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Fuel station project proposal

project management (Addis Ababa University)

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PROJECT PROPOSAL

FOR
FUEL STATION PROJECT

PROJECT LOCATION: WEST ARSI ZONE SHASHAMANE TOWN,

OROMIA REGIONAL STATE

PRMOTER- ADUGNA BUSA HAJI

JULY, 2022

Shashamane /ETHIOPIA

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TABLE OF CONTENTS
TABLE OF CONTENTS................................................................................................................2
EXECUTIVE SUMMARY.............................................................................................................4
1. INTRODUCTION....................................................................................................................5
1.1. Objective of the project.....................................................................................................6
1.2. Profile of the Promoter......................................................................................................6
1.3. The Economic Significance of the Project........................................................................7
1.4. Location and Premises Required.......................................................................................8
2. MARKET STUDY.................................................................................................................11
2.1. Scope of the Market Study..............................................................................................11
2.2. Market Demand...............................................................................................................11
2.3. Market Supply.................................................................................................................13
2.4. Target Customers............................................................................................................13
2.5. Market Prospects.............................................................................................................13
2.6. Marketing Promotion and Strategy.................................................................................13
2.7. Service program..............................................................................................................14
2.8. Sales Plan/Capacity.........................................................................................................14
3. SERVICE MIX AND CIVIL WORK OF THE PROJECT...................................................15
3.1. Service mix.....................................................................................................................15
3.2. Civil Engineer Building and Civil Works.......................................................................16
4. ORGANIZATION AND MANAGEMENT..........................................................................17
4.1. Organization and Management.......................................................................................17
4.2. Man Power......................................................................................................................17
4.3. Organizational Structure.................................................................................................17
5. FINANCIAL REQUIRMENT AND ANALYSIS.................................................................20
5.1. Total Initial Investment Cost...........................................................................................20
5.1.1. Fixed Investment.....................................................................................................20
5.2. Annual Service (Production) Cost at Full Capacity........................................................22
5.3. Financial Analysis and Statements.................................................................................23
5.3.1. Underlying Assumption...........................................................................................24

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5.3.2. Sources of Fund.......................................................................................................25

5.3.3. Loan repayment Schedule........................................................................................25
5.3.4. Depreciation Schedule.............................................................................................25
5.3.5. Revenue Projection..................................................................................................26
5.3.6. Balance Sheet...........................................................................................................27
5.3.7. Income Loss Statement............................................................................................28
5.3.8. Cash Flow Statement...............................................................................................29
5.3.9. Profitability..............................................................................................................29
5.3.10. Break-Even Analysis...............................................................................................29
5.3.11. Pay-Back Period......................................................................................................29
6. ENVIRONMENTAL IMPACT OF THE PROJECT............................................................30

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EXECUTIVE SUMMARY
1. Project Name Fuel Station Project

2. Project Owner ADUGNA BUSA HAJI

3. Nationality Ethiopian

4. Project location West Arsi Zone Shashamane town , Oromoia Regional

State
5. Project Composition Fuel station service (Diesel, Gasoline, Kerosene, LBG
gases, Engine oils, Lubricant and Car wash service)
6. Premises Required 2500m2

7. Total Investment Br. 16.5 million of which 30% equivalent to 5 million

Cost
financed by the owners equity and the react 70%
equivalent to 11.5 million financed through bank loan
8. Employment A total of 32 employees ,14 are permanent & the rest 18
Opportunity
are temporary and contractual employees
9. Benefits of the Provide better service, Revenue generation, Employment
project For The
Opportunity, benefits local economy and stimulate local
region/ country
economy.

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1. INTRODUCTION

The Ethiopian economy has been registering extraordinary, double digit, and economic growth
for the last nine years. When there exist fast economic growth in one nation, the income of the
citizen also increase this phenomena changes the life style and modernization of the citizen.

In order to keep the economic growth long lasting there should be parallel growth and linkage in
all sectors of the economy such as manufacturing and service (tertiary) sector. The development
of hotel as one part of service sector has a great contribution to the economy in different ways.

