VI. MANPOWER AND TRAINING REQUIREMENTS
A. MANPOWER REQUIREMENT
Total manpower requirement, including skilled and unskilled labour is 62 persons.
Correspondingly, total annual labour cost, including fringe benefits, is estimated at USD
19250. Table 6.1 below shows the list of ma npower required and the estimated annual
labour costs.
Table 6.1
MANPOWER REQUIREMENT & LABOUR COST
B. 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 USD 2125.
| Total | 62 | 1,604 | 19,253 | |
| 8. 6. 7. 4. 5. 2. 3. 1. |
Messenger/ cleaner Driver Store clerk Security guard Secretary Cashier/ clerk and sales head Salesman B. Others Stores, Finance ,administration |
1 1 1 2 1 1 1 1 |
9 19 19 21 26 26 0 26 0 55 |
102 230 230 255 306 306 0 306 0 663 |
| 6. 7. 4. 5. 3. 1. 2. |
Labour Operator Mechanic supervisor Production clerk Manger Production and maintenance A. Production |
6 36 6 1 1 3 |
64 0 918 166 0 19 85 153 |
765 0 11,016 1,989 0 230 1,020 1,836 |
| Sr. No. |
Job Position | Req. No. |
Salary per Month |
Salary per Year |
VII. FINANCIAL ANALYSIS
The financial analysis of the nail manufacturing project is based on the data presented in
the previous chapters and the following assumptions:-
| Construction period Source of finance |
1 year 30 % equity 70 % loan 3 years 8% 8.5% 30 days 30days 90days 5 days 30 days 2 days 30 days |
| Tax holidays Bank interest Discount cash flow Accounts receivable Raw material local Raw material, import Work in progress Finished products Cash in hand Accounts payable |
A. TOTAL INITIAL INVESTMENT COST
The total investment cost of the project including working capital is estimated at USD
306850, of which 36 per cent w ill be required in foreign currency.
The major breakdown of the total initial investment cost is shown in Table 7.1.
Table 7.1
INITIAL INVESTMENT COST
| Sr. No. |
Total Cost (USD) |
Cost Items |
| 1 | Land lease value | 51 |
| 2 | Building and Civil Work | 3315 |
| 3 | Plant Machinery and Equipment | 16869 |
| 4 | Office Furniture and Equipment | 521 |
| 5 | Vehicle | 850 |
| 6 | Pre-production Expenditure* | 2161 |
| 7 | Working Capital | 6925 |
| Total Investment cost | 30704 | |
| Foreign Share | 153 |
* N.B Pre-production expenditure includes interest during construction ( Birr 358.63 thousand ) training
(Birr 50 thousand ) and Birr 100 thousand costs of registration, licensing and formation of the company
including legal fees, commissioning expenses, etc.
B. PRODUCTION COST
The annual production cost at full operation capacity is estimated at USD 441575
(see Table 7.2). The material and util ity cost accounts for 85.12 per cent, while
repair and maintenance take 1.91 per cent of the production cost.
Table 7.2
ANNUAL PRODUCTION COST AT FULL CAPACITY (USD)
C. FINANCIAL EVALUATION
1. Profitability
According to the projected income statement, the project will start generating profit in the
first 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 life-time of the project.
The income statement and the other indicators of profitability show that the project is
viable.
| Cost of Finance | 1215.97 | 2.75 |
| Total Production Cost | 44,181.64 | 100 |
| Total Operating Costs | 40,762.43 | 92.26 |
| Depreciation | 2203.24 | 4.99 |
| Factory overheads | 385.1 | 0.87 |
| Administration Costs | 770.1 | 1.74 |
| Maintenance and repair | 843.46 | 1.91 |
| Labour direct | 1155.2 | 2.61 |
| Raw Material and Inputs | 37,575.19 | 85.05 |
| Utilities | 33.49 | 0.08 |
| Items | Cost | % |
2. Break-even Analysis
The break-even point of the project including cost of finance when it starts to operate at
full capacity ( year ) is estimated by using income statement projection.
| BE = | Fixed Cost Sales – Variable Cost |
= 25 % |
3. 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 within 4 years.
4. Internal Rate of Return and Net Present Value
Based on the cash flow statement, the calculated IRR of the project is 28% and the net
present value at 8.5% discount rate is Birr 5.89 million.
D. ECONOMIC BENEFITS
The project can create employment for 62 persons. In addition to supply of the
domestic needs, the project will generate USD 160225 in terms of tax revenue. The
establishment of such factory will have a foreign exchange saving effect to the country by
substituting the current imports.
