fl'.' ;) 5"^ /j/^- <72- l(j flCC - J ? FEDERAL DEMOCRATIC REPUBLIC OF ETHIOPIA MINISTRY OF WATER RESOURCE FEASIBILITY STUDY AND DETAIL DESIGN OF BALE GADULA IRRIGATION PROJECT —- I I I 1 I 1 1 I 1 1 i VOLUME - 11 ANNEX 15 FINANCIAL & ECONOMIC ANALYSIS FEASIBILITY FINAL REPORT MAY 2010 Waici Works Design and Supervision Fnlcrpnsc (WWDSE) Iniei continental ( onsuliants and Tec hi ioc ru is PVT LTD (ICT)Federal Democratic Republic of Ethiopia-Ministry of Water Resources Feasibility Study and Detail Design of Bale Gadula Irrigation Project VOL 11 Annex 15 Financial 4 Economic Analysis LIST OF VOLUMES VOL 1 Executive summary VOL 2 Main Report VOL 3 Annex 1 Meteorological and Hydrological Study VOL 4 Annex 2 Geological and Geotechnical Investigations VOL 4 Annex 3 Hydro-geological Study VOL 5 Annex 4 Soil Survey VOL 5 Annex 5 Land Evaluation VOL 6 Annex 6 Socio Economic Study VOL 6 - Annex 7 Settlement Study VOL 7 Annex 8 Irrigation Agronomy VOL 7 Annex 9 Farm Mechanisation VOL 7 Annex 10 Agricultural Marketing VOL 8 VOL 9 Annex 11 Livestock Study Annex 12 Environmental Impact Assessment VOL 9 Annex 13 Watershed Management VOL 10 I Annex 14 Institutional Dev VOL 11 Annex 15 Financeal & Economic Analysis WWDSE in Association with ICT Final Feasibility Study Report1 I r1 i1 r1 r1 rFederal Democratic Republic of Ethiopia-Mimstry of Water Resources Feasibility Study and Detail Design of Bale Gadula Irrigation Project VOL 11 Annex 15 Financial & Economic Analysis TABLE OF CONTENTS LIST OF TABLES........................................................................................................................................................................................... Ill LIST OF CHARTS.......................................................................................................................................................................................... IV LIST OF ANNEXES........................................................................................................................................................................................IV ABBREVIATIONS AND ACRONYMS.............................................................................................................................................................. V EXECUTIVE SUMMARY................................................................................................................................................................................. 1 1 INTRODUCTION................................................................................................................................................................................. 4 2 OBJECTIVES.......................................................................................................................................................................................6 3 METHODS OF ANALYSIS.................................................................................................................................................................. 7 3.1 financial and Economic Analysis.................................................................................................................................... 7 3.2 Measures of Financial viability.........................................................................._..................................................... ............ 8 3.3 Sensitivity Analysis.............................................................................................................................................................. 11 3 4 Financial Statements............................................................................................................................................................... 12 3.5 Financial Ratios....................................................................................................................................................................... 12 3.6 Source of Finance.................................................................................................................................................................. 13 4 COST ESTIMATES...............................................................................................................................................-............................ 14 4.1 Initial Capital COST................................................................................................................................................................. 15 4.2 Replacement cost................................................................................................................................................................. 16 4.3 Working and operating Capital......................................................................................._................................................... 17 4 4 TotaJnvestment Cost........................................................................................................................................................... 20 4.5 Annual Operating Cost.......................................................................................................................................................... 20 5 PROJECT BENEFITS......................................................................................................................................................................... 25 5 1 Crop Production........................................................................................................................................................................ 25 5 2 Crop Budget of Witk and Without the Project.............................................................................................................. 32 5.2 1 Crop Budget without the Protect.................................... ...................... ................. ................... 32 5.2 2 Crop Budget with the Project...................................................... . .. ......... .................. .. ..........................................36 5 3 Financial Farm Budgets ............................................................................................... 41 5 4 Employment Creation................................................... .................................................. ..42 5 5 Residual and Depreciation Est.mate........................................ .... 42 6 ESTIMATED TAX PAYMENTS.......................................................................................................................................................... 44 6.1 Business Income Tax.............................................................................................................................................................. 44 6.2 Vai je AddedTax.......................................................... ..................... .45 7 FINANCING SCHEME (SOURCE OF FUND)..................................................................................................................................... 46 7 1 Cost Sharing ......................................................................................................................................................... 46 7.2 Availability of Contingency Funding............. .. .. 48 8 LOAN REPAYMENT AND COST RECOVERY....................................................................................................................................49 9 PROJECTED FINANCIAL STATEMENTS........................................................................................................................................... 50 9 1 Financial Results..................................................................................................................................................................... 50 9 2 BREAK Even Analysis and payback Perioo ......................................................................................................................... 51 9.3 Ratio Analysis............................................................................................................................................................................ 53 9 4 Efficiency .................................................................................................................................................................................... 57 9.5 liquidity Ratio............................................................................................................................................................................. 59 WWDSE in Association with ICT Final Feasibility Study Report IFederal Democratic Republic of Ethiopia-MImstry of Water Resources Feasibility Study ana Detail Design of Bale Gadula irrigation Project VOL 11 Annex 15 Financial & Economic Analysis 10 FINANCIAL ANALYSIS............................................................................-...................................................................................... 62 10 1 Viability of the Project................................................................................................................................................. 62 10.2 Viability for the Farmers' share of financing........................................................................................................... 65 10 3 The Financer..................................................................................................................................................................... 68 10.4 Sensitivity Analysis.......................................................................................... .............._....................................................... 71 11 ECONOMIC ANALYSIS................................................................................................................................................................... 74 11.1 Conversion Factors -......................................................................................................................................... 74 112 EconomicCost................................................................................................................................................................ 76 113 Economic Benefits and Returns ................................................................................................................................. 76 11.3.1 Economic Benefits from Existing Crops ...................................... ................................................... ...... -............... ............ 78 113 2 Economic Benefits from Proposed Crops ..................... ....................................................................................................... 79 114 Economic Farm Budgp................................ ................................ ........................... 81 115 Economic Viability.............................................. .......................................................................................................... 83 116 Sensitivity analysis............................................. ..................................................................................................... 84 12 CONCLUSION AND RECOMMENDATION......................................................................................................................................86 13 REFERENCE..................................................................................................................................................................................... 89 ANNEXES.......................................................................................................................................................................................................90 WWDSE in Association with ICT Final Feasibility Study Report liFederal Democratic Republic of Ethiopia-Mimstry of Water Resources Feasibility Study and Detail Design of Bale Gadula Irrigation Project VOL 11 Annex 15 Financial & Economic Analysis LIST OF TABLES Table 0-1Summary of investment ANd Source of Finance........................................................................... —.......................................... 2 Table 4-1 Planned Physical Activities......................-.................................................................................................................................. 15 Table 4-2 Estimated Initial investment Cost..................................... ......................................................................... —............................16 Table 4-3 Operating Capital Requirement.................................................................................................................................................. 17 Table 4-4 Working Capital Requirement.................................................................................................................................................... 19 Table 4-5 Total Cost of the Project......................................................................................................................................................... 20 Table 4-6 Estimated Quantities of Annual Operating Expenditures ................................................................................................. 21 Table 4-7 Unit Rates for Fixed Annual Operating Costs..................................................................................................................... 21 Table 4-8 Annual Fixed and Variable Operating Costs ............................................... ......................................................................... 23 Table 4-9 Summary of Annual Foreign and Local Operating Costs ..........................................................~...................................... 24 Table 5-1 Development of Irrigation....................................................... ~..................................................................................................26 Table 5-2 Area Opened under Different Crops in the Cropping Pattern ....................................................................................... 27 Table 5-3 Area under Each Crop from l” to 5^ Year of irrigation in ha............................................................................................. 28 Table 5-4 Producer's yield Buildup ............................................................................................................................................................ 30 Table 5-5 Quantity of Crop and By-Product Production..................................................................................................................... 31 Table 5-6 Price of inputs Used in Cultivation of the Existing Crops................................................................................................. 33 Table 5-7 Producer's Yield And Price of the Crops............................................................................................................................ 34 Table 5-8 Financial Costs and Returns from Existing Crops............................................................................................................... 34 Table 5-9 Annual Financial Benefits from Existing Crops....................................... ............................................................................. 35 Table 5-10 Annual Financial Benefits from Existing Crops.................................................................................................................. 36 Table 5-11 Price of inputs Used in Cultivation of the Proposed Crops........................................................................................... 37 Table 5-12 Farm Gate Unit Prices of Main Cropsand By Products.....................................................................................................37 Table 5-13 Gross income from Crop and by product Production................................................... ......... .. ....................................... 38 Table 5-14 Cost and Returns for Proposed crops at Full Development......................................................................................... 39 Table 5-15 Net Financial Benefits from Proposed Crops in Cropping Pattern...............................................................................40 Table 5-16 Financial Farm Budget for 2.0 ha Farm At Existing Farming System ........................................................................... 41 Table 5-17 Financial Farm Budgc for 3 12 Ha Farm For Cropping Pa^ern ...................................................................................... 42 Table 6-1 Estimated Annual Business income Tax............................................................................................................................... 45 Table 7-1 Allocation of Costs between the Financerand the Farmers....................................................... „................................... 47 Table 8-1 loan Repayment...................................................................................................................... ................................................ 49 Table 11-1 Price Conversion Parameters used in Economic Analysis............................................................................................ 74 Table 11-2 Summary of Economic Costs of the Projec*................................................................... .... 76 Table 113 Economic Prices for Inputs..................................................................................................................................................... 76 Table 11 4 Producer s Prices for Crops .............................................................................................................................................. 77 Table 11 5 Cost or Cultivation and Returns for Existing Crops Table 11-6 Economic Costs and Returns for Existing Crops...................... 78 78 Table 11-7 Cost and Returns for Proposed Crops............................................................................................................................. .79 Table 11-8 Yearly Economic Net Returns from irrigated Crops Table 11-9 Annual Economic Net Benefits from Crop Production jnder Post irrigation Table 11-10 Economic Farm Budget for 2 6 ha Farm a: Existing Farming System Table 11-11 Economic Farm Budget For 2 Ha Farm For Cropping intensity of 156% Table 11-12 Baseline Economic Analysis .............................. 83 Table 11-13 Results of Economic Sensitivity Analysis .. .82 .80 81 82 85 WWDSE In Association with ICT Final Feasibility Study Report illFederal Democratic Republic of Ethiopia-Ministry of Water Resources Feasibility Study and Detail Design of Bale Gadula Irrigation Project VOL 11 Annex 15 Financial & Economic Analysis LIST OF CHARTS Chart 9 1. Returns to Owners' Equity.....................................................................................................................................................54 Chart 9 2 Returns on Capital Employed (ROCE)................................................................................................................................. -55 Chart 9 3 net Prof t Margin .................................................................................................................................................................... 