% to 8.98%

which is 76.65%.this indicates operating cost has significant impact on the results of IRR.

27

COMFAR III Expert

Sensitivity of IRR

80

70

60

50

40

I R R 30

20

10

0

-20 -15 -10 -5 0 5 10 15 20

Variation (%)

Sales revenue

Increase in fixed assets

Operating costs

28

Table 20 sensitivity analysis

Variation Sales Increase in Operating (%) revenue fixed assets costs

-20.00 % 1.81 % 42.98 % 68.19 %

-16.00 % 8.42 % 41.98 % 62.44 %

-12.00 % 15.48 % 41.03 % 56.57 %

-8.00 % 22.94 % 40.13 % 50.61 %

-4.00 % 30.66 % 39.28 % 44.57 %

0.00 % 38.46 % 38.46 % 38.46 %

4.00 % 46.24 % 37.69 % 32.34 %

8.00 % 53.91 % 36.95 % 26.26 %

12.00 % 61.43 % 36.24 % 20.29 %

16.00 % 68.77 % 35.56 % 14.50 %

20.00 % 75.93 % 34.92 % 8.98 %

29

2.1.2. Break-Even Analysis

The purpose of break-even analysis is to determine the equilibrium point at which sales revenues

equal the costs of products sold. When sales (production) are below this point, the project is making a

loss, and at the point where revenues equal costs, the project is breaking even. Break-even analysis

serves to compare the planned capacity utilization with the production volume below which a project

would make losses.

The break-even point in terms of physical units produced, or of the level of capacity utilization at

which sales revenues and production costs are equal. The sales revenues at the break-even point

represent the break-even sales value, and the unit price of a product in this situation is the break-even

sales price. If the production programme includes a variety of products, for any given break-even

sales volume there would exist a variety of combinations of product prices, but no single break-even

price.

2.1.2.1. Conditions and Assumptions

Production and marketing costs are a function of the production or sales volume;

The volume of production equals the volume of sales;

Fixed operating costs are the same for every volume of production;

Variable costs vary in proportion to the volume of production, and consequently total

production costs also change in proportion to the volume of production;

The sales prices for a product or product mix are the same for all levels of output (sales) over

time. The sales value is therefore a linear function of the sales prices and the quantity sold;

The level of unit sales prices and variable and fixed operating costs remain constant,;

The break-even values are computed for one product; in case of a variety of products, the

product mix, that is, the ratio between the quantities produced, should remain constant.

Break –even analysis indicates the volume of sales at which fixed costs are covered by variable

margins (break-even point, or BEP).at a sales volume above (below) BEP, the difference between the

variable margin and fixed costs represents profit (loss).

30

2.1.3. Break-even analysis of electric motor

Variable margin ratio

This ratio is the percentage contribution on the portion of sales revenue in excess of variable costs,

available to cover fixed costs. As this ratio increases the break even sales volume decreases. A high

ratio, therefore, tends to diminish risk, but the sustainability of high margins should be investigated in

relation to competition and stability and reliability of factor inputs. The result shows that variable

margin ratio for the project life is 21.67%.

Fixed cost coverage ratio

This result is an indicator of project risk.it gives the multiple by which the variable margin covers fixed

costs. A high multiple offers security against project uncertainty. From the analysis result in the first

year of production period is 4.51 and continuously growing and reaches 16.97 at the end of

production year.

Ratio including and excluding costs of finance

The break even ratio is the ratio of break-even sales to planned production for the period.it is the

percentage of the planned production at which the variable margin covers the fixed costs. Risk

increases with increasing break even ratio; a low ratio (maximum+1) provides a level of security

against unforeseen operational difficulties. The table including and excluding cost of finance for both

break even ratio depicts that the ratio in the first production year and then after continuously declining

and shows the project safety from unforeseen operational problems.

Break even, total sales, selected period break even including and excluding costs of finance

At break-even the variable margin covers the fixed costs. Above the break-even point the project is

profitable; below break-even the project operates at a loss. The production level at break-even

compared to full-scale production is a measure of risk: the closer break-even to planned production,

the greater the risk.