However, the implementation of the fuel station project is concentrates in main woreda of the
nation. Hence, further investments in these areas are very vital for better service provision for the
citizens through that it supports the economic development.

The government of Ethiopia has developed a conducive investment policy packages and other
sectoral reforms at federal and regional level to attract a huge private investment for the
wellbeing of the nation and its citizens as a whole. Besides, it is also currently implementing the
five years growth and transformation plan (2010/11-2014/15) that gave a space for the
development industrialization and tertiary sector by private sector.

Like the federal government investment policy packages and incentives, the Oromia regional
state government has been exerting its maximum effort to expand investment opportunities in the
region, so as to foster the economic development of the region and subduing the region’s big
enemy that is the trap of poverty. Therefore, the regional government has been prepared a viable
business environment to attract many domestic and foreign investors so that the dream of making
poverty history turns to be true.

Furthermore, this region is the largest regional state in terms of area and population. The total
area of the Region is 363,136 km2, accounting for about 34.3 percent of the total area of the
country. Administratively, the Region is divided into 18 administrative zones, 304 woredas (out

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of which 39 are towns structured with the level of woredas and 265 rural woredas), more than
6,342 peasants and 482 Urban Dwellers Kebeles. (ONRS, PPACC, 2011).

Therefore, the visible market gap, attractive investment policies and deep interest to contribute
for the development of birth town attracts the owners of the envisioned project to establish Fuel
Station Company in, Shashamane town of Oromia region.
Shashamane town the capital town is west Arsi which is on the way of the roads Addis Ababa
to Southern Ethiopia, main asphalt road and rail way, and the district capital, Bote town is
endowed with different crop production mainly irrigated vegetable and fruit production.

The owners of this envisaged project has a good business experiences and very ambitious to
establish the company by expecting a good support and facilitation from the regional
government.

1.1. Objective of the project

The main objective of this project is to establish a standard Fuel Station in West Arsi zone
Shashamane town Oromia Region.

1.2. Profile of the Promoter

The promoter of the project MR Adugna Busa Haji is a known business entrepreneur in the
area and also engaging in different business in Bote town and surrounding area. In addition, the
owner of this project hope this project to be the first of many other developmental projects to
follow as they look forward to share the responsibility of fighting poverty, reducing
unemployment here in Ethiopia. The promoter accumulated diversified skills in the area and also
adopted working with many people. Thus, it is these experiences which primarily motivated this
investor to develop the inception of this project idea.

The feasibility of the project has been carefully assessed and the promoters are confident that it
will be a total success. The business will be run by a team of competent management
professionals who have acquired practical achievement in related business fields. The marketing

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oriented approach to placement of products and distribution will be primarily based on the need
and preference of the customers and end users.

The promoter also is visionary and ambitious business, who is committed to make a difference in
traditional business practice by approaching it in an innovative way. The promoter is currently
seeking to establish Fuel Station project which shores up the development base the country is
looking for; as well as meets the growing demand of the service in most wide ranging like hotel
and tourism sectors.

1.3. The Economic Significance of the Project

The envisaged project deemed to contribute to the economic development of the region in
general and the district/zone in specific with following ways:

1. Provide better service

By providing quality services, the project will satisfy the demand of the customers.
2. Source Of Revenue

As public policy of any nation, the government collects different forms of taxes from different
business organizations and individuals. Among the different forms of taxes, business income
taxes and payroll taxes are collected from undertaking business activities. Therefore, the project
has been serving sources of revenue for regional government.

3. Employment Opportunity

One of the problems that our country faced is unemployment. Therefore, the current objective of
the government is working on tackling the problem of unemployment and fostering the
development process either through creating self-employment or employment in other
organization. In this regard, project will hire 32employees.
Besides, during the construction work of the project extra jobs will be created particularly for
local community in construction part

4. Benefit For Local Community

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Apart from employment opportunity for local community, as a corporate responsibility the
project has been engaged in different development activities. This will better worth the
community in particular and contribute for the development of the nation as a whole

5. Stimulate The Local Economy

The project will increase economic relationship and transactions among different actors in the
local economy.