56 Chart 9 4 Gross Profit Margin................................................................................................................................................................. 57 Chart 9. 5 Average Stock Turnover Period...........................................................................................................................................58 Chart 9 6 Asset Turnover Ratio.................................................................................................................................................. 59 t Chart 9 7 Current Ra ;o .......................................................................................................................................................................... 60 Chart 9 8 Acid Test Ratio.............................................................................................................................................................................61 LIST OF ANNEXES Annex 5 1. Crop Budget without the Project........................................................................................................................................ 90 Annex 5. 2 Crop Budget with the Project.............................................................................................................................................. 54 Annex 9 1 Projected income Statement............................................................................................................................................. 101 Annex 9 2 Projected Cash Flow.............................................................................................................................................................. 103 Annex 9 3 Projected Balance Sheet...................................................................................................................................................... 105 WWDSE m Association with ICT Final Feasibility Stuoy Report IVFederal Democratic Republic of Ethiopla-Ministry of Water Resources Feasibility Study and Detail Design of Bale Gadula Irrigation Project VOL 11 Annei 15 Financial & Economic Analysis ABBREVIATIONS AND ACRONYMS BEP Break- Even Point B/C Ratio Benefit Cost ratio ha hectare HH Households IRR Internal Rate of Return MBirr Million Birr NPV Net Present Value Qt Quintal WWDSE Waterworks Design ana Supervision Enterprise W/P With Project WOP without Project WWDSE in Association with ICT Final Feasibility Study Report VFederal Democratic Republic of Ethiopw-Ministry of Water Resources Feasibility Study and Detail Design of Bale Gadula Irrigation Project VOL 11 Annex 15 Financial & Economic Analysis EXECUTIVE SUMMARY The Balegadula Irrigation Project has as its objective the production of about 1 674 368 qt of crops annually on net harvestable area of 5 150 ha The crops will serve for the consumption and for the market. Under the existing cultivation wheat, maize, chickpea, haricot bean, black cumin, coriander, onion, and red pepper crops are grown by the farmers The irrigation would commence in about 75% of the net irrigable area in the 4ln year The same would gradually increase and full development of irrigation woula take place in the 8lh years. 12 types of crops are proposed to be grown while it is also currently used largely for farming activities The proposed cropping intensity is 156% with total cropped area of 8,034 hectares Investment Cost The total cost of the project amounts to be MBirr5 544 2 that woula be incurred throughout the life of the project. Of this, MBirr557 1 is for initial investment MBirrO 2 for replacement of assets and MBirr3,586 for taxes and MBirrl,401 for operating costs The initial investment cost of MBirr557 1 consists of MBirr506 7 investment, MBirr44 4 of operating and MBirr6 1 working capital In addition to this the annual organization and management as well as maintenance expenditures would start from the 4th year onwards Operating Cost The total operating cost inclusive of operating capital over the entire years time of the project is estimated at MBirrl 560 3 tne average Deing around MBirr52/annum Source of Investment Finance The project would be implemented by the fund that will be obtained from the financer preferably by government in tne form of loans It is estimated that tne initial investment cost would be covered by the financer The initial investment cost is planned to be repaid witnin 15 years time at an equal annual payment of MBirrl 12 6 WWDSE in Association with ICT Final Feasibility Study Report 1Federal Democratic Republic of Ethiopla-Mimstry of Water Resources Feasibility Study and Detail Design of Bale Gaflula Irrigation Project Table 0-1Summary of Investment ana Source of Finance VOL 11 Annex 15 Financial & Economic Analysis No u Description Source Of Finance('OOOBirr) Share Of Financers in % Financer Farmers Total Financer Farmers Total I 1 I 11 Total Cost 1,818,170 3,725,999 5,544 169 32.87. 67.2% 100.07. initial Investment Cost Initial 557,138 Investment Cost 506.660 1 2 Operating Capital 44 377 I 1 3 Wonting Capital 6 102 Annual 557 138 100.07. 506,660 100 0% 44,377 100 0% 6,102 100 0% 10007. 100,07. - 100 07. 100 07. 2 Operating Costs 224 897 1 175.687 1,400 584 16 1% 33 9% 100 07. 3 Income Tax 1.035 941 2,550 312 3 586,253 28 9% 71 1% 100 07. 4 Replacement Investment Cost 194 194 100 0% 100 07. Cost Sharing The farmers will cover the major components of the annual operating costs wnereas the financer will be responsible to cover the entire investment costs as well as a portion of the annual operating costs The Financer will cover about 32 8% of tne totai cost whereas the farmers will cover 67 2% Considering the payment of income tax. the Financer will cover about 28 9% and the farmers cover about 71 1% of the total tax amount Production and Revenue There will be two partners that will conduct tne project These two partners are the Financer/government and the farmers The benefit streams are estimatea by the establisned farm gate selling prices of the crops The farm gate average selling prices of the crops is Birr783/qt consisting of Birr569/qt of the farmers and Birr214/qt of the Financer s snare Tne estimated snare is done on the oases of their cost contributions The snare of the financer s benefit is done mainly for the recovery of investment costs The annual revenue from the main and ihe Dy-proaucts at full scale of development is estimated at MBirr526 4 Net Revenues with the Project Currently crop production takes place at a place where the project is going to be implemented Tne farmers would be involved in the proauction of crops after tne implementation of the project On the WWDSE in Association with ICT Final Feasibility Study Report 2Federal Democratic Republic of Ethiopia-Minlstry of Water Resources Feasibility Study and Detail Design of Bale Gadula Irrigation Project VOL 11 Annex 15 Financial & Economic Analysis basis of the crop budget estimates, the farmers could get a net additional income of Birrl60.721/ha as the result of the project. Job Creation The level of unskilled rural labor employment will increase from the existing level of 1 34 Million maydays to 3 4 Million man days Viability of the Project: The viability of the project is evaluated Dased on financial & economic analysis and financial statements The result of the analysis shows that the project is viable in all of the viability measures of criteria On top of this sensitivity analysis is conducted by varying important variables It was found that the project could remain viable under all the sensitivity tests Under the base case scenario and considering the payment of income taxes, the IRR, the B/C ratio and the NPV of the project amount to 26 0%. 1.7 and MBirr1,839. respectively The financial discounting factor which is used for the financial analysis relates to the lending 7 5% interest rate of the Development Bank of Ethiopia The result of the financial IRR is therefore higher as compared to it for both before and after the payment of taxes Its economic IRR and B/C ratio amounts to 32% and 2 8. respectively The economic discount rate is 10 23% Therefore, it can be concluded that Balegaaula Irrigation project is viable from financial and economic point of view The project, if implementea will have significant contributions to the socio-economic conditions of peoDle in the project area and of the region in particular, and the country and national economy in general The income of people due to irrigation in the command area will increase to tne level that they can oe able to pay for their neeas and the social services The increase in agricultural production and employment opDortumty will make further contributions to the local and national economy In view of the above findings, the project aeserves priority and it is recommenaed that the project be implemented as early as possible WWDSE in Association with ICT Final Feasibility Stuoy Report 3Federal Democratic Republic of Elhiopia-Minlstry of Water Resources Feasibility Study and Detail Design of Bale Gadula Project VOL 11 Annex 15 Financial & Economic Analysis 1 INTRODUCTION The development of irrigation in rural area is essential for agricultural growtn. The benefits of irrigation are well recognized by farmers Reliable and timely supply enables farmers to get higner yields from existing crops by using higher levels of fertilizers and high yielding varieties seeds and other complimentary inputs which are more responsive to good moisture Conditions, to shift to crops which have higher water requirement and higner values to increase cropping intensity so that crops can be grown in two or more seasons on the same land, to bring new land under cultivation, and to gain all this improvement in productivity with greater certainty These benefits to individual farmers have considerable impact in the economy as a whole in the form of increased production and decreased prices of food, fibers and other agricultural raw material to meet the need of rising population In addition to direct production Denefits, irrigation normally generates increased demand for labor and indirectly stimulates a broad range of economic activities in the surrounding areas However, supply of water for irrigation is under pressure from the demands of otner water-using sectors Increases in household ano industrial demand for water are expected to result in increases in the scarcity of water For providing assured water supply for irrigation and agricultural production, the Bale Gadula Irrigation project is being planned for implementation The extent of the net irrigable area (NIA) will be 5 150ha The initial capital cost of the project is MBirr557 1 In addition to this the annual operational and maintenance expenditure would start from the 4ln years onwards and will aDOut MBirr52 per annum Irrigation would commence in 20% of the Net IrrigaDie Area in the 4th year The same would be gradually increased and full development of irrigation would take place in 8,n years However, full potential of Irrigation would be realized in the 12th year onward on account of gradual growth in crop yields WWDSE in Association with ICT FinalFeasibillty Study Report 4Federal Democratic Republic of Ethiopia-Ministry of Water Resources Feasibility Study and Detail Design of Bale Gadula Project VOL 11 Annex 15 Financial & Economic Analysis The availability of irrigation would lead to the cultivation of some new crops The main proposed crops are wheat, rice, maize, chickpeas haricot bean black cumin, corianaer, onion red pepper . citrus avocado and fodder crops In the light of above discussion, it is proposed to undertake the financial and economic analysis of the project WWDSE in Association with ICT FinalFeasibility Study Report 5Federal Democratic Republic of Ethiopia-Mlnistry of Water Resources Feasibility Study and Detail Design of Bale Gadula Project VOL 11 Annex 15 Financial & Economic Analysis 2 OBJECTIVES The main objective of this financial and economic analysis study of Bale Gadula Irrigation Project is to undertake a comprehensive financial and economic appraisal of the project in terms of its viability and to help take investment decision However the specific objectives are as follows • To estimate the magnitude of funds in order to finance activities through out tne implementation and operations pnases of the project cycle, • To assess whether tne project is a worthwhile investment resources, • To asses whether the project meets the oasic feasibility criteria for financial and economic viability To meet tne stated objective a comprehensive financial and economic analysis has to be prepared for the project The main items included with respect of the analysis are as follows (1) To provide the cost structure of the project (2) To estimate financial and economic annual net returns from the existing and proposed crops in the command area and farm budgets, (3) To conduct financial analysis that are indicative of resource use efficiency ievels of returns .incentives, (4) To prepare financial statements including ratio analysis (5) To undertake financial viability of the project including calculations of NPV IRR and B/C (6) To indicate the tentative source of finance ano share of investments (7) To Undertake economic analysis and (8) To undertake sensitivity analysis by using the financial and economic criteria Dy changing for aii of the major factors WWDSE in Association with ICT FinalFeasibility Study Report 6Federal Democratic Republic of Ethiopia-Ministry of Water Resources Feasibility Study and Detail Design of Bale Gadula Project VOL 11 Annex 15 Financial & Economic Analysis 3 METHODS OF ANALYSIS This part of the report is devoted to the description of methodology It covers discussion on financial and economic and analysis project evaluation metnods, sensitivity analysis, projections of financial statements and ratio analysis and indicative source of finance. 3.1 FINANCIAL AND ECONOMIC ANALYSIS Financial and Economic analysis provide a framework within which all aspects of a proposed project can be evaluated in a coordinated and systematic manner A project carefully analyzed and revised in tne light of economic and financial analysis has a better chance of being implemented on time and providing the required benefits The policy makers are concerned about where scarce capital resources can best be directed to maximize economic growth and higher social and economic returns. The financial analysis is concerned with the individual financial entities which participate in a project - farmers businessmen, private corporations, public agencies or whoever - each is directly concerned about the return to the capital he contributes The financial analysis also deals with the estimation of the return to all equity capital or all capital used in the proposed project The financial analysis also determines the financial viaoility of the project In economic analysis the decision maker is keen to know the total return or productivity and profitability to tne whole society or the economy of all the resources committed to the development of project regardless of wno in the economy contributes tnem and regardless of who in the society receives the benefits from tne proposed project, i ne economic analysis nelps in identifying those projects which make the greatest contribution to national income It allows for remuneration to labor and other inputs at economic prices or shadow prices whicn are intended to approximate true opportunity costs Every thing left over is then compared to tne capital stream necessary for the project. The project whicn maximizes returns to capital is given the highest rank. This approach assumes that capital is the most important limit to the faster economic growth WWDSE in Association with ICT FinalFcasibility Study Report 7Federal Democratic Republic of Ethiopia-Ministry of Water Resources Feasibility Study and Detail Design of Bale Gadula Project VOL 11 Annex 15 Financial & Economic Analysis Keeping in view the above discussions, crop budgets and farm budgets both for the existing (pre irrigation) as well as proposed crops under post irrigation stage nave been prepared While preparing the budgets for proposed crops under irrigated conditions yield build up for these crops for 5 years was studied Cost of cultivation of crops was computed on the Dasis of input use and their prices The inputs included in computation of cost of production are numan laDor, oxen labor seed fertilizers pesticides ana farm machinenes Expenses on lana rent, depreciation of machineries and contingencies or miscellaneous have also been included Gross returns were computed by utilizing the information on crop yields and producers prices Net profits were calculated by deducting the cost of cultivation from the gross returns unaer both the situations of with and without the project. Gross returns were computed by utilizing the information on crop yields ana proaucers prices Farm budgets were computed for a representative farm Keeping in view his lana ana other resources for tne existing ana proposed crops at post irrigation stage Net profits from production of crops were calculated from the gross returns ana cost of cultivarion unaer botn the situations The crop wise net returns per ha ana area devotea to various crops on tne Dasis of cropping pattern have been used for computing tne total net returns from crops for each year The economic crop budgets were preparea using conversion factors for Ethiopian economy and financial parameters 3.2 MEASURES OF FINANCIAL VIABILITY Benefit cost ratio (BCR). Net Present Value (NPV) and internal Rare of Return (IRR) nave been usee to determine tne financial viability of the project Since costs are meurrea at different levels and different quantities of benefits accrue in different years over the life of a project present values of both costs and benefits have been determined in order to compare them in this study tne three measures of project viaDility were usea to determine the viaoility of the project The viability of tne project is also supportea using the results of the financial statement, efficiency ana ratio analysis WWDSE in Association with ICT FmalFcasibility Study Report 8Federal Democratic Republic of Ethiopia-Mimstry of Water Resources Feasibility Study and Detail Design of Bale Gadula Project VOL 11 Annex 15 Financial & Economic Analysis Benefit Cost Ratio The Benefit Cost Ratio is computed as a ratio Between the sum of the benefits, and cost of the irrigation project. Thus. BCR = ZQt/ZC Where BCR. Qt and C represent Benefit Cost ratio, sum of discounted benefit and sum of discounted costs respectively The discounted benefit cost ratio is computed as a ratio of the present value of the future benefits at a specified rate of discount, to the present value of the present and future investment and other costs, at the same rate This indicator is equivalent to the ratio of tne present value of benefits to the present value of costs If there is no limitation of funds, the decision criterion is to accept any project having BCR greater than 1 The benefits from a project may be tangible and intangible In case of irrigation projects the tangible benefits would be in terms of introduction of new crops crop diversification and yield increases of existing crops The new agricultural technology requires optimal soil moisture as a pre-requisite for better utilization of other productivity enhancing inouts such as improved seeds fertilizers, cnemicals and improvea farm equipments and machinery Moreover irrigation schemes allow multiple cropping and