From the table and graph in the first production year the break even quantity is 3,325.24 which is the

quantity of sales at which the fixed costs including cost of finance and variable costs will be covered

by the sales price of 10.65.

32

BREAK-EVEN ANALYSIS – TOTAL Thousands Ethiopian Birr

Production Production Production Production Production Production Production Production Production Production Production Production

3 4 5 6 7 8 9 10 11 12 13 14

Sales revenue 42,600.00 63,900.00 76,680.00 85,200.00 85,200.00 85,200.00 85,200.00 85,200.00 85,200.00 85,200.00 85,200.00 85,200.00

Variable costs 33,366.82 50,050.23 60,060.27 66,733.64 66,733.64 66,733.64 66,733.64 66,733.64 66,733.64 66,733.64 66,733.64 66,733.64

Variable margin 9,233.18 13,849.77 16,619.73 18,466.36 18,466.36 18,466.36 18,466.36 18,466.36 18,466.36 18,466.36 18,466.36 18,466.36

Variable margin ratio (%) 21.67 21.67 21.67 21.67 21.67 21.67 21.67 21.67 21.67 21.67 21.67 21.67

Including cost of finance

Fixed costs 1,133.94 1,133.94 1,133.94 1,027.28 1,027.28 1,027.28 1,027.28 1,027.28 1,027.28 1,027.28 740.59 1,027.28

Financial costs 913.05 852.18 791.31 730.44 669.57 608.70 547.83 486.96 426.09 365.22 304.35 243.48

Break-even sales value 9,444.39 9,163.55 8,882.71 8,109.73 7,828.89 7,548.05 7,267.21 6,986.37 6,705.53 6,424.69 4,821.15 5,863.01

Break-even ratio (%) 22.17 14.34 11.58 9.52 9.19 8.86 8.53 8.20 7.87 7.54 5.66 6.88

Fixed costs coverage ratio 4.51 6.97 8.63 10.51 10.88 11.29 11.72 12.20 12.71 13.26 17.67 14.53

Excluding cost of finance

Fixed costs 1,133.94 1,133.94 1,133.94 1,027.28 1,027.28 1,027.28 1,027.28 1,027.28 1,027.28 1,027.28 740.59 1,027.28

Break-even sales value 5,231.78 5,231.78 5,231.78 4,739.65 4,739.65 4,739.65 4,739.65 4,739.65 4,739.65 4,739.65 3,416.95 4,739.65

Break-even ratio (%) 12.28 8.19 6.82 5.56 5.56 5.56 5.56 5.56 5.56 5.56 4.01 5.56

Fixed costs coverage ratio 8.14 12.21 14.66 17.98 17.98 17.98 17.98 17.98 17.98 17.98 24.93 17.98 Table 21 break-even analysis – total

33

COMFAR III Expert

BREAK-EVEN ANALYSIS - TOTAL Thousands Ethiopian Birr

Production Production Production

15 16 17

Sales revenue 85,200.00 85,200.00 85,200.00

Variable costs 66,733.64 66,733.64 66,733.64

Variable margin 18,466.36 18,466.36 18,466.36

Variable margin ratio (%) 21.67 21.67 21.67

Including cost of finance

Fixed costs 1,027.28 1,027.28 1,027.28

Financial costs 182.61 121.74 60.87

Break-even sales value 5,582.17 5,301.33 5,020.49

Break-even ratio (%) 6.55 6.22 5.89

Fixed costs coverage ratio 15.26 16.07 16.97

Excluding cost of finance

Fixed costs 1,027.28 1,027.28 1,027.28

Break-even sales value 4,739.65 4,739.65 4,739.65

Break-even ratio (%) 5.56 5.56 5.56

Fixed costs coverage ratio 17.98 17.98 17.98

34

COMFAR III Expert

CASH FLOW FOR FINANCIAL PLANNING - TOTAL Thousands Ethiopian Birr

Construction Construction Production Production Production Production Production Production Production Production