1.4. Location and Premises Required

A. Project Location
The envisioned project will locate in, West Arsi Zone, Shashamane town, Oromia Regional
State.
Location Map of the area

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B. Land Requirement
The total land required by the project is estimated to be 2500M 2. The premises required and land
use plan is indicated in table below;
Table. Premises required and land use plan
SN Description Land m2

Ground 1st 2nd Floor 3rd Floor 4th Floor

Floor
1 Building (G+4)

1.1 Ground (Business Center) 600

1.2 First Floor(Business 550
Center)
1.3 Second Floor(Bar, Café
and Restaurant ) 350
1.4 Different Offices
350
1.5 Third Floor(Assembly 350
Hall & Admin Office)
2 Guard house 50
3 Store 100
4 Generator House 50
5 Fuel Station area 1300
6 Parking, green area and
400
road
Total 2500

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2. MARKET STUDY

2.1. Scope of the Market Study

The project is targeted for Shashamane town district cross the vicinity and surrounding area.
Hence, the scope of market study of this project concentrates on the Shashamane town and
surrounding rural villages in general and the kebele in specific scenario.

2.2. Market Demand

There are a number of factors which creates demand for Fuel Station In the area. The following
major factors are identified;
 Economic activities
 Population
 Location Importance
 Infrastructure (road)
 Availability of different institutions
 Energy Demand

These major demand factors for the project are explained as follows

1. Economic Activities
According to responsible municipalities in the eight towns, the estimated population figure is
258,857. This is more than the figure provided by OUPI and CSA, which are 134,846 and
183,138, respectively. However, the figure demonstrated under the 2007 census survey is
228,420. On the other hand, the recent census result shows the total figure of the rural people in
the Special zone is 566, 069. On the contrary, figures provided by District Administration and
OUPI estimation/projection are 640,781 and 800,356 respectively.

2. Location Importance

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The planned Hotel service use project will be established in Oromia regional state, West Arsi ,
Shashamane town , where the different construction is flourishing from time to time. Because
this cash crop area has easy access to the fundamental utilities and other facilities required for
construction area such as treated water supply, electric power, access to telephone line and easy
access for transportation and market outlet. Moreover, the regional government has been
undertaking various measures help boost the growth of investment endeavors in the area by
allotting land, and providing efficient municipal services

3. Infrastructure (Road)

In the district there exist asphalt all whether and dry whether roads that connects different areas
that will create a demand for the fuel station services.

4. Availability of Different Institutions

In the district, there exist many governmental bureaus. Besides, there exist non-government
organizations (NGOs) and private companies. All these institutions are potential market demand
for the project

5. Energy Demand
The major source of domestic energy supply is agri-wastes, followed by firewood, animals dung,
charcoal and kerosene. Hydro electric light services and more than 10 fuel stations were
available in the district (at Bote towns).

Hence, there will be a good market demand potential for the envisioned project (fuel station) in
consumption of fuels for vehicles, the district is an Intercept of the roads Addis Ababa to
Southern Ethiopia, Eastern way to main ,.

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2.3. Market Supply

In the Bote town there exist few service provider organizations. Standard restaurants, cafeterias,
pensions, assembly halls, play station and fuel station centers. Besides, all quality services in one
organization is almost nonexistence in the woreda kebele’s abroad.

2.4. Target Customers

The target customers of the envisioned project are

 The residents of the kebele and the surrounding area

 Merchants and drivers
 Business Community
 Different occasional guests
 Different institutions( Government, NGOs and Private)
 Domestic and Foreign tourists and visitors

2.5. Market Prospects

From the above analysis of market, it can be deduced that there is a huge gap between demand
and supply for Hotel business in the kebele as well as in the district that will give a lucrative
market for the envisioned project.

2.6. Marketing Promotion and Strategy

To reach customers different marketing ways will be used. Among the different marketing
strategies and tools for promotion controlling the market:

 Printed and non printed forms of advertising,

 Sponsorship of key government activities and public support mechanism.
 Seasonal discount pricing for guest houses and different others customer centric
marketing strategies will be used by the company.

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The Fuel Station under discussion will have diversified marketing strategies that could enable it
come up with the different competitors in the market. Moreover, customer satisfaction will be the
key marketing strategy of the building. Generally the project has a competitive advantage since
there are no many standard fuel station in the town.