thereby increase the level of cropping intensity The benefits from crop production would be in terms of additional production minus extra costs incurred by the producers. The secondary benefits of an irrigation project are due mainly to multiplier effect of the oroject investment The secondary benefits are also termed as indirect or intangible benefits arising from tne development of the project The secondary effects are extremely difficult to evaluate There will be some forward and backward linkages due to more oroduction These are in terms of more economic activities in tne area in terms of trade and commerce Generation of employment in rural areas is another important secondary benefit from irrigation project Besides irngation schemes create employment opoortumty for unemployed ano under employed labor force and landless farmers Irrigation projects result into development of roads and otner infrastructure in the inaccessible areas There are many intangible benefits which are difficult to measure but are important The most common indirect effect would oe on human population in terms of their improved socio economic status WWDSE tn Association with ICT FinalFeasibility Study Report 9Federal Democratic Republic of Ethiopia-Ministry of Water Resouri Feasibility Study and Detail Design of Bale Gadula Project VOL 11 Annex 15 Financial & Economic Analysis including better health, education ana overall development This will bring improvement in quality of life There may be improvement in livestock, vegetable and fruit production, Improvement in trade transport and other related sectors However for financial and economic analysis only direct benefits from irrigated agriculture has been considered After getting data on benefits and cost of irrigation tne calculation of Denefit cost analysis can be used to evaluate the desiraDility of the project To work out the benefit cost ratio one must decide upon tne discount rate to be taken in the analysis Discount Rate The discount rate to De used in any study of project evaluation is tne opportunity cost of capital for financial evaluation and social rate of interest of the country for economic evaluation The opportunity cost of capital is tne profitaoility of the last possible investment in an economy given the total investment fund In view if this, discount rate for financial analysis is taken as 7 5% based on the lending rate of the Development Bank of Ethiopia The social rate of interest is the rate which more adequately reflects time preference of the society as a whole than does the opportunity cost of capital. For the economic study the recommended rate of discount for the Etniopian economy is 10 23% as being established by the Ministry of Finance ano Economic Development Net Present value Tne net present value is simpiy tne difference between tne present value of benefits ana the present value of costs This is defined as N P V = Z Qt/(1 + k)' - Z Ct/(1 + k )' Like Denefit cost ratio the NPV takes account of all incomes and its timing with appropriate weights Computation process ,n Doth the cases is similar except that instead of taking the ratio of tne sums of Denefus and cost, tne differences of both are taken for analysis Project Life Period The tecnmcai life of the project is considered as 50 to 100 years However the economic life of such capital assets is shorter because of technological obsolescence The period of analysis cover the jseful life of WWDSE in Association with ICT FmalFcasibility Study Report 1 0Federal Democratic Republic of Ethiopia-Ministry of Water Resources Feasibility Study and Detail Design of Bale Gadula Project VOL 11 Annex 15 Financial & Economic Analysis investment Accordingly a period 30 years exclusive of the construction years is considered to oe sufficiently long for the viability of the analysis even though the project could remain functioning economically beyond this year The effect of discounting beyond this year has got an insignificant impact on tne viability analysis of projects since the greater part of the present value streams is accounted prior to year 30 In addition, some of tne replaced assets may last beyond tne designated life A residual value of these capital assets is normally included as the benefit at the terminal year of the project life Internal Rate of Return Tne Internal rate of return is the discount rate that results in a net present value of zero for a series of future cash flows By definition, the rate of return is the rate of discount which will equate the present value of the net benefit witn tne cost of the project It can be found out by working out the following equation for k £Qt(1+k) •' = ZCt(1+k)_< Where i is the rate of return is casn flow in period t and C is the cost of project The present value of benefits from the proposed project is denoted by V V = ZBt(1+k)'' and tnat of cost as C C = Z Ct (1 + k ) -' The traditional approach is to fix a discount rate The present values are then calculated and summed to fina V -C If V - C is positive a higner rate should be used, if it is negative a lower rate must De tried However if V- C = 0. tne internal rate for the project has been found Moreover tne iRR is computed using the EXCEL software The internal rate of return is a widely used measure of investment worth of irrigation project tnat takes the interest factor into account It is also termed as the marginal efficiency of capital or the rate of return over cost 3.3 SENSITIVITY ANALYSIS In sensitivity analysis an attempt is made to examine the implication of increased cost of investment on the internal economic or financial returns Projections of returns and costs are uncertain and subject to change Reworking an analysis to WWDSE in Association with ICT FinalFoaslbility Study Report 1 1Federal Democratic Republic of Ethiopia-Ministry of Water Resources Feasibility Study and Detail Design of Bale Gadula Project VOL 11 Annex 15 Financial & Economic Analysis see what happens unaer these changed circumstances is termed as sensitivity analysis In this analysis an assessment will be made of the extent to which the proposed investment implies risk for the project 3.4 FINANCIAL STATEMENTS The major financial statements are designed to provide information of the overall financial position and performance of tne business The financial statements include the projections of income statement, cash flow and balance sheets The three financial statements are applied and are concerned with providing various financial positions The cash flow statement shows what cash movements took place over a particular period The profit and loss account or income statement is to measure ano report how much profit the business could De generated over a particular period The balance sneet concerns aDout tne accumulated wealth of the business at tne end of a particular period 3.5 FINANCIAL RATIOS Financial ratios provide a quick and relatively simple means of examining the financial health of a Dusiness A ratio simply expresses one figure appearing in tne financial statements or perhaps some resources of the business Ratios can be expressed as a percentage, as a fraction, as a proportion etc Ratios could broadly be grouped in to certain categories of profitability efficiency liquidity gearing and investment The ratio analysis is calculated from a set of financial statements Therefore the income statement cash flow and Dalance sheet are first prepared from wnicn important ratios coula De calculated The ratio analysis is indictors of profitability of the business Profitability Business come into being with the primary purpose of creating wealth for their owners profitability ratios provide an insight to tne degree of success in achieving the purpose They express the profits made in relation to other key figures in financial statements The following ratios couio oe used to evaluate the profitability of the business • Return On Owners Equity (ROE) • Return On Capital Employed (ROCE) WWDSE in Association with ICT FinalFcasibility Study Report 1 2Federal Democratic Republic of Ethiopia-Ministry of Water Resources Feasibility Study and Detail Design of Bale Gadula Project VOL 11 Annex 15 Financial & Economic Analysis • Net Profit Margin • Gross Profit Margin Efficiency Efficiency is expressed in terms of ratio ratios Efficiency ratio examines the ways in which various resources of the business are managed Those ratios that consider some of the more important aspects of the resource management are: • Average stock turnover period • Average settlement period of debtors • Average settlement period of creditors • Asset turnover ratio Liquidity This ratio is vital to the survival of a business for there to be sufficient liquid resources available to meet maturing obligations The ratios calculated are • Current ratio and • Acid test ratio 3.6 SOURCE OF FINANCE The source of finance to cover the initial investment, replacement and operating costs together with loan repayment period are discussed WWDSE in Association with ICT FinalFcasibility Study Report 1 3Federal Democratic Republic of Ethiopia-Ministry of Water Resources Feasibility Study ano Detail Design of Bate Gadula Project VOL 11 Annex 15 Financial & Economic Analysis 4 COST ESTIMATES The project will involve various types of costs that will be incurred through out its entire life These costs are one of the basic parameters that serve for the estimation of the viability of the project Therefore all the cost categories that could be identified at this level of study are estimated and incorporated in the cost stream estimation Financing is usually arranged on the basis of the costs established in the feasibility studies of projects such as this type The estimates of costs are done on the basis of more extensive identification of all the types of the cost of the project with great care by collecting reliable data and information If the project costs are not properly identified, it could result in over estimation of the net benefit and similarly, under valuation of the costs also leads to the same result like the above one Thus detailed cost estimate are needed for determining the economic ment of a project appraising its financial implications and arranging financing for it The cost components are categorized under major categories of initial capital, replacement cost and annual operating cost Among other things, the initial capital includes operating & working capital costs The operating capital would be used to finance the operating expenses required prior to the start of production The annual operating cost consists of operation and maintenance management costs and other fixed and variable annual operational costs The initial capital investment cost will be required to establish the irrigaole farm whereas as the periodic replacement costs will be needed to replace all or parts of the depreciated machineries and equipments The prices for both cost ana oenefit items will have to be constant In other words prices will not vary with inflation over years, although consideration will have to be given if there is a distinct possibility of changes in relative prices of the inputs and the outputs of tne project Machineries and eauipment could De purchased from tne local market through the licensed importers WWDSE m Association with ICT FinalFeasibility Study Report 1 4Federal Democratic Republic of Ethiopia-Ministry of Water Resource* Feasibility Study ano Detail Design of Bale Gadula Project VOL 11 Annex 15 Financial & Economic Analysts 4.1 INITIAL CAPITAL COST Physical Investment Plan various types of physical activities woula be performed to implement the project The major activity types are presented in Table 4 1 Table 4-1 Planned Physical Activities Item No t ■— Activity Description Unit Quantity Physical Plan Year-1 Year-2 Year-3 1 Head Works % ■ % 100 100 100 100 - 1 1 Diversion Weir 12 Bate Gadula Main Canal Head Regulator % 100 100 ■ 2 Irrigation System 7o 100 12 88 2 1 Bale Gaauia Irrigation System % 100 i 3 Cross Drainage Bale Gaduia Cross Drainage - 31 Structure % 100 % 100 - 12 88 100 - 100 4 Site Investigations % 100 100 5 Project Management Unit (Pmu) % 100 67 33 Access Roads To Pmu & 6 Command Area % 100 33 Others % 100 51 6 48.2 0.2 .71 Settlement % 100 52 48 72 Environment And Ecology % 100 33 33 33 Initial Investment The initial investment cost of the project is summarized and presented in Table 4 2 The cost comprises of initial investment pnysical contingency of 10% ano estimated payment of 15% Value added taxes The economic lives of investment costs are also included in the table The investment cost is categorized under foreign and local cost components for which the foreign component is nil for this specific project WWDSE tn Association with ICT FinalFcasibihty Study Report 15Federal Democratic Republic of Ethiopia-Ministry of Water Resources Feasibility Study and Detail Design of Bale Gadula Project VOL 11 Annex 15 Financial & Economic Analysis Table 4-2 Estimated Initial Investment Cost Item No Estimated Cost ((OOOBirr)J Financial Plan In Local Currency Activity Description Total Cost Locai Foreign Year 1 Year 2 Year 3 l 1 Heaa Works 10 271 10.271 10 271 I 11 Diversion Weir 5 864 5,864 5 864 ‘ •J 12 Bale Gaduia Mam Canai Heaa Regulator 4 406 4.406 4 406 J: 2 Irrigation System 332.059 332,059 39 406 292 653 I 2-11 Baie Gaaula irrigation I System 1 332 059 332 059 39 406 292.653 3 Cross Drainage 1 437 1 437 ' Bale Gaauia Cross 1 437 31 Drainage Structure 1 437 1 437 - i--------- 5 4 Site Investigations 187 187 187 1 437 • Project Management Unit (Pmu- 22 859 22.859 15 316 7 544 6 Access Roads To Pmu & Command Area 4 559 4 559 3 055 1.505 I I S Total 371 371 371 371 18 557 58 724 294 090 7 Others 7 1 Settlement 29 150 29 150 . 1 15 042 14 042 67 28 95C 28 950 . i 14 975 I 13 975 7.2 Environment Ana Ecology 200 200 67 67 67 I - Total 400 521 40C 521 33 599 72 766 294 156 —-—r . I Vat Physical Contingency 40 052 40 052 - 3 360 7 277 29416 66 086 66 086 5 544 12 006 48 536 G Total 506 560 506 660 - 42 503 92 G49 372 108 4.2 REPLACEMENT COST Certain components of tne initial investment would depreciate fully on account of their shorter economic life The investments are classified under the activity of gate assemoiy While all the rest of the investments have got a life of more than 50 years these items have got about 20 years of economic life The replacement cost are then calculated and included as replacement costs The replacement costs are included considering tne full depressions of the economic life of the components The amounts of the replacement costs are estimated at MBirrO 2 WWDSE in Association with ICT FmalFeasibility Study Report 16Federal Democratic Republic of Ethiopia-Mimstry of Water Resources Feasibility Study and Detail Design of Bale Gadula Project 4.3 WORKING AND OPERATING CAPITAL VOL 11 Annex 15 Financial & Economic Analysis On top of the initial and the replacement costs, the project requires to finance short term cash deficits which are termed as working and operating capital The operating capital refers to the amount of money required to finance the annual operational costs that would occur prior to the start of revenue collection The working capital refers to the amount of money required to finance the cash deficits that could originate as a result of accounts receivables accounts payables and stocks occurrences Operating Capital Cash would be required to cover the annual fixed and variable operational expenses which would be available from the financers of the project. Both of the operating and working capital requirements are temporal casn deficits which couldn’t be overcome by the current transaction. The financial requirements of the working and operating capital are already recoroed as an expense in the income statement. These figures are not independently snown in the table that snows the viability of the project. They are instead included as part of the annual costs and revenue items The total requirement of the estimated working capital is presented in Table 4.3 Table 4-3 Operating Capital Requirement No Operating Capital Operating Capital In Years lOOOBirrj Yr 3 Yr 4 Total 1 Variable Cost - 33,809 33,809 1 1 Labor 6.766 - 9.811 6,766 1 2 Machinery Cost 9,811 1 3 Seeo/Seedlings - 5.422 5.422 1 4 DAP - 7,143 1 5 UREA 2.557 7.143 2,557 1 6 Pesticides - 636 636 1 7 Depreciation Of Farm implements (3irr) 491 491 1 8 Miscellaneous 985 985 II Fixed Cost 4,064 6,504 10,568 21 O&M For irrigation And Associated Structures 3,863 4 184 8,047 2 2 Project Management Unit (PMU) - 145 145 23 Training 193 | 16 | 209 24 Access Roads To PMU & Command Area 173 173 25 Land Tax 26 j institutional Cost - 93 1 - 1.880.28 93 1,880 27 Miscellaneous 8 13_|_ 21 ' Total 4,064 40,313 44,377 WWDSE in Association with ICT FinalFeasibility Study Report 1 7Federal Democratic Republic of Ethiopia-MImstry of Water Resources Feasibility Study and Detail Design of Bale Gadula Project VOL 11 Annex 15 Financial & Economic Analysis Working Capital The working capital of the project includes stocks of input and output, work in progress, accounts receivable and payable as well as cash The magnitudes of input ana output stocks are determined by considering the perishability and seasonality of what is produced Since the project has got commercial output, it will nave stocks of outputs and inputs accounts receivables ana accounts DayaDle The output and the input stocks are determined at 0 20% of the output and 0 25% of the input level Accounts payable and accounts receivables are considered to constitute 2% and 3% respectively The real magnitudes however will be revealed during the operation of the project The cash flow of the project includes the requirement of working capital in order to ensure that it includes sufficient cash for the normal operation of the project The incremental working capital in the final year of the project life will be negative since stocks will be exhausted and accounts settled The total working capital requirement shown at the end of Table 4 5 would be multiplied by negative so that the figure becomes positive The total requirement of the working capital is presented in Table 4 5 WWDSE in Association with ICT FinalFcasibility Study Report 1 8Federal Democratic Republic of Ethiopia-Ministry of Water Resources Feasibility Study and Detail Design of Bale Gadula Project Table 4-4 Working Capital Requirement VOL 11 Annex 15 Financial & Economic Analysis — r OOOBirr Stocks of Stock Of UREA, Total Incremental Stocks Accounts ------------------1 Accounts Net Net Yr Out Put DAP and Stocks Receivables Payable Receivables Incremental i Incremental Working Pesticide inputs Receivables Capital __________ 4 458 85 543 543 6 876 4 584 2,292 2.292 2 835 5 560 92 652 109 8 400 5 600 2,800 508 616 r~ 6 668 99 766 115 10017 6 678 3 339 539 654 7 774 106 880 113 11 611 7 740 3 870 531 644 8 933 113 1 045 166 13 992 9 328 4 664 794 ■’ I 959 L 9 938 113 1 051 5 14 071 9 381 4 690 26 i 10 949 113 1 061 11 14 232 9 488 4 744 54 64 11 963 113 1.076 14 14 447 9 631 4,816 72 I 86 12 998 113 1 111 35 14 973 9 982 4 991 I 175 210 i—------------- 32 ! 