1 2 3 4 5 6 7 8 9 10

TOTAL CASH INFLOW 6,432.94 7,544.28 42,600.00 63,900.00 76,680.00 85,200.00 85,200.00 85,200.00 85,200.00 85,200.00

Inflow funds 6,432.94 7,544.28 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Inflow operation 0.00 0.00 42,600.00 63,900.00 76,680.00 85,200.00 85,200.00 85,200.00 85,200.00 85,200.00

Other income 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

TOTAL CASH OUTFLOW 6,432.94 7,544.28 54,794.05 63,358.40 71,179.61 76,863.34 73,488.22 77,157.65 77,127.82 77,097.99

Increase in fixed assets 6,139.40 6,802.69 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Increase in current assets 0.00 0.00 17,126.51 7,665.08 4,687.88 3,154.86 -177.66 0.00 0.00 0.00

Operating costs 0.00 0.00 33,417.82 50,089.23 60,092.07 66,760.64 66,760.64 66,760.64 66,760.64 66,760.64

Marketing costs 0.00 0.00 24.00 36.00 43.20 48.00 48.00 48.00 48.00 48.00

Income (corporate) tax 0.00 0.00 0.00 0.00 0.00 0.00 0.00 5,049.12 5,067.38 5,085.64

Financial costs 293.54 741.59 1,353.75 1,292.88 1,232.01 1,171.14 1,110.27 1,049.40 988.53 927.66

Loan repayment 0.00 0.00 716.11 716.11 716.11 716.11 716.11 716.11 716.11 716.11

Dividends 0.00 0.00 2,155.86 3,559.10 4,408.34 5,012.60 5,030.86 3,534.38 3,547.16 3,559.95

Equity capital refund 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

SURPLUS (DEFICIT) 0.00 0.00 -12,194.05 541.60 5,500.39 8,336.66 11,711.78 8,042.35 8,072.18 8,102.01

CUMULATIVE CASH BALANCE 0.00 0.00 -12,194.05 -11,652.45 -6,152.06 2,184.60 13,896.38 21,938.73 30,010.91 38,112.92

Foreign surplus (deficit) 0.00 -3,557.69 -38,662.27 -43,665.46 -48,825.26 -52,621.88 -49,973.82 -50,118.84 -50,118.84 -50,118.84

Local surplus (deficit) 0.00 3,557.69 26,468.23 44,207.06 54,325.65 60,958.53 61,685.60 58,161.19 58,191.02 58,220.84

Foreign cumulative cash balance 0.00 -3,557.69 -42,219.96 -85,885.42 -134,710.68 -187,332.56 -237,306.37 -287,425.21 -337,544.04 -387,662.88

Local cumulative cash balance 0.00 3,557.69 30,025.92 74,232.97 128,558.62 189,517.15 251,202.75 309,363.94 367,554.96 425,775.80

Net flow of funds 6,139.40 6,802.69 -3,785.02 -5,127.39 -5,915.76 -6,459.15 -6,416.54 -4,859.19 -4,811.11 -4,763.02 Table 22; cash flow for financial planning - total

35

COMFAR III Expert

CASH FLOW FOR FINANCIAL PLANNING - TOTAL Thousands Ethiopian Birr

Production Production Production Production Production Production Production Scrap

11 12 13 14 15 16 17 18

TOTAL CASH INFLOW 85,200.00 85,200.00 85,200.00 85,200.00 85,200.00 85,200.00 85,200.00 41,902.85

Inflow funds 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Inflow operation 85,200.00 85,200.00 85,200.00 85,200.00 85,200.00 85,200.00 85,200.00 0.00

Other income 0.00 0.00 0.00 0.00 0.00 0.00 0.00 41,902.85

TOTAL CASH OUTFLOW 77,068.17 77,038.34 80,330.65 76,978.69 76,948.86 76,919.04 76,889.21 0.00

Increase in fixed assets 0.00 0.00 3,175.93 0.00 0.00 0.00 0.00 0.00

Increase in current assets 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Operating costs 66,760.64 66,760.64 66,760.64 66,760.64 66,760.64 66,760.64 66,760.64 0.00

Marketing costs 48.00 48.00 48.00 48.00 48.00 48.00 48.00 0.00

Income (corporate) tax 5,103.90 5,122.16 5,226.43 5,158.68 5,176.94 5,195.20 5,213.47 0.00