2.7. Service program

The organization will initially operate at 70% of its capacity and will reach 100 %( full capacity)
service provision in the second year.

2.8. Sales Plan/Capacity

SN Description Measurement Daily Monthly Annual

Production production Production
Fuel Station
2.1 Kerosene Liter 60050
2.1 Benzene Liter 50030
2.3 Diesel Liter 100005
2.4 Lubricant and oil Liter 1500
3 Bed Rental No. 15 450 5400
4 Meeting Hall Hall/seat 80/1 80/10 80/120
5 Barbery Person 18 540 6480
6 Pool game No of game 25 750 9000
7 Supermarket _ _ _ _
8 Car Wash No of cars 5 150 1800

3. SERVICE MIX AND CIVIL WORK OF THE PROJECT

3.1. Service Utility

The Fuel Station will provide the following service

Fuel Station

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The project will provide different fuel energy (like kerosene, benzene and Diesel) for end users
by franchise based business from one of the oil company. Besides, the projects will also sale
different oil and lubricants for consumer. Moreover, service like car wash and parking will be
provided by the company.

3.2. Civil Engineer Building and Civil Works

As indicated in part 1 the total land requirement for the project is estimated to be 2500M2.The
buildings are planned to accommodate fuel station, and other utility requirements as well as
green areas and parking.

In general the buildings must be capable of being kept clean and provision should be made for
keeping the sewerages drained out properly and room temperature is attained to keep healthy
environment. In most environments, equipment should be totally enclosed in a light structure:
where the climate is suitable. A concrete floor, which can be swept, is usual.

The site will be encircled by a chain linked fence fastened to concrete posts. The project
construction is designed by professional engineers and construction will be done under close
supervision and colla Shashamane town of the engineers.

4. ORGANIZATION AND MANAGEMENT

4.1. Organization and Management

The organizational structure should be in a way that the fuel station service can able to achieve
its objectives as well as the satisfaction of standard requirement.

4.2. Man Power

The total manpower required for the building will be 32 persons. The manpower list and the
corresponding labor cost are shown in Part five of this document.

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4.3. Organizational Structure

The organizational structure of the project is designed by including all the necessary personnel
under the right division. At the top of the organizational structure, there will be manager with the
responsibility of supervising the overall activity of the fuel station. Depending up on the nature
of the center and the amount of work to be performs; there exist auxiliary units under the general
manager.

Employees under each unit will be supervised by the department head that is accountable for the
general manager. General Manager is appointed by the owner.

Owner

General Manager

Service Management Admin and Finance Marke琀椀ng Department

Dept. Department

Fuel Sta琀椀on Car Wash Parking Engine Oil Vehicle Spare Employee rooms
Shop Part

Fig Organization Structure of the Building

A. The General Manager’s

The duties and responsibilities of the general manager are;
 He/she will plan, organize, direct and control the overall activities of the fuel station.
 He/she will devise policies and strategies that will enable the organization profitable.

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 He/she will plan, organize, direct and control the human and non-human resources of the
organization (other departments) so as to achieve the short and long run objectives of the
organization.
B. Service Management Department
This is the core department that has six main sections (Fuel station, Car Wash, Parking area,
Engine Oil Shop, Vehicle Spare Parts and employee rooms)

The main duties and responsibilities of this department are

 To render those outlined services of the project and manage the overall service delivery
system of the motel and fuel station in line with the customer need and satisfaction.
 He/she will incorporate modern technological innovation that will facilitate the service
delivery of the fuel station Car Wash, Parking area, Engine Oil Shop, Vehicle Spare Parts
and employee rooms’ services that will increase customer’s satisfaction.