1 Working Caoital Requirement (4 991) (6 102) WWDSE in Association with ICT FinalFeasibility Study Report 19Federal Democratic Republic of Ethiopia-Minlstry of Water Resources Feasibility Study and Detail Design of Bale Gadula Projoct VOL 11 Annex 15 Financial & Economic Analysis 4.4 TOTAL INVESTMENT COST The overall investment cost of the project amounts is consisting of initial ana replacement costs The initial investment is composed of initial investment and replacement costs The entire investment cost constitutes local currency The total financial investment requirement of the project in terms of the Pase cost and replacement cost is presented in Table 4 5 It includes tne operating and working caDital as well as the overall operating costs The estimation of tax payment is discussed in section 6 of the report Table 4-5 Total Cost of the Project No Description Source Of Finance (’OOOBirr) I Total Cost 5 544 169 1 Initial Investment Cost 557 138 11 Initial Investment Cost 506 660 1.2 Operating Capital 44 377 1.3 Working Capital 6 102 2 Annual Operating Costs 400 584 3 Income Tax 3 586,253 4 Replacement Investment Cost 194 4.5 ANNUAL OPERATING COST The operating costs are composed of the annual variaDle and fixed costs of the project All of the annual costs to De incurred on recurring oasis for production, maintenance raw materials manpower utilities ana other expenses are included under tne cost category of operating costs Under tne variaDle operating cost of the project various types of costs required to run the operation are included They ,nclude costs of labor seed fertilizers pesticides deprecation of farm implements miscellaneous exDenses and otners In addition to these maintenance of the infrastructures training management cost and the payment of land taxes are part of tne fixed operating costs tnat involve significant amount of financial requirement The operating cost required prior to tne start of production will be covered by the initial investment capital and is termed as operating capital Accordingly the operating cost of year 3 and year 4 would De financed Dy the operating capital that would De allocated similar to the initial investment. The quantities of the operating cost items in terms of expenditure years are presented in Table 4 6 WWDSE in Association with ICT FinalFcasibility Study Report 20Federal Democratic Republic of Ethiopia-Ministry of Water Resources Feasibility Study and Detail Design of Balo Gadula Project VOL 11 Annex 15 Financial & Economic Analysis Some of the operating costs are estimated on the oasis of their initial investments Thus, the physical quantities of such costs are not included in the Table Table 4-6 Estimated Quantities of Annual Operating Expenditures item /anabi* Costs abor Unit Of Measurement 1st Year (***) 2nd (Yr5th) 3rd Year £Yr5tnj 4th Year Sth " Year prrSth) 6th Yr (Yr9thj " ”1 7th Yr (YrlOtn ) 8th Yr (Yrlith) 9th Yr (Yr12th) Kin-45th Total Mona ay 5 338 278 366 458 394 657 422 84^ 45’ 037 451 037 45’ 037 451 037 451 037 9 471 777 13,249.21.' i Seed/Seeaimgs Qt 4 351 4 713 5 076 5*38 5 801 5 801 5 801 5 801 5.801 121 020 17C.CC1 — JAP Gt 9 927 10 754 11,581 12 408 13 236 13 236 13 236 13.236 13 236 277 946 388 793 UREA Of 3 554 3 850 4 146 4 442 4 738 4 738 4 738 4 738 4 738 99 498 139 X79 ---------- "7 — 3 esticfles L< 6 798 7 365 7 931 8 496 9 064 9 064 9 064 9 064 9 064 190 344 266.255 Fixed Annual Operating Costs Payment of land taxes maintenances of canals ouildings and roads and other infrastructures training of the water user association members and other similar line of expenses are included under this investment category The area of land subject for land tax includes the entire command area of 5 550 ha of land Accordingly, the land consists of 5,150 ha of irrigable and 350 ha allotted for various purposes of the project. The various types of rates applied to estimate the annual fixed operating costs are shown in Table 47 Table 4-7 Unit Rates for Fixed Annual Operating Costs I Unit Rate Of Annual Operating Costs No Item O&M For Irrigation Ana Associated Structures Unit Of Measurement 1st Year (Yr4th ) 2nd ( Yr5th) 3rd Year ( Yr6th/ 4th Year \ Yr7th j 5th Year ( YrSth) 6th Year On Wards . (-Y--r-9-t-h--j L-- , I 1 I 2 Ha 1 000 1 000 1 000 i 1.000 i 1,000 1 000 Maintenance Of Project Management Unit (PMU) % Of Initial Investment I 0 50% 0 65% 0 75% 0 88% • 00% 1 13% 3 Maintenances Of Access Roads To PMU & Command Area % Of Initial Investment % Of initial i 3 00% 3 15% 3 21% 3 27% 3 33% 3 39% -----------------1 4 Settlement Environment Ana 5 Ecology 6 Land Tax investment 2 50% 2 50% 2 50% % Of Initial Investment 2 50% 2 50% 2 50% 2 50% 2 50% 2 50% Birr/Ha 24 24 24 24 24 24 7 Miscellaneous % 0 20% 0 20% 0 20% | 0 20% 0 20% 0 20% WWDSE in Association with ICT FinalFeasibility Study Report 21Federal Democratic Republic of Ethlopia-Ministry of Water Resources Feasibility Study and Detail Design of Bale Gadula Project VOL 11 Annex 15 Financial & Economic Analysts Variable Annual Operating Costs The items that are categorized under the variable costs are items that would be used for the direct production of crops as well as to run the various scheme components The items of variable inputs that would be required to undertake crop production are labor seed /seedlings, fertilizer and pesticides. The required annual variable operating costs are estimated for the initial and optimum level of production In this regard the annual demand for labor in terms of mayaays the requirement of seed/seedlings DAP UREA and pesticides are estimatea The total estimatea cost of the annual variaDle ana fixea operating costs is presented in Table 4 8 WWDSE in Association with ICT FinalFcasibility Study Report 22Federal Democratic Republic of Ethlopla-Ministry of Water Resources 15 VOL 11 Annex Feasibility Study and Detail Design of Bale Gadula Project Financial & Economic Analysis Table 4-8 Annual Fixed and Variable Operating Costs OOOBirr item 4tn Year (Yrztnj 5th Year Sth Yr (vrstn j 7th Yr (YrlOth ) 8th Yr (Yrllth j Sth Yr fYri2th ) 14 th -45 th Total 1 (YrStn ) Variable Costs 1 J Labor - 6 766 7 329 7 893 8 457 9,021 225 519 264.984 Pair Ot Oxen - -’ -| • 1 --------------- ----------- Macninery Cost 9.811 10,628 11 446 12,263 13,081 327.025 384,254 | Seeo/Seednngs 5 422 5 874 6.325 6 778 7.230 180.743 212.373 DAP 7 143 7.738 8333 8 928 9 524 238 090 279.756 1 UREA 2,557 2.770 2,983 3,196 3 409 85.231 l 100,146 1 Pesticides 636 689 742 795 847 21 187 24,895 Depreciation Ot Farm implements .(Birr) < 91 531 572 613 654 16.351 19,213 Miscellaneous 985 1.067 1,149 1,231 1,313 32 824 38 569 Total 33,809 36.627 39.444 42,261 45.079 1 126,970 1.324.190 Fixed O&M For irrigation Anc Associated Structures 3,863 Project Management Unit (PMU) Training 193 4 184 4,506 4,828 5,150 5,150 128,750 156.431 r 145 188 217 16 16 16 16 — 289 8,133 9,224 258 Access Roaas To PML & Command Area 173 182 185 189 192 4.888 Settlement 916 916 916 916 Environment And --------------------- 1 5,809 3,662 Ecology 6 6 6 158 177 1 uana Tax 93 100 108 116 124 3,090 3,631 institutional Cost 1,880 1,880 1.880 1,880 1,880 47 007 56.408 Miscellaneous 8 13 16 16 17 17 384 471 Total 4,064 6,504 7,804 1 8,173 8,543 8,574 192,410 236,071 ‘1 n i G Total 4,064 40,313 44 430 47,617 50,804 53,653 1,319,380 1,560,261 WWDSE in Association with ICT FmalFeasibihty Study Report iFedoral Democratic Republic of Ethiopia-Ministry of Water Rosources Feasibility Study and Detail Design of Bale Gadula Project VOL 11 Annex 15 Financial & Economic Analysis Local and Foreign Currencies Out of the total operating costs, fertilizers and pesticides could be requiring purchases in foreign currencies These inputs are available from the importers ano thus would be procured in local currencies However, if a necessity of importing them at tne entire expense of the project occurs, the foreign currency requirement of the operating costs is estimated The annual operating costs do consist of 26% foreign ano 74% local currencies ana is presented in Table 4 9 Table 4-9 Summary of Annual Foreign and Local Operating Costs No Expenses 1 Fixed Operational Cost 1 1 O&M For irrigation And Associated Structures 12 Project Management Unit (PMU) ■ Annual Operating Costs Foreign Local Total Cost 236,071 236,071 156,431 156,431 9,224 9,224 1.3 Training 258 258 1 4 Access Roads To PMU & Command Area 1.5 Settlement 5,809 3,662 5,809 3,662 1.6 Environment And Ecology 177 177 |- 1 7 j Land Tax 1.8 institutional Cost 3,631 56,408 3,631 56,408 1 9 Miscellaneous 471 471 2 Variable Costs 21 Labor 264,984 264,984 22 Macmnery Cost 384,254 384,254 2.3 Seed/Seedlings 2.4 DAP 2 5 UREA 2 6 Pesticides 2 7 Depreciation Of Farm Implements (Birr) 2 8 Miscellaneous Total Fixed And Variable 404,797 919393 1,324,190 212,373 212,373 279,756 100,146 24,895 19,213 38,569 279.756 100 146 24,895 19 213 38,569 404,797 1,155.465 1 560,261 %Age __ ______________[ 26% 74% 100 00% WWDSE in Association with ICT FlnalFcasibility Study Report 24Federal Democratic Republic of Ethiopia-Mimstry of Water Resources Feasibility Study and Detail Design of Bale Gadula Project VOL 11 Annex 15 Financial & Economic Analysis 5 PROJECT BENEFITS The direct benefit of the project relates to the production of crops and byproducts Accordingly the benefits of agricultural benefits are estimated following various types of steDs and methodologies discussea below 5.1 CROP PRODUCTION Development of Irrigation and crop Yield build up A Derusal of the aevelopment of irrigation in the command area indicates that the first 3 years of the project period is utilized for the construction of diversion weirs, canal and other infrastructure and land aevelopment. The actual irrigation would start in the fourth year and full irrigable area would be put to cultivation in the 8lh year However due to gradual increase in the crop yields and adoption of moaern technology, full potential of crop production would be achieved in the 12ln year It is assumed that the entire net irngated area would be opened for irrigation in a period of 5 years. It has been assessed that in the 4th year 20% of the area will be irrigated In the 5th year irrigation would cover 40% of the irrigable area The irrigated area in tne 6h year would be 60 % and in the 7th year the total irrigated area will be 80% The entire irrigable area under the command would be put to cultivation in tne 12th year The aevelopment of irrigation is presented in table 5 1 WWDSE in Association with ICT FinalFcasibility Study Report 25Federal Democratic Republic of Ethiopia Ministry of Water Resources Feasibility Study and Dotail Design of Bale Gadula Projoct VOl 11 Annox 15 Financial & Economic Analysis Table 5-1 Development of Irrigation Year Total 1st Year h (Yt4' ) 3.863 Sth Year (Yr8lh) 6th Yr (YrSth) 7th Yr (Yr10lh) 8th Yr (Yr11,h) 9th Yr (Yr12‘h) Irrigable Area (Ha) 2nd (Yr5,h) 4,184 4th Year lh (Yr7 ) 4,828 5,150 5,150 5.150 5.150 NIA (Ha) Ha Percent Area Opened During 1 he Year (Ha) 1 otal Area Under Irrigation (Ha) 1“ Year Of Irrigation 2 ’ Year Of Irrigation 3’* Year Of Irrigation Year Of Irrigation 5,150 100% 75 00% 3,863 3,863 3.863 6 25% 322 4.184 322 3.863 3rd Year ( Yr6,h) 4,506 6 25% 322 4,506 322 322 3.863 1 6 25% 322 4,828 322 322 322 3,863 5,150 6 25% ---------------- j 322 5 150 322 322 5 150 5,150 5.150 5.150 • J - 5"’ Year Of Irrigation — - —— — — 322 3,863 322 322 322 4.184 322 322 4.506 - 322 4.828 5 J 50 WWDSE in Association with IC7 FinilFeasIbility Study Report 26Federal Democratic Republic of Ethiopia-Ministry of Water Resources Feasibility Study and Detail Design of Bale Gadula Project VOL 11 Annei 15 Financial & Economic Analysis Cropping Pattern: The extent of irrigation development and area allocated to different crops under is presented in table 5 2 Table 5-2 Area Opened under Different Crops in the Cropping Pattern Command Area (Hai 5 500 Net Irrigaoie Area (Ha) 5 150 Cropping Intensity Cropped Area(Ha) 156% 8,034 Croppin g Share Out Of 156% Total Area In Each Years (Haj Crops Cropping Share Out Of 100% 1st Yr(Yr4ln) 2nd Yr (Yr5* ) 75% 6% 3rd Yr 1 4th Yr 5* Yr (YrS*) (Yr7* ') (Yr8' ) | rr Total Area Cultivated I___ 6% 6% 6% 100% Wheat 46 0% 29 5% 1 776 8 148 1 148 1 148 1 -48 1 2.369 0 Rice 10 0% 6 4% 386 3 32 2 32 2 32 2 32 2 515 0 Maize 34 0% 21 8% 1 313 3 109 4 109 4 109 4 109 4 1 751 0 Chic* Pea 13 0% 8 3% 502 1 41 8 41 8 41 8 41 8 669 5 Hancot Bean 13 0% 8 3% • Blac* Cumin 8 0% 5 1% 309 0 25 8 25 8 25 8 25 8 412 0 Cor.anoer 4 0% 2 6% 154 5 129 12.9 129 12 9 206 0 Onion 4 0% 2 6% 154 5 12 9 129 129 12 9 206 0 . 502 1 418 4- 8 41 8 4- 8 669 5 Reo Pepoer 4 0% 1 2 6% 154 5 129 129 12 9 129 r 206 0 Citrus 4 0% 2 6% 154 5 12 9 12 9 12 9 1 12 9 206 C Avocado 2 0% i 1 3% 77 3 64 64 64 64 103 0 Forage Crops Total 14 0% 9 0% 540 8 45 1 45 1 45 1 ----- ----------- 721 0 __ 156%J_____ ioo%_ 6 025 5 502 1 502 1 502 1 502 1 8 034 0 There will De gradual increase of irrigated area in the command initially 20% of the area will De availaDle for irrigation With crooping intensity of 156% it would be 6 026 Ha During the next 2 years the additional area of 502 ha in each year will De irrigated In this way the total cropoea area will De 8 034 ha Based on the details of area under irrigation and area devoted to different crops in each year as snown in table 5.2 area for each crop under 1st to 5th year of irrigation have Deen computed and shown in taple 5 3 WWDSE in Association with ICT FinalFoasibility Study Report 27 U »“ 51 )Federal Democratic Republic of Ethiopia-Ministry of Water Resources Feasibility Study and Detail Design of Bale Gad u I a Project VOL 11 Annex 15 Financial & Economic Analysis Table 5-3 Area under Each Crop from 1*‘ to 5,h Year of Irrigation in ha 1st year tyr<’") 1--------------------------- [ 2nd ( yr5’“) • 3rd year ( yr6”) 4lh yeaqyr7 Crop Year of irrigation Total Area Wheat 1st 1st 2nd 1st 2nd 3rd 3 863 3 863 322 3 863 322 1st 2nd 322 3 863 322 1 777 148 1.777 ' 148 148 1 777 148 148 r Rice 386 32 1---- :------- i 386 32 32 386 32 7--------- 32 3rd i 4th 322 322 148 1ZZL . 32 386 Maize 1.313 109 1 313 109 109 1.313 109 109 109 1 313 Chick pea 502 42 502 42 42 502 42 42 42 502 Haricot bean 502 42 5C2 42 42 502 42 42 42 502 Black cumin 1----------- 1 309 26 309 26 26 309 26 26 26 309 Coriander 1--------- 155 13 155 13 13 i 155 13 13 13 155 I Onion 155 13 155 13 155 13 13 13 155 1-------- — 13 Red oepper 155 13 155 13 13 155 13 13 13 155 Citrus 155 13 155 13 13 155 13 13 13 155 Avocado 77 6 77 | 6 6 77 6 6 6 77 Forage crops 541 45 541 45 45 541 45 45 45 541 Total Area 6,026 502 6 026 6,528 | 6 026 502 502 6 026 502 502 502 6 026 I 7 030 (continued) Crop Year of Irrigation 5th year(yr8'h > 7 532 6th yr (yrSth ) —T otal Area 1st 2nd 3rd 4th 5th 2nd 3rd 4th Sth 3 863 322 322 322 322 4 184 322 322 322 Wheat 148 148 148 148 1 777 296 148 148 1 777 1 Rice 32 32 32 32 386 64 32 32 386 Maize 109 109 109 109 313 219 109 109 1 313 r *----------------- J Haricot bean 42 42 42 42 502 Chick pea 42 42 42 42 502 84 42 42 502 84 42 42 502 Black cumin 26 26 26 25 309 52 26 26 I 309 Coriander 13 13 13 13 155 r 26 13 n I 155 Onion 13 I 13 • 13 I 13 155 26 13 13 155 Red pepper 13 13 13 13 155 26 . 13 d 155 Citrus r 13 , 13 13 13 155 26 13 13 155 -------- ------------------------------- Avocado 6 6 . 6 . 6 77 13 66 77 Forage crops 45 45 45 45 541 90 45 45 541 Total Area l--------------------------------------- 502 502 502 502 6 026 1,004 502 502 6 026 8 034 1 8 034 WWDSE in Association with ICT FinalFeasibllity Study Report 28 r1 r1 rL > i. r1 I 1Federal Democratic Republic of Ethiopia-Minlstry of Water Resources Feasibility Study and Detail Design of Bale Gadula Project \rrx under Each Crop from 1st to Sth 1 car of Irrigation in ha VOL 11 Annex 15 Financial & Economic Analysis (continued) Crop Year of Irrigation 7th yr (yr1 Oth ) 8th yr 9th yr (yr11th) (yrl2th) 3rd 4th 5th 4th 5th 5th 1 Total Area 4 506 322 322 4 828 322 5.150 ' Wheat 444 148 1 777 592 ,777 2,369 Rice 97 32 386 129 386 515 Maize 328 109 1.313 438 1 313 i 1751 i Chick pea 126 42 502 167 5C2 670 I Haricot bean 126 42 502 167 502 670 Black cumin 77 26 309 103 309 412 Coriander 39 13 I 155 I 52 155 206 Onion 39 13 155 52 155 206 I Red pepper 39 13 155 52 155 206 Citrus 39 13 -------- ’ 155 52 155 206 Avocado 19 6 77 26 77 1013 Forage crops 135 45 541 180 541 < 721 1 Total Area 1 506 502 6 026 2 009 6 026 8 034 8,034 8,034 8 034 Output yields Witn the growth of irrigation tne technique of proauction wouia also improve ana the extent of the benefit from irrigation would be dependent on the level of experience of the land holder and the resultant area put under cultivation Better crop yields and returns wou'd be availaDie to farmers as they proceed with tne crop cultivation The proposed yield under post project condition would be gradually achieved in a phased manner in a period of 5 years after the introduction of irrigation The yield level starts at minimum during the first year of operation and increases annually up to year 5 where it reaches their optimum level TaDle 5 4 contains the average yield of crops which are attainable over a giver, one hectare of land It can be observed in the table that the yield level of onion is mghest amongst tne crops whereas the yield level of chicK pea is lowest WWDSE in Association with ICT FinalFeasibility Study Report 29Federal Democratic Republic of Ethiopia-Minlstry of Water Resources Feasibility Study and Detail Design of Bate Gadula Project Table 5-4 Producer’s yield Buildup VOL 11 Annex 15 Financial & Economic Analysis Yield Of Crops Projection Years Yield Of Byproducts Projection Years NO Proposed Crops Wheat 2 Rice 3 Maize 1st Year (Yr4th ) r- - 2nd (Yr5th) 3rd Year (YrSth) I-------------- 4th Yoar (Yr7th J 5th Year (Yr8th) 1st Year (Yr4th) I 2nd (Yr5th| 3rd Year (Yr6th) 4* Year (Yr7th ) 5th i Year (Yr8th ) — 48 52 56 r- 45 . 55 65 » 62 70 4 Chick Pea 12 Haricot Bean 22 6 Black Cumm 18 14 15 60 64 26 28 31 33 35 70 75 12 15 17 19 20 78 85 29 32 37 41 45 16 16 6 7 8 8 8 25 28 30 30 6 22 25 28 29 T“ 788 56788 7 Coriander 8 Onion 25 27 30 34 36 7 A . 8 9 1° J 120 175 220 250 270 160 175 200 210 7 400 2. 3 4 5 A 9 Red Pepper 150 Citrus 11 Avocaao 8 10 . 10 - - I____ - 20G 12 Forage Crops 993 1 -49 1 295 i 428 1 500 -I-I - Total Volume of Production Crop Production The volume of production that could De produced is a function of the area of irngable land tnat comes under irrigation and the annual yield build up pattern Dunng year 1 tne total volume of production will amount to 781 416 qt During the second year, tne production would increase to 963,785 qt The volume of production shows annual increment and reaches its optimum production level of 1 674 368 qt in year 9in At optimum level, mere would De annual production of 151616 qt of wneat, 38 625 qt of rice 150 586 qt of maize 10.712 qt of cmcKpea,20 085 qt of haricotbean. 