Financial costs 866.79 805.92 745.05 684.18 623.31 562.44 501.57 0.00

Loan repayment 716.11 716.11 716.11 716.11 716.11 716.11 716.11 0.00

Dividends 3,572.73 3,585.51 3,658.50 3,611.08 3,623.86 3,636.64 3,649.43 0.00

Equity capital refund 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

SURPLUS (DEFICIT) 8,131.83 8,161.66 4,869.35 8,221.31 8,251.14 8,280.96 8,310.79 41,902.85

CUMULATIVE CASH BALANCE 46,244.75 54,406.41 59,275.76 67,497.07 75,748.21 84,029.17 92,339.96 134,242.82

Foreign surplus (deficit) -50,118.84 -50,118.84 -53,209.76 -50,118.84 -50,118.84 -50,118.84 -50,118.84 25,755.51

Local surplus (deficit) 58,250.67 58,280.49 58,079.11 58,340.15 58,369.97 58,399.80 58,429.63 16,147.34

Foreign cumulative cash balance -437,781.72 -487,900.55 -541,110.31 -591,229.15 -641,347.99 -691,466.82 -741,585.66 -715,830.15

Local cumulative cash balance 484,026.47 542,306.96 600,386.08 658,726.22 717,096.20 775,495.99 833,925.62 850,072.96

Net flow of funds -4,714.93 -4,666.84 -4,678.96 -4,570.67 -4,522.58 -4,474.50 -4,426.41 0.00

36

COMFAR III Expert Ethiopian Metal Industry Development

DISCOUNTED CASH FLOW - TOTAL CAPITAL INVESTED Thousands Ethiopian Birr

Construction Construction Production Production Production Production Production Production Production

1 2 3 4 5 6 7 8 9

TOTAL CASH INFLOW 0.00 0.00 42,600.00 63,900.00 76,680.00 85,200.00 85,200.00 85,200.00 85,200.00

Inflow operation 0.00 0.00 42,600.00 63,900.00 76,680.00 85,200.00 85,200.00 85,200.00 85,200.00

Other income 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

TOTAL CASH OUTFLOW 6,432.94 7,544.28 50,568.33 57,790.31 64,823.15 69,963.50 66,630.98 71,857.75 71,876.01

Increase in fixed assets 6,432.94 7,544.28 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Increase in net working capital 0.00 0.00 17,126.51 7,665.08 4,687.88 3,154.86 -177.66 0.00 0.00

Operating costs 0.00 0.00 33,417.82 50,089.23 60,092.07 66,760.64 66,760.64 66,760.64 66,760.64

Marketing costs 0.00 0.00 24.00 36.00 43.20 48.00 48.00 48.00 48.00

Income (corporate) tax 0.00 0.00 0.00 0.00 0.00 0.00 0.00 5,049.12 5,067.38

NET CASH FLOW -6,432.94 -7,544.28 -7,968.33 6,109.69 11,856.85 15,236.50 18,569.02 13,342.25 13,323.99

CUMULATIVE NET CASH FLOW -6,432.94 -13,977.22 -21,945.55 -15,835.87 -3,979.02 11,257.49 29,826.51 43,168.75 56,492.74

Net present value -6,432.94 -6,735.97 -6,352.30 4,348.76 7,535.24 8,645.60 9,407.64 6,035.36 5,381.33

Cumulative net present value -6,432.94 -13,168.91 -19,521.21 -15,172.46 -7,637.21 1,008.39 10,416.03 16,451.38 21,832.72

NET PRESENT VALUE at 12.00% 54,419.89

INTERNAL RATE OF RETURN 38.46%

MODIFIED INTERNAL RATE OF RETURN 20.87%

NORMAL PAYBACK at 0.00% 5.26 years = 6

DYNAMIC PAYBACK at 12.00% 5.88 years = 6

NPV RATIO 1.44

Net present values discounted to 12/01 Table 23; discounted cash flow - total capital invested