C. Administration & Finance Department

The Admin & Finance Department of the Hotel is responsible for undertaking the following
activities:
 Manage the human resources and control employee’s activity
 Will manage non human resources of the organization, which include: effective handling
of the different inventories and devise strategies of controlling against fraud and damage.
 Will provide the right material or inventory to the center with right price at the right time.
 Will plan, organize direct and control the financial transaction of the building by using all
the necessary documents.
 Accountant and cashers that will collect money from the customers.
 Will develop sound financial control system by developing modern financial control
systems.
 Will prepare the annual financial statements and prepare condensed reports for both the
General Manager and other concerned government body.
D. The Marketing Department

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 Will handle the overall marketing activities of the organization which include planning,
organizing, directing, and controlling.
 Will develop the marketing strategies.
 Will develop effective customer handling strategies
 Plan and execute the promotion mix

5. FINANCIAL REQUIRMENT AND ANALYSIS

5.1. Total Initial Investment Cost

The total amount of money that is required to establish the envisaged hotel is estimated to be Birr
15.0 million.
Table Total Initial Investment Capital
Description Cost in birr
Land, Building & Construction 6,985,038.5
Machines & Equipment’s 1,626,750
Vehicles 3,218,750
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Office Equipment 83,250

Total Fixed Investment Cost 11,913,788.5
Working capital 2,875,766
Pre service Expense 508,593.75
Total 3,384,359.75
Contingency (10%) 1,079,764.1
Total Initial Investment Capital 16,377,912.35

5.1.1. Fixed Investment

A. Building & Construction

Total 7985039.2

B. Machinery And Equipment

Machinery and Equipment required for the hotel service is estimated to be ETB 4,200,000.00
C. Vehicles
Unit Price in Total Price in
No Description Qty Remark
br. br.
1 Mini Bus 1 500,000 500,000 Duty free
2 Bote Track 1 3,500,000 3,500,000
3 Generator 1 200,000 200,000
Total 4,200,000

D. O昀케ce Equipments
Unit Price in Total Price in
SN Description Measurement Oty
Br Br.
1 Chairs Unit 20 1500 30000
2 Tables Unit 20 10000 200000
3 Computer Unit 10 5000 50000
4 Printer Unit 2 3500 7000
5 Computer table with chairs Set 10 1300 13000
Managerial Chair with
6 Set 4 1800 7200
table
7 File Cabinet Unit 2 1200 2400
8 Self 3 2200 6600
9 Telephone Set Unit 2 1500 3000
10 Decoration Set 7000
Total 326,200.00

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E. Initial Working Capital

The initial working capital is estimated to be birr. 2,266,000.00

F. Pre-Service Expense
No Description Cost
1 Project proposal 10,000.00
2 Licensing fee and others 1500.00
Total 11,500.00

5.2. Annual Service (Production) Cost at Full Capacity

i. Raw Materials and Inputs
Total Annual cost
No Description Measurement
in Br.
1 Restaurant and café LS 1,850,000.00
2 Fuel station Liter 4,660,000.00
3 Super Market LS 582,000.00
4 Other service LS 858,000.00
Total 7,950,000.00

ii. Salary Expense

Monthly Annual
SN Position No. Qualification
Salary Salary
1 General Manager 1 BA in Management 5000 60000
2 Acct & Admin head 1 BA in Acct/mgt 2000 24000
3 Marketing head 1 BA in Marketing Mgt 2000 24000
4 Service Mgt Service head 1 BA in Hotel Management 3000 36000
5 Accountant 1 Diploma in Accounting 2000 24000
6 Cashier 1 10+2 in Accounting 1500 18000
10+2 in Sales and
7 Marketing Officer 1 1500 18000
marketing
8 Waiters 5 10 completed 500 30000
10+1 in purchasing and
9 Purchaser 1 1500 18000
supplies mgt
10 Store Keeper 1 12 completed 1200 14400
11 Guards 2 Basic 500 12000
12 Janitors 3 Basic 500 30000
10+2 in Sales and
13 Sales person 1 900 10800
marketing
14 Barista 2 10 completed 750 18000
15 Cooking Chief 2 10+2 in food preparation 1500 36000

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16 cookers 2 10 completed 800 19200