11 948 qt of Diackcumin,7 416qt of coriander 55,620 qt of onion 43 260 qt red peper 82,400 qt of citrus,20 600 qt of avocado ano 1 081 500 qt of forage Over tne entire analysis of 30 years time 47 456 691 qts of croD would be produced By-Product Production The production of Dy- products are directly proportional to tne auantity of main crop productions The production starts at a minimum level of 99 769 qt during year 1 and reaches its optimum level of 191 168 from year 9,h on wards The volume of annual production of main crops and by-products is presented in Table 5 5 WWDSE tn Association with ICT FlnalFcasibility Study Report 30Fodcral Democratic Republic of Ethiopia Ministry of Water Resources Feasibility Study and Detail Design of Balo Gadula Project VOL 11 Annex 15 Financial 1 Economic Analysis Table 5-5 Quantity of Crop and By-Product Production Crop Production In Qt Crop Year Of Irrigation Wheal Rice Maize Chick Pea Haricot Bean Black Cumin Coriander Onion Red Pepper Citrus Avocado Forage Crops I otal 9y Product Crop Production In Ql 1st Year r- (YrSth) (Yr4th) 3rd Year (Yrfith) 4th Ycar(Yr7lh ) 7th Yr (YrlOth) 8th Yr (Yrlllh) 9th Yr (Yrl2th) 13th 30th 86 284 99 498 17 381 22 692 114 304 129,703 28 325 32 348 104 841 123 008 8 620 9 750 16,026 18 202 147 470 149 247 151,616 3 183,936 73 542 6,026 11 047 5.562 3 863 18 540 87 550 7,532 13 474 7,262 4 493 28,583 38 625 811 125 150.586 3 162,306 10,712 224.952 20,085 421.785 lotal 4.353.038 1 099 364 4.278.131 309 811 579,5 /8 8 755 5 305 37.788 31 029 10 326 6 309 45 256 5th Year (YrSth) 145,694 36 533 142 050 10 419 19 457 11,356 7 056 51 564 6th Yr (Yr9th) 146 286 36 855 142 707 10 503 19 583 11,459 7 081 52,273 41 393 61,800 15 450 1 037.366 37 498 37 981 144 458 147 084 10 586 10 712 19 834 20,085 11 613 11 845 7,159 7,313 53 431 54 590 41.779 42 745 61,800 61 800 15 450 15.450 1,050,528 1 068 464 1 601_607 1,627 317 11,948 250.908 341.033 7,416 155.736 211729 1.168.020 1,565.664 23,175 26 651 536,997 666 051 37 144 41 264 61 800 - 796 796 926 899 15,450 1 030 341 55,620 43,260 82,400 20,600 1 081,500 1.6/<368_ 908,460 1.730,400 4 32,600 22,711.500 781 416 963 785 1,151 789 1,338 944 1 572 983 1 582754 35 161.728 1,236,901 2,060,000 515,000 30 906,442 47.456 691 Crop Year Of Irrigation 1st Year (Yr4th) 2nd (YrSth) 3rd Year (Yr6th) 4th Year(Yr7th) 5th Year (Yr8th) 6th Yr (Yr9th) 7th Yr (YrlOth) 8th Yr (Yrlllh) 9th Yr (Yrl2th) 13th 30th lotal Wheat 46 640 54 413 62 510 70.931 79.676 80 000 80 648 81 619 82 915 1.741,215 _ ------------ 2.380 567 Rice 4 635 6.051 7,553 8 626 9 742 9,828 10 000 10 128 10 300 2)6,300 — 293,164 Maize 38 481 45 811 54 859 64 365 74 328 74 672 75.588 76 963 78 795 1.654 695 2 238.557 Chick Pea 3 013 3 766 4 310 485 5210 5 251 5 293 5 356 5 356 112 4/6 154 906 Har cot Bean 2 946 3 593 4 274 4 854 5,189 5 222 5 289 5 356 5.356 112,4/6 154.554 Biack Cumin 1 534 2 003 2 415 2.848 3 133 3,161 3 204 3 268 3 296 69.216 94,078 Conander 1 073 1 248 1 473 1 752 1 960 1 967 1 988 2 031 2,060 43.260 58,814 Onion 343 529 700 838 955 968 989 1 011 1,030 21,630 28,994 Red Pepper 1 104 1 269 1 478 1 769 1,965 1 971 1 989 2 035 2060 43,260 58 900 1 otai 99769 118 684 139.572 160,858 182,157 183,041 184,989 187.768 191,168 4.014.528 5 462,533 WWDSE in Association with IC1 FlnalFeaalbllity Study Report 31Federal Democratic Republic of Ethiopia-Mimstry of Water Resources Feasibility Study and Detail Design of Bale Gadula Project VOL 11 Annox 15 Financial & Economic Analysis 5.2 CROP BUDGET OF WITH AND WITHOUT THE PROJECT In the proposed Bale Gadula command area, cropping is practiced with limited resources under rain -fed conditions In the post development phase of the command area, the production levei of crops is anticipated to be substantially higner than the existing cropping pattern This would be on account of irrigation water likely to be availaDle as per requirement of tne product, higher input use better farm operations and cultural practices in crop cultivation In addition to these, there would be considerably a good system development of research and extension linkage and arrangement of allied facilities Crop budget with the project is estimated for situations of with and without the project conditions The quantification of tne existing and the projected benefit is described in the sections presented below 5.2.1Crop Budget without the Project The currently grown crops are wheat, maize chickpea, haricot bean black cumin coriander onion and red pepper For the cultivation of these crops, minimum expenditure is incurred by farmers in land preparation Sowing is done by broad casting method and usually one weeding is done Based on input data and yield levels financial analysis of crop budgets has been undertaken for the existing command area For this purpose cost of production, gross returns and net returns are computed Tne inputs included in computation of cost of production are human tabor oxen labor seed, fertilizers pesticides etc Expenses on land tax and miscellaneous expenses have also been included Gross returns are computed oy utilizing the information on crop yields and producers prices. Net profits are calculated by deducting tne cost of cultivation from gross returns under both the situations The return per hectare for the existing crop under pre project conditions is shown in Table 5 8 WWDSE in Association with ICT FinalFcasibility Study Report 32Federal Democratic Republic of Ethiopie-Ministry of Water Resources Feasibility Study and Detail Design of Bale Gadula Project VOL 11 Annex 15 Financial & Economic Analysis Input Prices The production of crops will involve the use of inputs like labor, tools and implements seeds, fertilizers and pesticides The prices used for the analysis are constant prices of year 2010 The prices of inputs like human labor oxen labor and fertilizers have been obtained from the agronomy study Information on items not given in the report has been obtained by personal discussion with the agronomist in charge of the project study Other relevant documents were also referred to get the desired data on input quantity and prices The types and the prices of inputs used for the production of the existing crops are given Table 5 6 Table 5-6 Price of Inputs Used in Cultivation of the Existing Crops Financial I Item Measurement Price In Birr | Labor Birr/Day 20; Payer Of Oxen Birr/Day 30 1 DAP Birr/Qt 720 UREA Birr/Qt 720 Pesticide Birr/Lit 80 1 I Depreciation Birr/Ha 20 Miscellaneous --------------------------------- %Age Of Total Cost 3 00% 24 Output Yields and Prices The farm gate selling price of crops whicn are currently grown in the area is presented in Table 5 7 The taDie also includes the average yield of crops whicn are attainable over a given one hectare of land It can be observed in the taole that the yield level of maize is highest amongst the crops whereas the price of black cumin and coriander exceeds the others WWDSE in Association with ICT FinalFeasibillty Study Report 33Federal Democratic Republic of Ethiopia-Mimstry of Water Resources Feasibility Study and Detail Design of Bale Gadula Project VOL 11 Annex 15 Financial & Economic Analysis Table 5-7 Producer's Yield And Price of the Crops Yield (Qt/Ha) No. Existing Crop Type (Financial) Crop Price (Birr/Qt) Crop 28 5 By Product Crop By Product 1 Wheat 2 Maize 30 0 3 Chick Pea 90 4 Haricot Bean 8 0 20 0 718 20.0 800 150 150 60 1000 150 6 0 1000 150 5 Biack Cumin 13 0 6 Coriander 9 0 7 J Onion 22 0 60 1500 60 60 1500 60 100 500 50 8 Red Pepper 100 0 5 0 400 50 Net Returns The gross return that can De attainable from one ha of land is hignest for onion whereas the least is for naricot Dean Witn respect to net returns, the net returns are maximum for onion and minimum for haricot Dean. The gross return, cost of production and net returns of tne croDS is snown in Table 5 8 Table 5-8 Financial Costs and Returns from Existing Crops __ (Birr/Ha) Gross Cost of Net Crops return cultivation returns Wheat 23 463 3 626 19 837 Maize 27,000 3 008 23 992 Chick pea 9 900 2,302 7 598 Haricot Bean 8 900 2 281 6619 Black cumin 19.860 2 084 17 776 Coriander 13 860 1.961 11 899 Onion 40 250 9,438 30 812 Red Pepper 11.500 3 887 7.613 I WWDSE in Association with ICT FlnalFeasibility Study Report 34Federal Democratic Republic of Ethiopia-Mlnistry of Water Resources Feasibility Study and Detail Design of Bale Gaoula Project VOL 11 Annex 15 Financial & Economic Analysis Net Returns from 1 ha of land in order to calculate the net returns that can be achieved from one ha of land, all the crops are assumed to De grown over a given one ha of land with a given proportions On the basis of net returns on per hectare Dasis and area cultivated under each crops in the existing situation total return from each crops is calculated The net return from each crop has Deen computed based on the agronomy report of the project. Benefits from financial angles for the existing crops are computed by using the area and net annual returns of the crops under cultivation The results are given in the Table 5 9 Table 5-9 Annual Financial Benefits from Existing Crops CBirr/ha) area Snare out of 100% Land holding for typical HH crops Wheat Maize Chick pea area cased on 1 ha net return (birr/haj net return (birr/HH) i ----------------1 57 71% 0 5771 19 837 11 447 1 0 42% 0 0042 23 992 99 6 3 21% 0 0321 7 598 243 9 ■ Haricot Bean 0 44% 0 0044 6619 28 9 —------------- ! Black cumin 28 65% 0 2865 17 776 5 092 6 Coriander 9 41% 0 0941 11 899 1 120 1 Onion 0 14% 0 0014 30 812 42 6 Red PepDer 0 03% I 0 0003 7.613 23 Total 100 00% 1 00 18 077 Total Net Benefits The total existing area of land tnat would be covered by crops amounts to 5 150ha This land is currently used by tne farmers and it is assumed that tne existing crop intensity is about 70% or 3 605ha of land The crop intensity refers to the efficiency level of land utilization The estimated total annual net benefit of the “without the project" is thus computed and presented in Table 5 10 WWDSE in Association with ICT FmalFeasibility Study Report 35Federal Democratic Ropuolic of Ethiopia-Mimstry of Water Resources Feasibility Study and Detail Design of Bale Gaoula Project VOL 11 Annex 15 Financial & Economic Analysis Table 5-10 Annual Financial Benefits from Existing Crops C rops |_______ _______ Total Area and Returns Net returns Wheat 19 837 Area cultivated (haj 2 080 Maize 23,992 Cnick pea 7 598 Haricot 3ean 6 619 15 116 16 Black cumin 17.776 1 033 Total returns 41 266.940 358,975 879,203 104 318 18 358 663 Coriander 11,899 339 ' 4 037.964 Onion 30.812 5 153 672 Red PepDer 7613 11 3,605 8 354 Total 126 147 65 168 088 It is observed that total annual net returns from existing crops are MBirr65 2 Since, this is existing situation of production without irrigation project, this benefit is also termed as without Droject benefit The crop budget of with out the project is presented in Annex 5 1 5.2.2 Crop Budget with the Project The proposed crops are wheat, rice maize chickpea haricot oean. black cumin, coriander, onion and rea pepper citrus avocado and forge crops Harvesting of crops starts during year 4 and continues up to the end of the analysis period The crop budget with the project situation is presented in Annex 5.2 Based on input data and yield levels financial analysis of crop budgets has been undertaken for the proposed command area For this purpose cost of production, gross returns and net returns are computed The inputs included in computation of cost of production are human labor machineries seed fertilizers pesticides etc. Expenses on land tax and miscellaneous expenses have aiso been included Gross returns are computed by utilizing the information on crop yields and farm gate prices of the proposed crops Net profits are calculated by deducting the cost of cultivation from gross returns under both the situations Input Prices The production of crops will involve the use of inputs like labor, tools and implements seeds fertilizers and pesticides Tne prices used for tne analysis are constant prices of year 2010 and are obtained from the agronomy WWDSE m Association with ICT FinalFcasIbility Study Report 36Federal Democratjc Republic of Ethiopia-Mintstry of Water Resources Feasibility Study and Detail Design of Bale Gadula Project VOL 11 Annex 15 Financial & Economic Analysis study The types and the prices of inputs used for the production of the proposed crops are given Table 5 11 Table 5-11 Price of Inputs Used in Cultivation of the Proposed Crops (Financial) Item Measurement Price In Birr Labor Birr/Day 20 Machinery Cost For Birr/Ha Citrus Birr/Ha 2500 Avocado Birr/Ha 2500 r Forage Crops Birr/Ha 2500 Machinery Cost For Other Crops Birr/Ha 1500 DAP Birr/Qt 719 55 J UREA Birr/Qt 719 55 ' Pesticide For Rice And Maize Birr/Lit 93 5 Pesticide For Rice Birr/Lit 94 Maize Birr/Lit 94 Chick Pea Birr/Lit 94 Depreciation %age Of Macnmery Cost 5 00% Miscellaneous %age Of Total Cost Lana Tax Farm Gate Unit Prices of Crops Birr/Ha 3 00% 24 The selling farm gate prices of main and by-product crops which are usea for the financial analysis are presented in Table 5 12 Table 5-12 Farm Gate Unit Prices of Main Crops and By Products Crops Main Crop By Product Crops Wheat 718 150 Rice 1 100 100 Maize 800 150 Chick Dea 1 000 150 naricot Dean 1 000 150 BlacK cumin 1 500 60 Corianaer 1 500 60 Onion 500 I 50 Red pepper 400 50 Citrus 400 Avocaao 400 Foraqe crops 75 Gross Returns from the Entire Crop Land The gross returns are computed by multiplying the quantity of production Dy the unit prices of the crops The result is shown in Table 5 13 WWDSE tn Association with ICT FinalFeasibility Study Report 37Federal Democratic Republic of Ethiopia Ministry of Water Resources Feasibility Study and Detail Design of Dale Gadula Project VOL 11 Annex 15 Financial & Economic Analysis Table 5-13 Gross Income from Crop and by product Production (MBirr) Mam Product Crop Gross Income (MBm) Crop Year Of Irrigation T 1st Year 3rd Year 4th Year Sth Year 7th Yr 8lh Yr 9th Yr | (Yr4th) (YrSth) | (Yr 6th) (Yr7th) Wheat 61 23 71 44 Rice 19 12 24 96 Maize 58 83 70 04 Chick Pea 6 03 7 53 Haricot Bean 11 05 13 47 Black Cumin 8 34 10 89 Coriander 5 79 6 74 Onion 9 27 14 29 Red Pepper 9 27 10 66 Citrus i Avocado H 82 07 93 13 31 16 35 58 83 87 98 41 (YrBth) 104 61 40 19 11364 1042 19 46 17 03 10 58 6th Yr (Yr9th) 105 03 40 54 114 17 105 19 58 17 19 10 62 (YrlOth) (Yrllth) (Yrl2th) 105 88 107 16 108 86 41 25 41 78 42 49 13th 30th 2 286 07 892 24 8 62 16 03 13 13 7 96 18 89 12 41 9 75 18 2 1549 9 46 22 63 14 86 11557 117 67 120 47 2 529 84 10 59 1071 10 71 224 95 19 83 20 09 20 09 421 79 17 42 17 77 17 92 3 76 36 Total 3 125 48 1 209 30 3 422 50 309 81 579 58 511 55 25 78 26 14 16 51 16 56 24 72 24 72 10 74 10 97 11 12 233 6 317 59 26 72 27 3 27 81 584 01 782 83 16 71 17 1 17 3 363 38 494 76 24 72 24 72 32 96 692 16 824 6 18 6 18 6 18 6 18 8 24 173 04 206 Forage Ciops 40 27 49 95 59 76 69 52 77 28 77 8 78 79 80 13 81 11 1 703 36 | 2 317 98 1 otai Production 229 21 279 98 333 9 _ 387 02 466 39 J69 03 474 39 [_ 48 1 57 499 09 10,480 81 14 101 39 By Product Ciop Gross Income (MBiir) Crop Year Of Irrigation Wheat Rice Maize Chick Pea 1st Year (Yr4th ) 7 0 46 5 77 0 45 0 44 0 09 0 06 2- (YrSth) 8 16 061 3rd Year YrSth) 9 38 0 76 4th Year (Yr7th) 5th Year (Yr8th) 7th Yr (YrlOth) 12 1 8th Yr (Yrllth) 12 24 1 01 11 54 08 08 02 0 12 0 05 01 26 88 9th Yr (YrlPth) 13th 30th Total 12 44 261 18 357 09 1 03 21 63 11 82 248 2 08 16 87 Hancot Bean Black Cumin Coriander Onion Red Pepper 1 olal Gross Income 6 87 8 23 0 56 0 65 0 54 0 64 0 12 0 14 0 07 0 09 10 64 11 95 0 86 0 97 9 65 11 15 0 73 0 78 0 73 0 78 0 17 0 19 0 11 0 12 0 04 0 05 0 09 0 1 23 02 26 09 6th Yr (Yr9th) 12 0 98 11 2 0 79 0 78 0 19 0 12 1 11 34 0 79 0 79 0 19 0 12 16 87 4 15 26 29 32 335 78 23 24 23 18 5 64 3 53 0 02 0 03 0 03 0 06 0 06 0 07 14 35 I 17 03 1 19 99 0 05 01 26 21 0 05 01 26 48 08 02 012 0 05 01 27 37 1 08 1 45 2 16 2 95 T ] 574 75 t-------- ' ; 782 17 WWDSE in Association with ICT FlnalFoasibility Study Report 38Federal Democratic Republic of Ethiopia-Mimstry of Water Resources FeasibilityStud y and Detail Design of Bale Gadula Project VOL 11 Annex 15 Financia & Economic Analysis Net Returns from one ha of Land The net benefit that would be ootained from one ha of land starts at a maximum return during the initial years. The reasons of higher returns are mainly the result of higher yield levels and lower production costs. A tame tnat shows the net return that could be obtained from one ha of mam ana by product crops is presented in the 5 14 Table 5-14 Cost and Returns for Proposed crops at Full Development (Birr/Ha) Crops Gross Return Birr/Ha Cost Cultivation Of Net Returns Gross Return Birr/The Entire Area Cost Of Cultivation Nel Returns Wheal 51,202 3775 47 427 121,297.538 8 941 881 112,355.657 Rice 84 500 4 982 79 518 43.517.500 2 505.986 40951,514 Maize 75 550 3 297 72 253 132.288.050 5 773 280 — -------- ------------1 126.514 ■’70 ' ! Chick Pea 17 200 2 337 14.865 11 515400 1.564 324 9951 076 Haricot Bean 31.200 2.481 28719 2C.888.400 1 660,865 19 227'35 Black Cumin 43 980 2.953 41 027 18,119.760 1.216 ©83 16 903 077 | I Coriander 54 600 2 733 51 867 11,247,600 56 3 008 10.684.592 Onion 135.250 129 394 27,861.500 1.206.355 26 655 |4S Red Pepper 27 350 22.172 5,634,100 1 066 602 4 567 498 Citrus 160.000 5.856 5.178 13.989 13.577 9.457 146 1)1 1 32,960,000 2 881.680 30 07R 320 t -- Avocado 80.000 Forage Crops 112.500 n 66.423 8.24C 000 1 398 404 103 043 81,112.5OC n KjK 309 6 84 1 59b --------------------- 1 _74 294 I m I For calculating net returns or oenefit for each year under post project condition the following procedure nas Deen followed 1 Based on the area opened for irrigation ana year of irrigation snown in Table 5 1 area under each crop with 1S! to 5th year of irrigation are computed for a particular cropping pattern 2 The aggregate net return or benefits from eacn crop in each year ana 1st to 4 tn year of irrigation is computed Dy the following formula Gc1 yn ~ ACi h * NCi h + ACi I2 * NCi I2 -»• AC1 I3 * NCi I3 * AC) I4 * NCi l< * Aci i5 ’ Ncn i5 WWDSE in Association with ICT Final Feasibility Study Report 39Foaeral Democratic Repuolic of Ethiopia-Minlstry of Water Resources Feasibility Study and Detail Design of Bale Gadula Project VOL 11 Annoi 15 Financial & Economic Analysis Where Gc1 yn is aggregate net return or benefits from crop c, in niri year of project life (from Tables 3 11) Aci i, is the area under crop Ci ana first year of irrigation. Nci I, is the net return per ha of crop Ci for first year of irrigation, and so on. 3 Net return or Denefits for each crop derived in step 2 is inserted in corresponding column of table 5 3 and by adding net returns from different crops in a particular year total returns or Denefits for that year is arrived On the basis of aoove procedure, annual total returns from 4tn year to 12,n year for the proposed cropping pattern are given in table 5 3 There is no change in gross return from 12th year onwards TaDle 5 15 refers to the projected gross income that could be obtained from the production of the main crops It on the contrary doesn t include Dy-product incomes The analysis of total net returns for each year indicates that benefits from crop production are increasing in each year This is expected on theoretical consideration as well The aggregate benefits in the initial year of production will be minimum the same in the 12th year on wards would be at its optimum level These benefits have also been termed as benefits With Project. Table 5-15 Net Financial Benefits from Proposed Crops in Cropping Pattern (Birr 000) r" Crops * 1st sear \r4th i 1 2** i yrSth 3rd year t | vroih i 4th scar tvr7ih j Sth \ cat IsrXfh | I — ----------------- Wheat 8,666 7.265 7 824 8 383 I-------- *?« 2 Race 2,351 2,085 2.245 i 2 40b 2.566 i------------------ 3 Maize 5 779 4.691 5 052 5 412 5.773 j ------------------- s 4 Chick pen 1.727 1.271 1.369 1,467 1.564 Haricot bean 1 8CO 1.349 1,453 1.557 1.661 1 -------- --------- 0 Black cumin 1.253 989 1.065 | 1.141 7 Coriander 593 457 493 528 563 I------------------ 8 Onion 1.075 980 1,056 1 131 i,206 9 K) Red pepne; 970 867 W3 1 1 000 1,067 Citrus 2.445 2.341 2,521 ! 