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COMFAR III Expert

DISCOUNTED CASH FLOW - TOTAL CAPITAL INVESTED Thousands Ethiopian Birr

Production Production Production Production Production Production Production Production Scrap

10 11 12 13 14 15 16 17 18

TOTAL CASH INFLOW 85,200.00 85,200.00 85,200.00 85,200.00 85,200.00 85,200.00 85,200.00 85,200.00 41,902.85

Inflow operation 85,200.00 85,200.00 85,200.00 85,200.00 85,200.00 85,200.00 85,200.00 85,200.00 0.00

Other income 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 41,902.85

TOTAL CASH OUTFLOW 71,894.27 71,912.54 71,930.80 75,210.99 71,967.32 71,985.58 72,003.84 72,022.10 0.00

Increase in fixed assets 0.00 0.00 0.00 3,175.93 0.00 0.00 0.00 0.00 0.00

Increase in net working capital 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Operating costs 66,760.64 66,760.64 66,760.64 66,760.64 66,760.64 66,760.64 66,760.64 66,760.64 0.00

Marketing costs 48.00 48.00 48.00 48.00 48.00 48.00 48.00 48.00 0.00

Income (corporate) tax 5,085.64 5,103.90 5,122.16 5,226.43 5,158.68 5,176.94 5,195.20 5,213.47 0.00

NET CASH FLOW 13,305.73 13,287.46 13,269.20 9,989.01 13,232.68 13,214.42 13,196.16 13,177.90 41,902.85

CUMULATIVE NET CASH FLOW 69,798.46 83,085.93 96,355.13 106,344.14 119,576.83 132,791.25 145,987.41 159,165.30 201,068.16

Net present value 4,798.18 4,278.21 3,814.58 2,563.93 3,032.59 2,703.93 2,410.89 2,149.60 6,835.26

Cumulative net present value 26,630.90 30,909.10 34,723.68 37,287.61 40,320.20 43,024.14 45,435.02 47,584.63 54,419.89

NET PRESENT VALUE

INTERNAL RATE OF RETURN

MODIFIED INTERNAL RATE OF RETURN

NORMAL PAYBACK

DYNAMIC PAYBACK

NPV RATIO

Net present values discounted to

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COMFAR III Expert

Net Present Value of Total Capital Invested (Thousands Ethiopian Birr)

250000

200000

150000

100000

N P V

50000

0

-50000

0 10 20 30 40 50 60 70 80 90 100

Discounting rate (%)

Net present value

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COMFAR III Expert

Discounting Net present

rate (%) value

0.00 % 201,068.16

10.00 % 66,875.17

20.00 % 23,897.20

30.00 % 6,937.30

40.00 % -875.90

50.00 % -4,879.96

60.00 % -7,078.37

70.00 % -8,335.09

80.00 % -9,065.39

90.00 % -9,486.19

100.00 % -9,718.29

Table 24; Net Present Value of Total Capital Invested

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DISCOUNTED CASH FLOW - EQUITY CAPITAL INVESTED Thousands Ethiopian Birr

Construction Construction Production Production Production Production Production Production Production

1 2 3 4 5 6 7 8 9

TOTAL CASH INFLOW 0.00 0.00 -10,038.19 4,100.70 9,908.73 13,349.25 16,742.64 11,576.74 11,619.34

Surplus (deficit) 0.00 0.00 -12,194.05 541.60 5,500.39 8,336.66 11,711.78 8,042.35 8,072.18

Dividends 0.00 0.00 2,155.86 3,559.10 4,408.34 5,012.60 5,030.86 3,534.38 3,547.16

Equity capital refund 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

TOTAL CASH OUTFLOW 1,534.84 1,700.67 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Equity capital paid 1,534.84 1,700.67 0.00 0.00 0.00 0.00 0.00 0.00 0.00

NET CASH RETURN -1,534.84 -1,700.67 -10,038.19 4,100.70 9,908.73 13,349.25 16,742.64 11,576.74 11,619.34

CUMULATIVE NET CASH RETURN -1,534.84 -3,235.51 -13,273.70 -9,173.00 735.73 14,084.98 30,827.62 42,404.35 54,023.70

Net present value -1,534.84 -1,518.46 -8,002.38 2,918.80 6,297.18 7,574.72 8,482.34 5,236.73 4,692.86

