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
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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
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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.
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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
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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.
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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
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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
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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
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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.
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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
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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.
31
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
37
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
38
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
39
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
40
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
41
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
in % of sales revenue 19.01 19.90 20.20 20.47 20.47 20.47 20.47 20.47 20.47 20.47 20.80
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
in % of sales revenue 16.87 18.57 19.16 19.61 19.68 19.75 19.83 19.90 19.97 20.04 20.45
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
in % of sales revenue 16.87 18.57 19.16 19.61 19.68 13.83 13.88 13.93 13.98 14.03 14.31
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
43
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
in % of sales revenue 20.47 20.47 20.47 20.47
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
in % of sales revenue 20.18 20.25 20.33 20.40
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
in % of sales revenue 14.13 14.18 14.23 14.28
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
44
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
45
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
46
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