17 Supermarket Supervisor 1 10+1 in sales management 1500 18000
10+1 in reception
18 Recipients 1 850 10200
management
19 Driver 1 10 completed 800 9600
20 Meeting Hall Supervisor 1 10+1 in Management 900 10800
21 Room worker 2 10 completed 750 18000
22 Barber 1 10+1 in barber 800 9600
25 Gardner 1 Basic 800 9600
Total 32 23,550.00 478,200
Benefit(20% of the basic
95,640
salary)
Grand Total 573,840

iii. Other Opera琀椀ng Expenses

Annual
SN Description Assumption Used
Cost in br
1 Property Insurance 10,898 1% of Fixed Investment Cost
2 Audit & Legal Fee 750 400 per month
3 Uniforms 938 30*200br
4 Telephone, fax and postal 1,500 800 per month
5 Cleaning goods supplies 1,875 1000 per month
6 Repair and maintenance 21,796 2% of the Fixed Investment Cost
7 Advertisement 9,375 Lump sum
Stationery and other office
6 656 350 per month
supplies
8 Electricity 3,984 0.85*30,000KW per year
9 Water 703 1.5*3,000m3 per year
10 Fuel 7,813 2500 lit*20 per year
11 Oil and lubricant 781 10% of fuel cost
12 Miscellaneous Expense 4,688 3000 per month
Total 65,757

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5.3. Financial Analysis and Statements

5.3.1. Underlying Assumption

The financial analysis of the envisioned Motel and is based on the data provided in the preceding
sections and the following assumptions.
A. Construction and Finance

Construction period 22 months

Source of finance 30% equity and 70% loan
Tax holidays 2 years
Bank interest rate 10 %
Operating Costs Increase by 1%
Salary and wages increase by 1%
Operating Costs and raw materials Increase by 1%
Raw materials increased by 1%
Sales 10% increment after 2nd year
B. Depreciation

Building 5%
Machinery and equipment 10%
Office furniture 10%
Vehicles 20%
C. Working Capital

Accounts receivable 30 days

Raw material local 30days
Work in progress 5 days
Finished products 30 days
Cash in hand 5 days
Accounts payable 30 days

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5.3.2. Sources of Fund

Amount(in
SN Description % share
birr)
1 Owners Share 30 5,0000,000
2 Bank Loan 70 11,500,000
Total 100 16,500,000

5.3.3. Loan repayment Schedule

Principal Total Annual Remaining
Year Interest (10%)
Payment Payment in br Balance
0 0 0 0 18,000,000.00
1 1,800,000.00 1,800,000.00 3,600,000.00 16,200,000.00
2 1,800,000.00 1,620,000.00 3,420,000.00 14,400,000.00
3 1,800,000.00 1,440,000.00 3,240,000.00 12,600,000.00
4 1,800,000.00 1,260,000.00 3,060,000.00 10,800,000.00
5 1,800,000.00 1,080,000.00 2,880,000.00 9,000,000.00
6 1,800,000.00 900,000.00 2,700,000.00 7,200,000.00
7 1,800,000.00 720,000.00 2,520,000.00 5,400,000.00
8 1,800,000.00 540,000.00 2,340,000.00 3,600,000.00
9 1,800,000.00 360,000.00 2,160,000.00 1,800,000.00
10 1,800,000.00 180,000.00 1,980,000.00 0

5.3.4. Depreciation Schedule

Original Depreciation
Depreciation
SN Description Value In Per year in
rate in %
Birr Birr
Construction and
1 5,083,366 5 254168.32
Building
Bldg. Machines &
2 74,050.54 10 7,405.05
Equipments
Assembly Hall
3 126,853.37 10 12,685.34
Equipments
4 Vehicle 549,141.50 10 54,914.15
5 Office Equipment 203,200 10 20,320.00
Total 6,036,612 349,493

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5.3.5. Revenue Projection

Based on the production capacity and program of the Motel indicated in previous (Chapter 2), the
revenue of the organiza琀椀on projected as indicated in the table below;
No Description Measurement Annual Unit Total price Assumption
Production Price
1 Fuel Station 5400 100 540000
1.1 Kerosene Liter 60050 16 960800
1.2 Benzene Liter 50030 20 1000600
1.3 Diesel Liter 100005 17 1700085
1.4 Lubricant and oil Liter 1500 55 82500
1.5 Sub Total 4,283,985.00
1.6 Bed Rental No. 5400 200 1,080,000.00
1.7 Meeting Hall Hall/seat 120 500 60,000.00 10 day reserved per month
1.8 Barbery Person 6480 30 194,400.00
Pool game No of game 9000 10 90,000.00
1.9 Supermarket LS _ _ 396000 Gross sales(br.1100/day)
Car Wash No of cars 1800 80 144000
Total 7,763,585.00