Cumulative net present value -1,534.84 -3,053.30 -11,055.68 -8,136.88 -1,839.71 5,735.02 14,217.36 19,454.09 24,146.94 NET PRESENT VALUE at 12.00% 53,791.91

INTERNAL RATE OF RETURN 56.31%

MODIFIED INTERNAL RATE OF RETURN 23.86%

SHORT NET PRESENT VALUE at 12.00% 42,828.37 for 15 years

NORMAL PAYBACK at 0.00% 4.93 years = 5

DYNAMIC PAYBACK at 12.00% 5.24 years = 6

NPV RATIO 17.62

Net present values discounted to 12/01 Table 25; discounted cash flow - equity capital invested

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COMFAR III Expert

DISCOUNTED CASH FLOW - EQUITY CAPITAL INVESTED Thousands Ethiopian Birr

Production Production Production Production Production Production Production Production Scrap

10 11 12 13 14 15 16 17 18

TOTAL CASH INFLOW 11,661.95 11,704.56 11,747.17 8,527.85 11,832.39 11,875.00 11,917.61 11,960.21 41,902.85

Surplus (deficit) 8,102.01 8,131.83 8,161.66 4,869.35 8,221.31 8,251.14 8,280.96 8,310.79 41,902.85

Dividends 3,559.95 3,572.73 3,585.51 3,658.50 3,611.08 3,623.86 3,636.64 3,649.43 0.00

Equity capital refund 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

TOTAL CASH OUTFLOW 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Equity capital paid 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

NET CASH RETURN 11,661.95 11,704.56 11,747.17 8,527.85 11,832.39 11,875.00 11,917.61 11,960.21 41,902.85

CUMULATIVE NET CASH RETURN 65,685.65 77,390.21 89,137.38 97,665.23 109,497.62 121,372.62 133,290.22 145,250.44 187,153.29

Net present value 4,205.42 3,768.56 3,377.03 2,188.89 2,711.68 2,429.86 2,177.30 1,950.97 6,835.26

Cumulative net present value 28,352.36 32,120.92 35,497.95 37,686.83 40,398.51 42,828.37 45,005.67 46,956.64 53,791.91 NET PRESENT VALUE

INTERNAL RATE OF RETURN

MODIFIED INTERNAL RATE OF RETURN

SHORT NET PRESENT VALUE

NORMAL PAYBACK

DYNAMIC PAYBACK

NPV RATIO

Net present values discounted to

42

COMFAR III Expert Ethiopian Metal Industry Development

NET INCOME STATEMENT Thousands Ethiopian Birr

Production Production Production Production Production Production Production Production Production Production Production

3 4 5 6 7 8 9 10 11 12 13

Sales revenue 42,600.00 63,900.00 76,680.00 85,200.00 85,200.00 85,200.00 85,200.00 85,200.00 85,200.00 85,200.00 85,200.00

Less variable costs 33,366.82 50,050.23 60,060.27 66,733.64 66,733.64 66,733.64 66,733.64 66,733.64 66,733.64 66,733.64 66,733.64

VARIABLE MARGIN 9,233.18 13,849.77 16,619.73 18,466.36 18,466.36 18,466.36 18,466.36 18,466.36 18,466.36 18,466.36 18,466.36

in % of sales revenue 21.67 21.67 21.67 21.67 21.67 21.67 21.67 21.67 21.67 21.67 21.67

Less fixed costs 1,133.94 1,133.94 1,133.94 1,027.28 1,027.28 1,027.28 1,027.28 1,027.28 1,027.28 1,027.28 740.59

OPERATIONAL MARGIN 8,099.24 12,715.83 15,485.78 17,439.09 17,439.09 17,439.09 17,439.09 17,439.09 17,439.09 17,439.09 17,725.77


Interest on short-term deposits 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Financial costs 913.05 852.18 791.31 730.44 669.57 608.70 547.83 486.96 426.09 365.22 304.35