2 702 2.882 Avocado 1.191 1.136 1.224 1,311 1.398 l2 Forage crops 6.108 5.540 5.966 b.392 6.818 Total 3X958 28.971 62 31,200 20 1 33 428 79 35.657 38 WWDSE In Association with ICT Final Feasibility Study Report 40Federal Democratic Republic of Ethiopia-Mimstry of Water Resources Feasibility Study and Detail Design of Bale Gadula Project VOL 11 Annex 15 Financial & Economic Analysis 5.3 FINANCIAL FARM BUDGETS In this section financial farm budgets have been prepared for both existing and proposed cropping patterns in the command area. It is assumed that an average farmer grows all eight crops in the existing farming system Farm budgets for a small farm with holding size of 2 ha have been prepared As per socio-economic survey of the area the weighted average holding size is 3 2 ha which includes backyard and grazing land The results of the cropping patterns for farm budgets of small and average farms are given in tables 5 16 to 5 17 Table 5 16 shows the average net income a small farmer witn land holding size of 2 0 ha and crop intensity of 70% under the existing conditions has been earning each year Table 5 17 snows the average net income of a typical household having the same farm size of 2 0 ha and a cropping intensity of 156 percent on a holding of 3 12 ha as given in the proposed cropping pattern in the command area Table 5-16 Financial Farm Budget for 2.0 Ha Farm At Existing Farminq System Lana Holding For Typical HH Net Return Area Ha Net Return (Birr/Ha) fBirr/HH) Wheat 40 40% 0 8079 19 837 ' 16 026 0 Maize 0 29% 0 0058 23 992 139 4 ChiCK Pea 2 25% 0 0449 7 598 341 4 Haricot Sean 0 31% 0 0061 6.619 40 5 Blacn Cumin 20 05% 04C11 17 776 7 129 6 Coriander 6 59% 0 1318 11.899 1 568 1 Onion 0 10% 0 0019 30 812 59 7 Red Pepper 0 02% i 0 0004 7613 32 Totai 70 00% 2.00 25 308 WWDSE in Association with ICT Final Feasibility Study Report 41Federal Democratic Republic of Ethiopia-MInlstry of Water Resources Feasibility Study and Detail Design of Balo Gadula Project VOL 11 Annox 15 Financial & Economic Analysis Table 5-17 Financial Farm Budget for 3.12 Ha Farm For Cropping Pattern Crops Area (%) Land Holding For Typical HH Net Return 1 Area Ha Net Return (B»rr/Ha) (Birr/HH) J Wheat — 29 49% 09200 47,427 .- t ■■ 43.633 Rice 6.41% 0.2000 79 518 15,904 Maize 21 79% 0 6800 72,253 49,132 Chick Pea 8.33% 0 2600 14.863 3,864 Haricot Bean 8 33% 0.2600 28,719 7.467 Black Cumin 5.13% 0 1600 41,027 6,564 Study of economic farm budget clearly indicates that farmers are highly benefited with the availability of irrigation water at their command Profits from irrigated crops on their holdings are 7 4 times higner under cropping pattern 5.4 EMPLOYMENT CREATION Computation of employment opportunities from crop production was done The existing level of employment is 1 34 million man days The additional employment from crop production on full development of proposed crop yields will be 2 0 million man days In monetary terms it would be at 2010 constant prices MBirr42 The existing labor in monetary terms amounts to MBirr26 1 This additional MBirr 42 will be directly generated due to crop production 5.5 RESIDUAL AND DEPRECIATION ESTIMATE The different tyoes of investment of the project have got different economic life spar The depreciation of them is done based on the engineering estimates of tneir economic life The residual value of the equipments is treated as the benefit of the project at the final year of tne analysis period In order to easily follow the estimation of the residual value and compare with the replacement cost of the project, the estimation is presented under this section WWDSL in Association with ICT Final Feasibility Study Report 42Federal Democratic Republic of Ethiopia-Minlstry of Water Resources Feasibility Study and Detail Design of Bale Gadula Project VOL 11 Annex 15 Financial & Economic Analysis On the basis of the replacement estimation tables the unutilized life of the assets is calculated The unit replacement cost of each of the assets is divided by the life span of the equipments and then the result is multiplied by the unutilized asset life Using this method tne overall calculated residual value of the equipments is to be MBirr202 8 The items of investments are depreciated using straight line method WWDSE tn Association with ICT Final Feasibility Study Report 43Federal Democratic Ropublic of Ethtopia-Ministry of Water Resources Feasibility Study and Detail Design of Bale Gadula Project VOL 11 Annex 15 Financia & Economic Analysis 6 ESTIMATED TAX PAYMENTS 6.1 BUSINESS INCOME TAX Incentives The project will have a privilege of tax exemption for a certain period of time For the sake of encouraging the domestic investors engaged in the investment activities of different kinos, the financer of Ethiopia has provided the investment incentive that would be enjoyed by the investors In this regard the council of Ministers has issued regulations No 84/ 2003 on investment incentives and investment areas reserved for the domestic investors Article 8 which deals with "council of Ministers regulations on investment incentives and investment reserved for domestic investors” reads as " An investor shall be allowed to import duty-free caDital goods and construction materials necessary for the establisnment of a new enterprise or for the expansion or upgrading of an existing enterprise” Article 4 of the same regulation states "where an investor engaged in manufacturing or agro-inaustrial activities or the production of agricultural products to be determined by directives to be issued oy the Board, a) exports at least 50% of his products or d) supplies at least 75% of his product to an exporter as a production input he shall De eligible for income tax exerriDtion for five years" Article 6 reads as "The period of exemption from income tax shall begin from the date of commencement of production or tne cate of provision of service as tne case may be" The income and dividend taxes are therefore estimated taking tne stated legal background of the country By considering the tax exemption period of five years during which the project would be free from the payment of any kind of taxes tax payment is projected to begin at the tentn year period and lasts at the end of tne project life The business income would be paid by tne financer and tne farmers. The annual amount of the estimated business income that would De paid Dy the two partners as well as the summation of the twc (the entire project) is presented in Table 5 1 The detail estimation of annual tax payments for the entire project, the financer and the farmers are snown in Annex 6 1 WWDSE in Association with ICT Final Feasibility Study Report 44Federal Democratic Republic of Ethiopia*Ministry of Water Resources Feasibility Stuoy and Detail Design of Bale Gadula Project VOL 11 Annex 15 Financial & Economic Analysis Table 6-1 Estimated Annual Business Income Tax OOOBirr Description Entire Project Farmers I Financer •/•age Share of the entire %age i Share of the %age Share of the Project farmers Financer Tax Free Gross Income (Tax Exempted' Taxable Gross Income Deauctible Expenses 2 130 738 1,547 979 582 759 100 0% 72 6% 27 4% 11 970.657 8 696 671 3,273 986 100 0% 72 6% 27 4% 1.213 830 1,039 655 174 175 100 0% 85 7% 14 3% Total Depreciation 233 - income Level Subject to Business 233 , 100 0% 0 0% 100 0% income Tax Business Income Tax 10 756 594 7 657 015 3,099,579 100 0% 71 2% 28 8% 1 ... ... r i 3,586,253 2,550,312 1.035.941 100.0% 71.1% 28.9% 6.2 VALUE ADDED TAX The payment of Value Added Tax (VAT) of the project would be determined on the Dasis of the Value Added Tax Proclamation No 285/2002 At the time of tne sale of tne products the project is expected to pay a Value Added Tax of 15 percent. Article 3 states tnat a taxable transaction is a supply of goods or rendition services in Ethiopia in tne course of furtherance of a taxable activity other than an exempt supply under Article 8 However the payment of VAT would be transferred to the purchase of crops It is therefore not required to include the payment of VAT to the project On the other hand. VAT is included on the purchased investment costs WWDSE in Association with ICT Final Feasibility Study Report 45Federal Democratic Republic of Ethlopia-Mlnistry of Water Resources Feasibility Study ano Detail Design of Bale Gadula Project VOL 11 Annex 15 Financia & Economic Analysis 7 FINANCING SCHEME (SOURCE OF FUND) 7.1 COST SHARING Total Investment and Operating Costs The total cost of the project that would be required over the entire life of the project consists of initial and periodic replacement costs operating capital working capital annual operating costs and income tax As the estimated costs would be shared between the two the snares of costs as well as tne benefits are discussed below Share of the Financer The financer of tne initial investment capital would be responsible to cover tne costs of the initial capital, the replacement capital, tne operating capital the working capital and annual fixed operating costs exclusive of the land taxes The percentage share of the financer out of rhe over all cost streams is estimated and shown in TaDie 7 1. The financer would cover 100% of the initial, the replacement, tne working ano operating capital It is expected to cover income tax related to its income flow Out of the entire ODerating costs the financer would cover those parts which are a necessitate expenses for the continuity ano well being of the .rogation infrastructures Share of the Farmers The farmers will cover the larger share of the annual operating costs which would directly be reiated to farming activities The cost tnat would be covered by them would start after tne starting year of crops production ano continues up to the eno of the analysis time A tabie that shows tne snare of costs between the financer and tne farmers is presented in TaDle7 1 WWDSE in Association with ICT Final Feasibility Study ReportFederal Democratic Republic of Ethiopia Ministry of Water Resources Feasibility Study and Detail Design of Rale Gadula Project VOl 11 Annex 15 Flnancia & Economic Analysis Table 7-1 Allocation of Costs between the Financer and the Farmers No 1 11 12 13 2 3 31 311 312 313 314 315 316 317 318 32 32 1 322 32 3 324 325 326 327 328 329 33 ________ _ Description Initial Investment Cosl Initial Investment Cosl Operating Capital Working Capital Replacement Investment Cos! Annual Operating Costs Vanable Cost Labor Machinery Cos! Seed/Seedlings DAP UREA Pesticides Depreciation Of Farm Implements I Birr) Miscellaneous Souice Of Finance('OOOBirr) Financer i Farmers 557 138 506 660 44,377 6,102 194 224 897 - - 1 175 687 1 172 049 234 539 340 106 187.973 247 614 1 olal 557 138 506 660 44 377 6.102 194 1 400 584 1 172.049 234,539 340 106 187 973 247 614 Share Of Contributors In % Financer 100 00% Share Of Contributors In % Farmers Share Of Contributors In % Total 100 00% I 100 00% 100 00% 100 00% 14 90% 88 640 88,640 - 22,035 17.005 34,137 - - 98 40%1 100 00% 100 00% 100 00% 100 00% 100 00% 85 10% 100 00% 100 00% 100 00% 100 00% 100 00% 100 00% 100 00% 100 00% 100 00% i 100 00% 100 00% 100 00% 100 00 !□ 100 00% 100 00% 100 00% 100 00% 100 00% 100 00% 100 00% Fixed Cost O&M 1 or Irrigation And Associated Structures Project Management Unit (PMU) 7 raining Access Roads 1 o PMU & Command Area Settlement Environment And Ecology 224 897 3,638 156 431 9 224 258 5 809 3 662 177 22.035 17.005 34 137 228 535 156431 9 224 258 5 809 3 662 177 3,631 48 887 456 3 586,253 - 98 40% 100 00% 100 00% 100 00% 100 00% 100 00% 100 00% 100 00% 1 and I ax Institutional Cosl Miscellaneous Income Tax 3 631 48 887 4491 7 1.035,941 2,550 312 100 00% 100 00% 98 40% 28 90% 29 40% 100 00% 100 00% Total ___________ _____ _________ [j 818 170 3 725 999 J 544 169 1 60% 71 10% 70 60% 100 00% 100 00% 100 00% WWDSE in Association with ICT Final Feasibility Study Roport 47Federal Democratic Republic of Ethiopta-Wliniatry of Water Resources Feasibility Study and Detail Design of Bale Gadula Project VOL 11 Anne* 15 Financia & Economic Analysis 7.2 AVAILABILITY OF CONTINGENCY FUNDING The financial requirement of the project is estimated on the basis of identified cost category However to cover any unforeseen pnysical expenses it is advisable that the investment increases by 7 5% so that the fmancer could mobilize an additional sum of financial resources required for initial investment. The contingency fund is allotted to cover unforeseen annual expenses The operating contingency funding would oe financed by the annual operational revenues of the project and requiring no additional allowances On the contrary price contingency which allow for likely effects of inflation are not considered since the analysis is worked on the basis of constant price The required contingency funding is already included in the total financial requirement of the project Unless the contingency funding on the initial investment is secured by the project, the project could face cash shortages and it is therefore one of the financial requirement of tne project WWDSE in Association with ICT Final Feasibility Stuay Report 48Federal Democratic Republic of Ethiopia-MinisVy of Water Resources Feastbiftty Study and Detail Design of Bale Gadula Project VOL 11 Annex 15 Financia & Economic Analysis 8 LOAN REPAYMENT AND COST RECOVERY Loan Repayment The financial requirement is assumed to be obtained on loan basis The loan repayment schedule assumes 4 years of grace period 7 5% interest rate ana 15years repayment periods The loan repayment consist the payment of interest rate and loan which would be paid on equal annual payment bases The estimated loan repayment is done using the method of capital recovery factor The tentative loan repayment schedule is presented in the following table Table 8-1 Loan Repayment WWDSE in Association with ICT Final Feasibility Study Report 49Federal Democratic Republic of Ethiopla-Mimstry of Wator Resources VOL 11 Annex 15 f - J —^aqul a Pr°Jcct Financia A Economic An alysis 9P ROJECTED FINAN CIA L STA TEM ENTS 9.1 FI NANCIAL RESULTS Profit and Loss Forecast: The profit ana ioss account is also known as the income statement and provides information on the value and costs of sales The trading profit also called gross profit or gross margin of tne project is calculated by subtracting the costs of sales i e variable operating costs from sales revenue The trading profit of the project is positive starting from its commencement up to the final year of operation It shows annual increment during the initial years of operation and then becomes constant up to the last year During the end year the trading profit increases because of the sales of the entire finished products as well as all of the previously accumulated stocks The net profit is the difference between the revenue and operating expenses of the project It is calculated by subtracting overhead operating costs depreciation and loan interest from the trading profit. Tne net profit is negative only during the initial years of the project whereas it shows similar trend like that of the trading profit Business income and dividend taxes are debited against the operating profit to arrive at tne final net profit or loss Witn regard to this project, dividends are assumed to be nil implying that there woulant be shareholders other than the proposed partners The trend of the net profit after tax follows the same trend like that of the net profit before tax ana therefore records losses only during the first year of operation The final net profit after tax can be divided in to dividends to equity holders and transfer to reserves Reserves are important for ensuring financial stability of the project ana permitting a measure of self financing of future expansion The trading and loss account is Dased on the concept of accruals in that sales made in a certain time period are compared with tne cost of making those for which payment may not yet have been received Like wise the cost of sales doesn’t include those materials used in the manufactunng stocks and work m progress Due to the tax exemption privilege and the positive cumulative taxable profit, the payment of taxes would be one years in arrears The trading and profit and loss account is an indicator of the relative efficiency of the project in terms of project income against project expenditure over a designated time Deriod The income statement is presented in Annex 9 1 WWDSF in Association with ICT Final Feasibility Study Report 50Federal Democratic Republic of Ethiopia-Ministry of Water Resources Feasibility Study and Detail Design of Bale Gaduia Project VOL 11 Annex 15 Financial & Economic Analysis Cash Flow Forecast: The casn flow statement contains information of casn inflow ano out flow of the project and availability of physical cash within the project The projected cash flow statement shows that the cumulative cash flow remains positive and there will be enough cash available to meet the expenditure requirement of the project at any particular moment in time Equity capital, loan, sales and residual values are ecorded as the source of r income i.e cash inflow On the other hand investments operating costs interest on loans loan repayment and taxes are recorded as the cash out flow of the project The cash out flow is subtracted from the cash inflow and the cumulative cash flow remains positive indicating that the project will not face any liquidity problem through out its operating life The cash flow forecast is presented in Annex 9 2 Balance Sheet Forecast The Balance Sheet consists of assets, liabilities ana owner's equity and its purpose is to snow financial position of the project as of at a particular time of eacn of the analysis period Assets, liabilities and owner’s equity ending balances are carried over as beginning balances to the next year whereas items such as revenues expenses and dividends have balances which arise from a particular transaction of the year The summation of the principal Long-Term Loan as well as tne accumulated interest accrual would be the beginning balance of loan amount at the start of the loan repayment period The stocks (Materials and Finished Goods) of eacn year are assumed to be fully utilized at the end of the each year Tax will be payables one year in arrears from that in tne cash flow The Balance sneet projection is presented in Annex 9 3 9.2 BREAK-EVEN ANALYSIS AND PAYBACK PERIOD Breakeven- Point The point of activity of the project at which revenue and costs are exactly equal is called breakeven point The calculated Dreakeven point is below tne planned annual volume of production Loss will be incurred beiow the break even point while aoove the Dreak-even point there would be a profit The average production volume of the project is much higner the computed break even point so that the profit is significantly higher The applied formula to compute the Dreakeven point is as follows BEP= fixed costs / (sales revenue per unit-variable costs per unit) WWDSE in Association with ICT Final Feasibility Study Report 51Federal Democratic Republic of Ethlopia-Minlstry of Water Resources Feasibility Study and Detail Design of Bale Gadula Project VOL 11 Annex 15 Financial & Economic Analysis The annual fixed operating cost includes the annual operating costs as well as the annualized investment costs The annualized investment cost is computed through capital recovery method of calculation Table 9.1: Break-Even Point Descnption Annual Fixed OC sales unit Sales Revenue Sales Revenue per unit Annual variable cost Variable Cost per unit Contribution per unit BEP Unit of ''.I'. COOBi" qt OOOBirr Birr/qt Birr Birr/at jt/annum Quant , 5 Bl 988 1,129,921 335,747 483 97 1424 31 528 331 27 90 269 24 19 061 Payback Period The payback period is defined as the length of time it takes for the initial investment to be repaid out of the cumulative net cash inflows before depreciation from the project The payoack period is calculated to be 5 2 years from the start of year 1 indicting tnat tne project recovers its initial investment costs at relatively shorter gestation period It will be nearly 6 years Defore initial outlay is covered by the inflows The payback period includes the recovery of all of the initial investments as well as operating capital including interests on long-term loans and bank charges that will be incurred curing tne .ndicated payback period The payback period can be derived by calculating the cumulative casn flows as in Table 9 2 Taole 9.2: Payback Period Year 0 1 Initial investment Annual Costs Sales Revenue Net Cash flows OOOBirr Cumulative Cash flows .