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5.3.6. Balance Sheet

Current Asset Value in Br.
Cash 1,109,273
Inventory of raw materials and inputs 5,875,766
Total Current Asset 6,985,039
Fixed Asset
Land, Building and Construction 6,985,039
Machineries and Equipment’s 1,626,750
Vehicles 3,218,750
Office Equipment 83,250
Total fixed Asset 11,913,789
Total Asset 16,377,912
Liability
Account payable 11,500,000
Owners Equity
Capital 5,000,000
Total Liability & Owners’ Equity 16,500,000

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5.3.7. Income Loss Statement

Revenue Year 1 Year 2 Year 3-10

Sales Revenue 8,950,000.00 9,845,000.00 10,829,500.00

Purchase of Raw Material 2,932,941.18 3,226,235.29 3,548,858.82

Gross profit 6,017,058.82 6,618,764.71 7,280,641.18

Expenses

Salary Expense 1,654,800.00 2,566,800.00 3,208,500.00

Other Operating Expenses 450,000.00 495,000.00 544,500.00

Deprecation Building 180,300.00 180,300.00 180,300.00

Deprecation Vehicles 450,000.00 450,000.00 450,000.00

Deprecation Machineries
120,700.00 120,700.00 120,700.00
& Equip.
Deprecation office Equip 21,115.00 21,115.00 21,115.00

Interest Expense 595,030.28 535,527.25 476,024.22

Total Expense 3,471,945.28 4,369,442.25 5,001,139.22

Profit Before Tax 2,545,113.55 2,249,322.46 2,279,501.96

Tax(30% ) 763534.0646 674796.7375 683850.5869

Net Profit 1,781,579.48 1,574,525.72 1,595,651.37

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5.3.8. Cash Flow Statement

Year Year 0 Year 1 Year 2 Year 3-10

Equity Capital 2,000,000.00
Loan principal 8,000,000.00 1,958,664.21 3,710,274.65
Net sale 0 8,950,000.00 9,845,000.00 10,829,500.00
Total cash in flow 10,000,000.00 8,950,000 11,803,664 14,539,775
Cash payment
Purchase of raw
0 2,932,941 3,226,235 3,548,859
materials
Salary expense 0 1,654,800.00 2,566,800.00 3,208,500.00
Other Operating
0 450,000.00 495,000.00 544,500.00
cost
loan repayment 0 1,190,060.55 1,130,557.52 1,071,054.50
Tax payment 0 763534.0646 674796.7375 683850.5869
Total payment 10,000,000.00 6,991,336 8,093,390 9,056,764
Cash surplus /
10,000,000.00 1,958,664.21 3,710,274.65 5,483,010.75
Deficit
Cumulative
1,958,664.21 3,710,274.65 5,483,010.75
Balance

5.3.9. Profitability
According to the projected income statement, the project will start generating profit in the 1st
year of operation. Important ratios such as profit to total sales, net profit to equity (Return on
equity) and net profit plus interest on total investment (return on total investment) show an
increasing trend during the lifetime of the project.

The income statement and the other indicators of profitability show that the project is viable.

5.3.10. Break-Even Analysis

The break-even point of the project including cost of finance when it starts to operates at full
capacity (year 3) is estimated by using income statement projection.

5.3.11. Pay-Back Period

The investment cost and income statement projection are used to project the pay-back period.
The project's initial investment will be fully recovered with in 6 year of operation.

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6. ENVIRONMENTAL IMPACT OF THE PROJECT

Currently the issue of environment and envelopment get due emphasis and thus every citizen
called exert their maximum effort for fighting against any negative impacts on the environment
so as to result in a win-win solution on common agenda that is creating environmentally friendly
business environment. Therefore, this Hotel project does not cause a negative impact on the
environment.

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