GROSS PROFIT FROM OPERATIONS 7,186.19 11,863.65 14,694.48 16,708.65 16,769.52 16,830.39 16,891.26 16,952.13 17,013.00 17,073.87 17,421.42


Extraordinary income 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Extraordinary loss 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Depreciation allowances 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

GROSS PROFIT 7,186.19 11,863.65 14,694.48 16,708.65 16,769.52 16,830.39 16,891.26 16,952.13 17,013.00 17,073.87 17,421.42

Investment allowances 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

TAXABLE PROFIT 7,186.19 11,863.65 14,694.48 16,708.65 16,769.52 16,830.39 16,891.26 16,952.13 17,013.00 17,073.87 17,421.42

Income (corporate) tax 0.00 0.00 0.00 0.00 0.00 5,049.12 5,067.38 5,085.64 5,103.90 5,122.16 5,226.43

NET PROFIT 7,186.19 11,863.65 14,694.48 16,708.65 16,769.52 11,781.27 11,823.88 11,866.49 11,909.10 11,951.71 12,194.99


Dividends 2,155.86 3,559.10 4,408.34 5,012.60 5,030.86 3,534.38 3,547.16 3,559.95 3,572.73 3,585.51 3,658.50

RETAINED PROFIT 5,030.33 8,304.56 10,286.13 11,696.06 11,738.66 8,246.89 8,276.72 8,306.54 8,336.37 8,366.20 8,536.50

RATIOS

Net profit to equity (%) 222.10 366.67 454.16 516.41 518.30 364.12 365.44 366.76 368.07 369.39 376.91

Net profit to net worth (%) 86.94 71.60 54.71 43.34 33.34 20.13 17.70 15.80 14.27 13.02 12.15

Net profit+interest to investment (%) 26.04 32.80 35.63 37.41 37.56 26.68 26.64 26.60 26.57 26.53 25.20 Table 26; net income statement

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COMFAR III Expert

NET INCOME STATEMENT Thousands Ethiopian Birr

Production Production Production Production

14 15 16 17

Sales revenue 85,200.00 85,200.00 85,200.00 85,200.00

Less variable costs 66,733.64 66,733.64 66,733.64 66,733.64

VARIABLE MARGIN 18,466.36 18,466.36 18,466.36 18,466.36

in % of sales revenue 21.67 21.67 21.67 21.67

Less fixed costs 1,027.28 1,027.28 1,027.28 1,027.28

OPERATIONAL MARGIN 17,439.09 17,439.09 17,439.09 17,439.09


Interest on short-term deposits 0.00 0.00 0.00 0.00

Financial costs 243.48 182.61 121.74 60.87

GROSS PROFIT FROM OPERATIONS 17,195.61 17,256.48 17,317.35 17,378.22


Extraordinary income 0.00 0.00 0.00 0.00

Extraordinary loss 0.00 0.00 0.00 0.00

Depreciation allowances 0.00 0.00 0.00 0.00

GROSS PROFIT 17,195.61 17,256.48 17,317.35 17,378.22

Investment allowances 0.00 0.00 0.00 0.00

TAXABLE PROFIT 17,195.61 17,256.48 17,317.35 17,378.22

Income (corporate) tax 5,158.68 5,176.94 5,195.20 5,213.47

NET PROFIT 12,036.93 12,079.53 12,122.14 12,164.75


Dividends 3,611.08 3,623.86 3,636.64 3,649.43

RETAINED PROFIT 8,425.85 8,455.67 8,485.50 8,515.33

RATIOS

Net profit to equity (%) 372.03 373.34 374.66 375.98

Net profit to net worth (%) 11.06 10.30 9.64 9.06

Net profit+interest to investment (%) 24.75 24.72 24.68 24.64

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COMFAR III Expert

PROJECTED BALANCE SHEET Thousands Ethiopian Birr

1 2 3 4 5 6 7 8 9 10

TOTAL ASSETS 6,432.94 13,977.22 30,485.49 37,532.33 41,601.97 46,429.85 57,452.40 64,983.17 72,543.78 80,134.21

Total current assets 0.00 0.00 17,126.51 24,791.60 29,479.48 34,818.93 46,353.06 54,395.41 62,467.60 70,569.60