| 42,503 Lj 42 503) 42.503 2 3 92,049 72,108 - 1 - (92 0491 (134.552) —.— - 4 5 6 47,617 064 j 376 171) 510.723) - 0,313 243,078 02 765 307 959) 44,430 296,418 251 988 151971]. 353,184 j 305.567 249.596 WWDSt m Association with ICT Final Feasibility Study Report 52Federal Democratic Republic of Ethiopia-Miniatry of Water Resources Feasibility Study ano Detail Design of Balo Gadula Projoct VOL 11 Annex 15 Financial & Economic Analysis It can be seen that the cumulative cash flows become positive in the 6th year If we assume tnat the cash flows accrue evenly over the year the precise payback period will be 5years* (55,971/305,567) =5.2 years which is equivalent to 62 2 montns or 5 years and 2 months 9.3 RATIO ANALYSIS Return to Owners Equity: This return is the Net profit to equity and is calculated to see the profitability of the owners' investment. It is the net final equity earnings after taxes divided by shareholders equity and retained earnings or reserves The ratio represents the amount of profit available to the owners The Return on Owner s equity (ROE) is calculated for every single year and for the average of the analysis period The ROE is calculated as follows ROE= (Net profit after taxation and preference dividends/Share Capital* Reserves)*100 Due to the assumption that there would De no share of initial investment, the return to owners equity is not calculated for the project The annual ROE is calculated at 51% The Net Profit to Equity ratio is found to be higher figures ano nigher figures reflect the extent to which the project earns very much return which is the most desirable objective of a business This will reveal the relative performance ana strength of the project in tne economy and is capable of attracting future investments The overall ROE nas almost a constant trend line as is shown in Chart 9 1 WWDSE in Association with ICT Final Feasibility Study Report 53Federal Democratic Republic of Ethiopia-WImstry of Water Resources Feasibility Study and Detail Design of Bale Gadula Project Chart 9.1: Returns to Owners’Equity Return on Equity (ROE) VOL 11 Annex 15 Financial & Economic Analysis Return on Capital Employed (ROCE): The ROCE ratio expresses the relationship Detween tne net profit generatea and the long-term capital invested in tne project and this ratio is a fundamental measure of business performance The ratio compares capital invested worth profit and this comparison is of vital importance in evaluating the effectiveness with wmeh funds have been deployed The ratio is expressed in percentage terms ano is as follows ROCE= (Net profit before interest and taxation/Share Capital* Reserves* Long-term loans)*100 The ROCE is calculated for every years and the result shows that for many of the years the ratio remains more than 81% tne average Deing 77% For the sake of simplicity the ratio is depicted in the following trend line cnart The cnart shows that the project will nave increasing trena line of profit ano remains almost constant for every operational year WWDSE in Association with ICT Final Feasibility Study Report 54Federal Democratic Republic of Ethiopia-Mmistry of Water Resources Feasibility Study end Detail Design of Bale Gadula Project VOL 11 Annex 15 Financial & Economic Analysts Chart 9 2 Returns on Capital Employed (ROCE) ROC Net Profit Margin: The ratio relates tne net profit for the period to the sales during that period The ratio is expressed as follows Net Profit margin= Net Profit before interest and taxation/salesX100 The net orofit before interest and taxation is used in this ratio as it represents the profit from trading operations before any costs of servicing long-term finance are taken into account This is often regarded as the most appropriate measure of operational performance for comparison purposes as differences arising from the way in which a particular business is financed will not influence the measure The net profit margin at optimum production level is calculated as 452 361/525 402X100=86 1% The trend of the net profit margin is depicted in Chart 9 3 WWDSE in Association with ICT Final Feasibility Study Repor. 55Fodcrai Democratic Republic of Ethiopia-Ministry of Water Resources Feasibility Study and Detail Design of Bale Gadula Project VOL 11 Annex 15 Financial & Economic Analysis Chart 9. 3 Net Profit Margin c ? 2 0. o z ♦- Net Profit Va g n Gross Profit Margin This ratio relates the gross profit of the business to tne sales generated for the same period Gross profit represents the difference between sales and the cost of sales The ratio is therefore a measure of profitability in buying or producing ano selling goods before any other expenses are taken into account As cost of sales represents major expenses for retailing and manufactunng businesses a cnange in this ratio can have significant effect on the bottom line i e the profit for tne year The gross profit ratio is calculated as follows Gross Profit Margin= Gross Profit/SalesX100 The average gross profit ma gin r is calculated to 90 9% for tne wnoie of the analysis period. WWOSE in Association with ICT Final Feasibility Study Report 56Federal Democratic Republic of Ethiopia-Ministry of Water Resources VOL 11 Annex 15 Feasibility Study and Dotail Design of Bale Gadula Project Financial & Economic Analysis Chart 9. 4 Gross Profit Margin Gross Pro*! Margin 92 00% t - —♦— Gross Profit Margin' | 9.4 EFFICIENCY Average Stock Turnover Period: Stocks represent a significant investment for a business and may account for a substantial proportion of the total assets held The average stock turnover period measures the average period for which stocks are being neld The ratio is calculated using the formula Stock turnover period = (Average stock heid/cost of saies)/2 X 365 Tne average stock for the Denoa can De calculated as a simple average of the opening and closing stock levels for tne year The average stock turnover period for the entire life of tne project is calculated as (opening stock -rend stock) /2 cost of sales X 365 days I hus on the average the stock held is being turned over every 2 1 days The low stock turnover period is preferred to a high period due to tne assumption tnat funds tied up in stocks cannot oe used for other purposes The lower amount of stock to carry could be the results of higher future demand and thus tne possibility of future shortages the likelihood of future price rises the amount ot storage space available tne perisnaDie of the products etc The products of the project thus could thus found market without creating Digger stocks The average stock turnover period is presented in Chart 9 4 WWDSE in Association with ICT Final Feasibility Study Report 57Federal Democratic Republic of Ethiopia-Mimstry of Water Resources Feasibility Study and Detail Design of Bale Gadula Project Chart 9 5 Average Stock Turnover Period VOL 11 Annoi 15 Financial & Economic Analysis Average Stock Turnover period (Days; 30 25 20 10 05 Average Stock Tjrnover Period (Days) 4 7 10 13 16 19 22 25 28 31 34 years Average Settlement Perioas for Debtors: Tne Dusiness would De concerned with how long it takes for customers to pay the amount owing The speed of payment can have a significant effect on the casn flow of the business The average settlement period calculates now long on average credit customers take to pay the amounts which they owe to the Dusiness The ratio is as follows. Average settlement period= trade debtors/credit saiesX365 The average settlement periods is estimated to be 10 cays It is tne result of tne calculation of accounts recevebles/saiesX365 The average settlement period is done for each year while the average for the entire life relates to the specified 10 days For the whole of the analysis period, it assumed that the accounts receivables would be recovered within a snort time span of the specified number of days Average settlement Periods for Creditors This ratio measures how long on average tne business takes to pay its creditors The ratio is calculated as follows Average Settlement Period= Trade Creditors/Credit PurcnaisesX365 WWDSE in Association with ICT Final Feasibility Study Report 58Federal Democratic Republic of Ethiopia-Mimstry of Water Resources Feasibility Study and Detail Design of Bale Gadula Projoct VOL 11 Annex 15 Financial A Economic Analysis The average annual settlement penod is calculated as accounts payable/sales X365 days The calculated period is a very short days of about 6 9 The shorter the settlement period is preferable than the longer period Asset turnover ratio this ratio examines how effective the assets of the business are Deing employed in generating sales revenue The ratio is calculated as follows Asset turnover ratio= sales/ffixed assets current assets) The annual asset turnover ratio shows a decline trend due to the cumulative cash flow increments which is considered as a sign of profitability The asset turnover ratio is depicted is depicted chart 9 6 Chart 9. 6 Asset Turnover Ratio 9 5 LIQUIDITY RATIO Current ratio tnis ratio compares the liquid assets i e cash and those assets held which will soon be turned into cash of the business with snort term liabilities that would be due within a year The ratio is calculated as follows WWDSE in Association with ICT Final Feasibility Study Report 59Federal Democratic Republic of Ethiopia-Ministry of Water Resources Feasibility Stuoy and Detail Design of Bale Gadula Project VOL 11 Annex 15 Financial & Economic Analysis Current ratio= current assets /current liabilities (creditors due within one year) The average current ratio for the entire life of the analysis period is 30.5 times The ratio reveals that the current assets cover the current liabilities by 34 5 times The higher the ratio, the more liquid the business is considered to be A higner current ratio is preferred to a lower ratio The trend of the current ratio is depicted in Chart 9 7 Chart 9. 7 Current Ratio current ratio Acid test ratio the stock in hana may not De convened into cash quickly As a result, it may be better to exclude this particular asset from any measure of liquidity The acid test ratio is calculated as follows Acid test ratio= current assets (excluding stock)/current liabilities (creditors due within one year) The ave age acid test ratio is calculated as 3 030 458/87 915=34 times r The liquid current assets cover the current liabilities and so the business do not experience liquidity problem WWDSE in Association with ICT Final Feasibility Study Report 60Acid Tait Ratio Federal Democratic Republic of Ethiopla-Ministry of Water Resources Feasibility Stuay and Detail Design of Balo Gadula Project VOL 11 Annex 15 Financial & Economic Analysis Chart 9. 8 : Acid Test Ratio Acid test ratio 250 WWDSE in Association with ICT Final Feasibility Study Report 61Federal Democratic Republic of Ethiopia-Ministry of Water Resources Feasibility Study and Detail Design of Bale Gadula Project VOL 11 Annex 15 Financla & Economic Analysis 10 FINANCIAL ANALYSIS Financial analysis of the project has been undertaken by considering the investment cost. O&M costs, net benefits from the cultivation of existing as well as proposed crops in the command area In the analysis of financial BCR. IRR and NPV the total cost of project is taken as a sum of caDital cost of investment, O & M charges as well as benefits from proauction of existing crops (without project benefits) On the other hand the benefits from production of crops under post irrigation phase which is also termed as with project benefits are taken as benefits from the proposea project These benefits and costs are discounted at the rate of 7 5% The explanation of these terms and metnoas of computation are discussed in the methodology section of the report The results of the analysis for the same cropping pattern of the farmers the financer and the entire participants are presented in table 10 1 The computation is done for the cases of after and before the payment of business income taxes The results of the viability measures snow that tne implementing authority and other stake holders in the project will be fully compensated 10.1 VIABILITY OF THE PROJECT Before and after taxation The financial Internal Rate of tne entire Project before taxation amounts to be 28 2% ana 26% after taxation Tne Net Present Value of the project before and after tax is estimated to be MBirr2 655 and MBirr1,839 respectively The Benefit Cost Ratio of the project before ana after tax amounts to 2 53 and 1 72. respectively The project is thus viable at tne established Dnces of the crops and their by products The viability of the project after tax is presented in Table 10 1 WWDSE in Association with ICT Final Feasibility Study Report 62Federal Democratic Ropublic of Ethiopia-Mmlstry o1 Water Resources Feasibility Study and Detail Design of Balo Gadula Project VOL 11 Annex 15 Financia A Economic Analysis Table 10.1: Financial Viability of the Entire Project after Tax — Year 0 1 2 3 4 6 6 7 8 9 10 11 12 Investment O&M lax 1 1 otal cost With out project Benefits With Project Benefits (OOOBirr) Incremental Benefits (65 168 1) PV of Costs 5 168 1 OOObirr Pv of Benefits - - 42 503 92 049 372.108 4 064 40,313 - 42.502 9 92 049 1 376,171 4 40 313 1 44.430 3 47 616 8 50,804 2 53.652 9 52.775 2 52.775 2 202 834 4 208 965 8 (107,671 0) 100 159 0 (157,217 2) 136 045 2 i (441,339 5) I 355 260 9 243,565 297 012 353 892 410 045 492,477 78 984 4 182 381 5 44,430 47 617 50 804 53,653 52.775 52 775 52.775 52.775 65,168 65,168 65 168 65,168 65 168 65,168 65 168 65,168 65.168 65,168 65,168 65 168 65 168 65,168 65,168 65 168 138 083 7 187,413 5 241,106 9 294 .072 8 373 655 9 377.296 1 76 341 7 206 886 3 73,080 3 229.308 2 69 902 8 247,156 7 495,239 1 66 623 2 61,517 3 57 225 4 276,132 9 258,308 7 243,022 0 150 059 156,191 13 14 15 52 775 52 775 .j 52 775 156 191 208 965 8 156 191 208 965 8 | 500,876 508 445 526,455 526 455 526 455 156 191 208 965 8 ] 526,455 382,932 8 240,442 4 252,321 3 252 321 3 252.321 3 ______ 252,321 3 120.961 1 229 483 2 115.096 3 221 034 4 107 066 3 205,613 4 99 596 5 191,268 3 92 647 9 177 924 0_ WWDSE In Association with ICT Final Feasibility Study Report 63e®?* * r 1 ,.P°TOCratic R°Pub,ic of Ethic- " -nd D^.T/Doi ZXTS ;'^, ■H Design ofBalo Gad Jia Project r Rc s-cos VOL 11 Annex 15 Financial & Economic Analysis Investment O&M lax 156,191 156.191 156.191 156.191 156 191 156 191 156 191 156,191 Total cost With out ------------------------------ T 52.775 52.775 52 7 75 52 775 52.775 52.775 52.775 52.775 With Project Benefits (OOOBirr) I PV of Costs T OOObirr Pv of Benefits 52,775 156 191 52,775 52.775 52,775 156,191 156 191 156,191 86 184 1 T 80 171 3 74 577 9 69,374 8 I 64 534 7 I 60 032 3 55 883 4 51 947 9 48.323 6 44.952 2 41 816 0 165 510 7 153,963 4 - _J43j221 8 133 229 6 123.934 5 115 287 9 1 U f Z44 b 99 762 4 92 807 2 86 327 6 80 304 8 i 52 775 156 191 52 775 156 191 52.775 156 191 52 775 156 191 52.775 156 191 __ B/C Ratio 52 775 1 560 261 1 7195 156.191 3,586.253 208 965 8 208 965 8 208 965 8 208,965 8 208,965 8 208 965 8 209 159 4 208 965 8 208,965 8 208 965 8 208 965 8 208 965 8 208 965 8 208,965 8 208 965 8 208 965 8 208,965 8 6,108 5 6 4 4H 4 1 n project Benefits 65 168 65 168 65 168 65 168 65 168 65 168 65,168 65 168 65,168 65.168 65 168 ___65 168 65.168 65.168 65 168 65,168 65,168 65 168 2,215.715 526 455 526 455 526,455 _ 526.455 526 455 526,455 526 455 526 455 526 455 526.455 526 455 526 455 526 455 526 455 526 455 526.455 526 455 526,455 14 883,566 Incremental Benefits 252 321 3 252,321 3 252 321 3 252,321 3 252.321 3 252.321 3 252,127 8 252.321 3 252.321 3 252 321 3 252 321 3 252 321 3 252,321 3 252 321 3 252.321 3 252,321 3 252 321 3 455,178 7 7 217.341 38 898 6 74,702 1 36 184 8 69 490 3 33 660 2 64 642 2 • 31 311 9 29 127 3 27 dck o 6 553 4 ■----- 60.132 3 vj,yj/ u □ 2 034 4 48 4D4 1 2 556 306 ' 4 395 451 NPV __ J,839.145 —----------- IRR __________ 26 0%Federal Democratic Republic of Ethiopia-Ministry of Water Resources Feasibility Study and Detail Design of Bale Gadula Project VOL 11 Annex 15 Financia & Economic Analysis 10.2 VIABILITY FOR THE FARMERS' SHARE OF FINANCING The financial Internal Rate of the farmers before taxation amounts to De 36 2% and 34 5% after taxation The Net Present Value before and after tax is estimated to be MBirrl 929 and MBirrl 349. respectively The Benefit Cost Ratio before and after tax amounts is estimated to 2 53 and 1 73, respectively The share of the farmers investment with respect to annual operating cost is thus viable at the established crops price of the crops and tne by products. Table 10 2 shows the financial viability of the farmers after the payment of taxes WWDSE in Association with ICT Final Feasibility Study Rcpon 65Federal Democratic Republic of Ethiopia Ministry of Water Resources Feasibility Study and Dotail Design of Balo Gadula Project VOL 11 Annex 15 Flnancia & Economic Analysis Table 10.2. Financial Viability of the Farmers’ Project after Tax 1 Year , Investment OSM Tax Total cost r OOUbirr Pv of Benefits 0 1 1 2 3 4 5 With out With Project project Benefits Benefits (OOOBirr) 65,168 65,168 65 168 65.168 Incremental PV of Benefits Costs I (65 168 1| 65.168 1 165.168 1) 60.621 5 165,168 1) 56 392 1 33,902 36.727 33.901 8 36.727 0 65.168 176,950 65,168 215.779 |65 168 1} 77 8/9 8 52 45/ 7 74 183 6 132.500 0 70.975 9 6 39.552 39,552 1 65,168 257,102 113 883 9 152.381 a 67,854 7 7 8 9 10 42.377 45.202 45 202 42.377 3 65,168 65.168 65,168 65 168 65,168 65 168 65,lb8 65.168 65 168 65.168 65,168 65.168 297.897 357.784 359 791 363 886 369,385 382 469 3H2 469 382 469 382.469 382 469 382,469 382,469 190 352 0 45 202 4 45 202 4 45 2O2 4 247.413 5 64 823 5 61885 0 57,56/ 4 45.202 45.202 249,420 4 253.515 5 53 551 1 11 12 13 97.938 2 92.975 6 86 488 9 14 15 16 45 202 45.202 45 202 45.202 45.202 10b.622 1 151.824 » 111,077 156 2 /9 2 i 111077 1 156 2 /9 2 152,392 0 161.022 0 161.022 0 161.027 0 161 022 0 161.022 0 17 IK 45.202 45 202 111.077 156.279 2 111 077 156 279 2 111.077 156,279 2 111.077 156.279 2 111.077 156,2 79 2 i— 161.022 0 161,022 0 80.454 8 74.041 7 69,620 1 64 762 9 1 | 60 1 14 150 302 7 166 592 2 1/9,559 1 200,610 3 18/.661 0 176.555 3 166 719 J 160 581 3 149.3/7 9 130 956 2 129 261 6 120 243 4 111,854 3 6 104 050 5 WWDSE In Association with IC1 Final Feasibility Study Report 66 TWT1Federal Domociatlc Republic of EthiopiaMinistry of Water Resources Feasibility Study and Detail Design of Balo Gadula Project VOL 11 Annox 15 Financial A Economic Analysis Year Investment With Projoct Benefits |000Blrr| 382,469 382.469 382 469 J82 469 382 469 382 469 Increments! Benefits PV of Costs 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 total 0AM 45.202 45.202 45.202 45,202 45,202 45,202 45 202 45 202 Us lotal cost in on 15G.279 2 111,077 156.2/9 7 111 077 156 2/9 2 111.07/ 156 2 /9 2 111,077 156 229 2 111.077 156 2 /9 2 111.077 156,229 2 111 0/7 156.2 '9 2 161.022 0 56.041 5 161 022 0 52.1)1 6 161,022 0 48 494 5 161022 0 45 lit i 161.022 0 41.96) 9 161.022 0 19.036 2 382 169 161.022 0 36.112 / 45,202 45,202 45,202 ’I 45.202 45.202 45 202 45,202 I 1 327,821 111,077 156,2’9 2 111.077 111 077 111,077 111077 111 077 111.077 2 550,312 156,2/9 2 156.279 2 156.2 .'9 2 156.229 2 156 2/9 2 156 2 79 2 3 878.132 With out project Benefits 65.168 65,1 (>8 65 168 65 168 65,168 65,168 65,168 65,168 65,168 65 168 6S.168 65,168 65 168 161 022 0 3)7293 161.022 0 31.422 6 161.022 0 29.230 3 161.022 0 27.191 0 161.022 0 25.293 9 65 168 65,168 2,215.715 382 469 382 469 382 469 382 469 382,469 382 469 382 469 382,469 10812 897 161,022 0 161.022 0 21 529 2 21817 7 161.022 0 20.360 6 4,719,050 1.844,593 34 5% OOObirr Pv of Benefits 96 '912 90 038 3 83.756 5 22.911 1 22.42/ 3 6/ 420 7 62 716 9 58.341 ) 54.221 0 50.48-1 7 46.962 5 43.686 0 40 C3I 2 12.107 9 15,165 5 3.193 291 8/C Ralio 1 73 NPV 1.348 698 IRR WWDSE in Association with ICT Final Feasibility Study Report 67Federal Democratic Republic of Ethiopia-Ministry of Water Resources Feasibility Study and Dotall Design of Bale Gadula Project VOL 11 Annex 15 Financia & Economic Analysis 10.3 THE FINANCER The financial Internal Rate of the financer Defore taxation amounts to be 19 2% ana 15 9% after taxation The Net Present Value before and after tax is estimated to be MBirr726 2 and MBirr426 5 respectively The Benefit Cost Ratio Defore ano after tax amounts is estimated to 2 5 and 1 6. respectively The share of the financer with respect to fixed capital and annual operating cost is thus viable at the established main and by product crop prices The viaoility of the financer considering the payment of income tax is presented in Table 10 3 WWDSE in Association with ICT Final Feasibility Study Report 68Federal Democratic Republic of Ethiopia Ministry of Water Resources I casibility Study and Detail DosiQn of Balo Gadula Projoct VOl 11 Annex 15 Financia & Economic Analysis 1 able 10.3: Financial Viability of the Financer Project after Tax OOObtrr Year 0 1 2 3 4 5 6 7 H 9 10 11 Investment O&M lax WHh Oul Total Cost Project Bonefits With Project Benefits (OOOBirr) incremental Benefits PV Of Pv 01 Costs Benefits Products(Qt) 42.503 92 019 372 108 4 064 6 411 7.703 8.065 8 427 H 450 7.573 4.’ 