Total fixed assets, net of depreciation 6,432.94 13,977.22 13,358.98 12,740.73 12,122.49 11,610.91 11,099.34 10,587.76 10,076.18 9,564.60

Accumulated losses brought forward 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Loss in current year 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

TOTAL LIABILITIES 6,432.94 13,977.22 30,485.49 37,532.33 41,601.97 46,429.85 57,452.40 64,983.17 72,543.78 80,134.21

Total current liabilities 0.00 0.00 12,194.05 11,652.45 6,152.06 0.00 0.00 0.00 0.00 0.00

Total long-term debt 4,898.10 10,741.71 10,025.60 9,309.48 8,593.37 7,877.26 7,161.14 6,445.03 5,728.91 5,012.80

Total equity capital 1,534.84 3,235.51 3,235.51 3,235.51 3,235.51 3,235.51 3,235.51 3,235.51 3,235.51 3,235.51

Reserves, retained profit brought forward 0.00 0.00 0.00 5,030.33 13,334.89 23,621.03 35,317.08 47,055.74 55,302.64 63,579.35

Retained profit 0.00 0.00 5,030.33 8,304.56 10,286.13 11,696.06 11,738.66 8,246.89 8,276.72 8,306.54

Net worth 1,534.84 3,235.51 8,265.84 16,570.40 26,856.54 38,552.59 50,291.25 58,538.15 66,814.86 75,121.41

RATIOS

Equity to total liabilities (%) 23.86 23.15 10.61 8.62 7.78 6.97 5.63 4.98 4.46 4.04

Net worth to total liabilities (%) 23.86 23.15 27.11 44.15 64.56 83.03 87.54 90.08 92.10 93.74

Long-term debt to net worth 3.19 3.32 1.21 0.56 0.32 0.20 0.14 0.11 0.09 0.07

Current assets to current liabilities 0.00 0.00 1.40 2.13 4.79 0.00 0.00 0.00 0.00 0.00 Table 27; projected balance sheet

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COMFAR III Expert

PROJECTED BALANCE SHEET Thousands Ethiopian Birr

11 12 13 14 15 16 17 TOTAL ASSETS 87,754.46 95,404.54 103,224.92 110,934.66 118,674.22 126,443.60 134,242.82

Total current assets 78,701.43 86,863.09 91,732.44 99,953.75 108,204.89 116,485.85 124,796.64

Total fixed assets, net of depreciation 9,053.03 8,541.45 11,492.48 10,980.90 10,469.33 9,957.75 9,446.17

Accumulated losses brought forward 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Loss in current year 0.00 0.00 0.00 0.00 0.00 0.00 0.00

TOTAL LIABILITIES 87,754.46 95,404.54 103,224.92 110,934.66 118,674.22 126,443.60 134,242.82

Total current liabilities 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Total long-term debt 4,296.69 3,580.57 2,864.46 2,148.34 1,432.23 716.11 0.00

Total equity capital 3,235.51 3,235.51 3,235.51 3,235.51 3,235.51 3,235.51 3,235.51

Reserves, retained profit brought forward 71,885.90 80,222.27 88,588.46 97,124.96 105,550.80 114,006.48 122,491.98

Retained profit 8,336.37 8,366.20 8,536.50 8,425.85 8,455.67 8,485.50 8,515.33

Net worth 83,457.78 91,823.97 100,360.47 108,786.31 117,241.99 125,727.49 134,242.82

RATIOS

Equity to total liabilities (%) 3.69 3.39 3.13 2.92 2.73 2.56 2.41

Net worth to total liabilities (%) 95.10 96.25 97.23 98.06 98.79 99.43 100.00

Long-term debt to net worth 0.05 0.04 0.03 0.02 0.01 0.01 0.00

Current assets to current liabilities 0.00 0.00 0.00 0.00 0.00 0.00 0.00

ENGINEERING PART OF ELECTRIC MOTOR PROFILE MOTOR.pdf2010 e.c by alemayehu eshete midi >> esd> ppt...

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