502 9 92 019 1 3/6.121 4 6.41! 3 b2 689 76,576 91.322 105 851 127,558 128,2 B0 7.573 75/3 ' 201 4 B OM 7 8.426 9 R 450 5 7.577 K 7.57? B 51 COT 2 576866 S2.6U 6 57 686 6 52 C8b 6 52 686 6 52X86 6 _ 52.686 6 129 747 131.709 12 13 14 IS 7.573 7 573 7 573 7 573 7 5 73 7.573 7 573 41 137 45 114 45.114 45.114 45 114 45 114 45.114 45,114 136.501 136.501 136.501 136,501 142.502 9) (92 049 1| (1/6 171 4| 56 2 78 0 68.1/2 6 83 257 6 97,424 1 119.10'8 120.70' 4 122.124 1 80,699 5 83.813 9 8) 813 9 83 813 9 83.813 9 lb 136,501 83.813 9 39.517 6 79.651 1 302 803 1 4 800 8 46 941 8 5 165 9 51 139 7 5 225 6 59.173 4 5 079 4 63 802 2 4 238 2 71.522 2 3,949 8 66 908 8 3 674.3 62.952 4 23.022 9 59 446 1 22 120 7 57.310 J 20.577 4 53.3119 19.141 8 49.592 5 17.BO6 3 46.132 5 16.564 0 42 914 0 17 18 136 501 136,501 83.813 9 | 83.813 9 15 408 4 14 333 4 39 920 0 37 114 9 281 416 963 78S 1 151.789 1,338,944 1.572 983 1 582.754 1,601.607 1 627 317 1 674.368 1,674 368 1 674.368 1.674 168 1,674 368 1 674 368 1,674 368 WWDSE In Association with ICT Final Feasibility Study Roport 69Federal Democratic Republic of Ethiopia Ministry of Walor Resources Feasibility Study and Detail Design of Dale Gadula Projccl VOL 11 Annex 15 Financial & Economic Analysis Year 19 20 21 Investment 22 23 24 25 26 27 28 29 30 194 OIM 2.573 7.573 7.573 7,573 2.573 7.573 7.573 7 573 7 573 7.573 7 573 7 573 7.573 7 573 7 573 232,441 1 60 lax Total Cost With Out Pioject Benefits 45.114 45,114 45 11 t 45 114 45 114 V 11 1 57 616 6 52 681 6 52 686 6 S2 880 2 52.686 6 52.686 6 ___52^686 6 57.6116 6 52.686 6 OOObirr Pv Ot Bcnoflts 34,544 1 , 32.134 0 1 Ptoducts(Qt) 1 674.368 1 674 368 29 892 1 j 1 674368 27.806 6 1 674 368 1 6 74 368 1 674 368 31 52 681 6 52 681 6 !-I 57.616 6 32 33 (202,857) With Project Benefits (OOOBlrr) 136,501 1 36 501 136,501 136,501 136 501 136.501 136.501 136 501 136.501 136.501 136 501 136 501 136 501 1 36 501 1 36.501 Inciomentel Benefits 83 813 9 83 111 9 8! 813 9 1 83813 9 83 813 9 83 fell 9 81 8139 83 813 9 ■ 3813 9 83 8139 83.811 9 83 81 3 9 81 813 9 286.671 1 PV Of Costs 13.333 4 12 403 1 H 537 8 10.772 3 9 984 0 9 28 7 5 8 639 5 8 036 7 4• t 954 5 t 4t>9 3 6 017 9 5.598 1 5 207 5 i: 1 807 2| IS 866 6 24.062 0 22 20 821 6 -------- --- - 18 017 6 16 760 6 IS 591 2 1 6'4 368 1 674 368 1 674 368 1 674 368 1.674 368 Total 303.99b 45,114 v lit 45 114 1• 45 114 45 114 1 O35J41 14/03 5 13 491 6 12.550 3 1 674 J68 1 674 368 B/C Hjtio 52,686 6 |I5O 1 70 7| V572J78 NPV * « 2 784 367 IRH 1 674 368 47 456 691 — 476 4H4 711 7B - 15 9% WWDSE in Association with ICT Final Feasibility Study Report 70Federal Democratic Republic of Ethiopia-Ministry of Water Resources Feasibility Study and Detail Design of Bale Gadula Project The results obtained are presented in the table 10 4 10.4 SENSITIVITY ANALYSIS VOL 11 Annex 15 Financla & Economic Analysis The purpose of sensitivity analys.s is to identify the factors that can affect the project More over it nelps to propose precautions tnat should be made to protect the project from the unfavorable situations important variables that are supposed to be changed are crop yiela investment costs, croo prices and operating costs In all of the cases, the worst case that may challenge the normal operation of the project is assessed It is relevant to test them all simultaneously at 10% variances compared to the base case scenano i.e • A 10% increase in the costs and no change in the benefits • A 10 % decrease in benefits and no change in costs and, • A 5% decrease in benefits and a 5 % increase in costs Under all circumstances, it is concluded that the project is strong enough to remain profitable despite the fact that the magnitude of variability results are changed The results of the cnangea variables are compared with the result of the base case scenario A change in any of the parameters will result in change of the IRR. NPV and B/C Ratio as well as in the unit selling prices of the output. Among the different kinds of sensitivity analysis, the project should try to avoid the simultaneous occurrences of unfavorable conditions The results of sensitivity analysis revealed tnat assuming an increase in cost by 10% and with no change in benefits as well as a decrease in benefits by 10% and witn no change in costs, the project is viable in both options similarly the decrease in benefits by 10% and increase in cost by the same amount resulted in BCR again more than 1 ana iRR also more than the applied discount factor of 7 5% Thjs the project is financially viable in Doth the situations even if there are unforeseen changes in the costs ana benefits of the project in some reasonable limits The sensitivity test for the entire project, the farmers and the Financer is discussed oeiow WWDSE in Association with ICT Finn Feasibility Study Report 7)Federal Democratic Republic of Ethiopia-Mimstry of Water Resources Feasibility Study and Detail Design of Bale Gadula Project VOL 11 Annex 15 Financial & Economic Analysis Decline of in benefits by 10%: Assuming that other things remain unchanged and at the established unit crops selling rate of the products the project could remain viable if a condition that reduces the yield level from the planned level occurs Under this condition, the two partners of the project will operate at profitable rate However the decline of yield indefinitely necessitates the establishment of higher selling prices Increment of Cost by 10%: The increment of the investmenr cost Dy 10% wouia reduce the viability and could make it to operate at reduced level of profitability Similarly; the increment of operating costs would be directly reflected mainly on the annual net benefit of the farmers and the entire project An increment of the operating cost by 10% will reduce the net income of the entire project Similarly the net benefit that could be obtained above the net benefit of the without project case of tne farmers reduces The established unit rate can therefore accommodate an increment of costs by 10% while the project remains viaDle Increment of costs and decline of benefits by 5% This unfavorable situation would cause a decline of the net benefits of the farmers and the entire project Accordingly, tne net benefit per ha oasis of the entire project would decline Similarly the additional net benefits of the farmers would oe reduced On the other hand tne net benefit that could be obtained from tne entire area of land still is much higher tnan the existing production level Change of variables that will result in a reduction of tne selling price of the products would marginalize the profitability status The major strategy to remain competitive in the market of the final crop production is to be aDle to deliver the products at the established price and any price decline could be a treat for the smooth operation of the project The reason for a significant impact of Drice changes is thai price is established based on the benefit and cost streams The result of the decline of the farm gate price is would greatly affect tne viability so that if price is to be reduced, it should be accompanied by simultaneous increment of yield level, reduction of costs or a combination of them WWDSE tn Association with ICT Final Feasibility Study Report 72Federal Democratic Republic of Ethiopia-Ministry of Water Rosources FeasibilityStudy and Detail Design of B ale Gadula Project VOL 11 Annex 15 Financial & Economic Analysis The summary results of the financial sensitivity analysis for the entire participants, the farmers and the financers are presented in Table 10 4 Table 10.4: Results of Sensitivity Analysis I the Entire Project Farmers Variables Base Case IRR NPV (OOOBirr) B/C Ratio NPV (OOOBirr) 1 713 429 1 177 604 IRR B/C Ratio 1 1 | Before Taxation 26 0% 1 2 After Taxation 23 7% 1 608 142 Decline of production by 10% 17 7% 14 5% Financers NPV | (OOOBirr. 656 011 369.026 2 31 1 51 l I 21 22 Before Taxation After Taxation 2 215 793 1 490,914 I I - 2 27 1 60 32 8% - i f—--------- t 30 8% i 1 095 708 17 5% 606.022 14 3% 337.639 2 27 1 49 I increment of Cost by 10% 3 1 Before Taxation 32 __ After Taxation Decline of Production and simultaneous cost increment , by 5% ----- f I 26 5% 2,521008 2 34 34 9% 24 2% 1 723 709 1 65 33 1% 18 0% - ------------- 14 7% 705 117 i 41 Before Taxation 2 31 656 011 < 2 After Taxation 23 7% 1 608 142 1 63 32 0% 14 5% 2 31 1 51 The results of the sensitivity analysis indicate that the degree of financial viability of tne project is nigh enougn to absorb tne adverse effects of these probable unfavorable circumstances ana the project still remains viaoie WWDSE in Association with ICT Final Feasibility Study Report 73Federal Democratic Republic of Ethiopia-Ministry of Water Resources Feasibility Stuoy and Detail Design of Bale Gadula Project^ VOL 11 Annex 15 Financia & Economic Analysis 11 ECONOMIC ANALYSIS 11.1 CONVERSION FACTORS The purpose of economic analysis of the proposed project is to measure its real contribution to the national income Since in case of such projects where significant amount of national investment is to be invested it should have to determine the extent of contribution such an investment of resources maxes to the national economy in order to decide whether it is worthwhile to invest in this project Prices to be used in the economic analysis have to be real reflecting the true scarcity vaiue or opportunity cost value Due to the existence of various market imperfections in the national economy the market prices as jsed in the financial analysis do not often reflect such opportunity cost values Therefore, the economy analysis demands for the adjustments of the financial benefits and the costs in to their respective real values in order to reflect their opportunity cost values The determination of appropriate prices is made on the basis of the conversion factors presented in tne document entitled the "National Economic Parameters and Conversion Factors for Ethiopia Ministry of Finance and Economic Development. FDR E. June 2008” which is being Drepared by the Ministry of Finance and Economic Development The conversion factors that are used for converting the financial values in to the real economic values are presented in the following Taole 111 Table 11-1 Price Conversion Parameters Used in Economic Analysis No Parameters Wheat Conversion Factors l .28 No 13 Parameters Citrus Conversion Factors l 0X4 i Rice 1 0X4 14 Avocado I 0X4 r J -» Maize 1.084 15 Forage Crops 4 Chick Pea I 17 l 0X4 I6 Labor 5 Haricot Bean 0 31 | I I7 I7 Oxen Power 6 Black Cjmir - I8 • 0 9u61 Machin er \ 7 Coriander I 06 19 Dap Fertilizer n oo u.vv orFI - —1 X 9 10 11 I2 Onion 1.084 Red Peoper 20 21 22 23 I RE A Fertilizer I 06 ' 0.99 Pesticides investment Cost 0 75 I Buildings Stanoard Conversion Factor 0 55 Skilled Labor Transfer Payments 0.76 Construction Roads 25 J Discount Factor 099 0.9 0 0.74 10.23% F «nai Feasibility Study Report 74Federal Democratic Republic of Ethiopia-Ministry of Water Resources Feasibility Study and Detail Design of Bale Gadula Project VOL 11 Annex 15 Financial & Economic Analysis Source: MOFED, National Economic Parameters and Conversion Factors for Ethiopia June 2008 The methods of converting the financial values of the cost ana the benefit components of the project are discussed unaer The economic costs and benefits of the project are estimated through the following ways a) Wheat is converted using its own conversion factor while maize chick pea, onion rice and forage used the conversion factor of Agriculture Similarly the conversion factor of pulses is applied for haricot bean Black cumin, red pepper and coriander are converted by conversion factor of spices b) The costs of supervision works relates to skilled labor whereas the conversion factors of unskilled rural labor formal and animal use are applied for labor and oxen power inputs respectively c) Machinery inputs and land preparation are converted by the conversion of factor of heavy machinery operations whereas the fertilizers ana pesticides used fertilizer factor d) The economic discount factor is 10.23% e) Land taxes ana business income taxes are treated as a transfer of payments using the conversion factor of zero f) The standard conversion factor is equally applied for works of diversion weir canals drainage settlement, miscellaneous ana maintenance The construction of buildings and settlements are based on the same rate of the construction building factor The rate of the road construction is aDpliea to convert the road construction of the project g) Residuals the economic costs are depreciated cased on their economic prices Thus, the remainea value after the economic life of each represents their economic residual values h) The discount rate is 10 23% WWDSE in Association with ICT Final Feasibility Study Report 75Federal Democratic Republic of Ethiopla-Mimstry of Water Resources Feasibility Study and Detail Design of Bale Gadula Project VOL 11 Annex 15 Financial A Economic Analysis 112 ECONOMIC COST Following the above stated methodologies, the economic initial investment replacement investment, operating and working capital as well as operating cost prices of the project is calculated ana presented in Table 11 2 Table 11-2 Summary of Economic Costs of the Project No I Description Source Of Finance(’OOOBirr) I Total Cost 1,523.564 1 Initial Investment Cost 418 163 11 initial Investment Cost 373,232 12 Operating Capital 38,077 • 13 Working Capital 6,854 '2I Annual Operating Costs 1 105,227 3 Replacement Investment Cost | 174 11.3 ECONOMIC BENEFITS AND RETURNS Economic Prices The economic prices of the out puts are presented in Table 11 3 Similarly economic values of the crops and tneir by products is shown in Table 11 4 Taole 11-3 Economic Prices for Inputs Item Measurement Price in Birr Labor Birr/day 6.2 Machinery cost for Birr/ha Citrus Birr/ha 1825 Avocado Birr/ha 1825 Forage crops Birr/ha 1825 Machinery cost for other crops Birr/ha 1095 I DAP Birr/qt 712 UREA Birr/qt 712 Pesticide for rice and maize Birr/lit 92 565 Pesticide for - Rice Birr/lit 93 Maize Birr/lit 93 Pesticide for ------- q1 Chick pea Birr/lit 93 depreciation %age or machinery cost 5 00% Miscellaneous %age of totai cost 3 00% Land Tax Birr/ha 0 WWDSE in Association with ICT Final Feasibility Study Report 76Federal Democratic Republic of Ethiopia-Ministry of Water Resources Feasibility Study and Detail Design of Bale Gadula Project VOL 11 Annex 15 Financial A Economic Analysis Table 11-4 Producer's Prices for Crops I----------------------- (Economic) Proposed Farm Gate Unit Price Of Operational Crop Crops Crop Budget Cost Of Crop Price Crop Price Of Production Of Farmers' (Birr/Qt) Share Financers' Share Crop Price (Birr/Qt) (Birr/Qt) (Birr/Qt) Wheat 57 726 193 919 Rice 52 942 251 1 192 Maize Chick Pea 33 685 182 867 I 120 924 246 1,170 r Haricot Bean 924 246 1,170 Black Cumin 1.256 334 1.590 Coriander 66 1,256 334 1,590 Onion 21 428 114 542 Red Pepper 20 335 89 424 Citrus i Avocado 26 343 91 434 53 343 91 434 Forage Crops 5 64 17 81 Average 51 685 182 868 Based on production inputs specified in financial crop budgets economic prices as shown above the economic crop budgets for tne existing as well as proposed crops grown in the project area have been prepared Summary for the economic costs and returns for existing croDS is given in table 11 5 WWDSE in Association with ICT Final Feasibility Stuay Rcoon 77Federal Democratic Republic of Ethiopla-Ministry of Water Resources Feasibility Study and Detail Design of Bale Gadula Project VOL 11 Annex 15 Financial & Economic Analysis Table 11 -5 Cost of Cultivation and Returns for Existing Crops (Birr'Ha) Crops Gross return Cost of cultivation Net returns ■ Wheat 30 033 3 004 27 028 Maize 29.268 2,213 27 055 Chick oca 11,583 1 823 9 760 Haricot Bear 10.413 1 940 8 473 Black cumin 21 052 1 557 19 495 Conanaer 14 692 1.519 13,173 Onion 42 665 8 917 33 748 Rea PepDer 12.466 3 086 9 380 The economic net returns are the hignest for onion followed by maize wneat and DlacK cumin crops. 11.3.1 Economic Benefits from Existing Crops Tne economic benefits for existing crops are Daseo on area under cultivation and economic net returns for tnese crops Results are shown in table 11 6 Tabie 11-6 Economic Costs and Returns for Existing Crops Crops Total Area ana Returns Net returns Area cultivated .'ha; Total returns Wheat 27 028 Maize 27.055 2 080 56.228 080 15 404 798 Cmck pea 9 760 116 1 129 358 naricot Bean 8 473 16 133.533 Black cumin Coriander 19 495 13 173 33 748 9.380 1 033 20 133 988 : ---- 1—~—I 4 470 176 Onion Red Pepper 339 5 ------------------ 1 IOO j IO Total 148 112 n 3 605 • u.zaz 82 678 540 Final Feasibility Study Report 78Federal Democratic Republic of Ethiopia-Mimstry of Water Resources Feasibility Study and Detail Design of Bale Gadula Project VOL 11 Annex 15 Financial A Economic Analysis The economic benefits from the existing crops are expected to be Birr 82 7 million The maximum, returns is from wheat followed by black cumin crop These befits are also termed as Without Project Benefits 11.3.2 Economic Benefits from Proposed Crops Economic returns for the proposed irrigated crops reaches its optimum level in the 5 th year of irrigation The proposed crops after full realization of yield potential is shown in table 11 7 Table 11-7 Cost and Returns for Proposed Crops - Birr/ha Crops Gross return Cost of cultivation Net returns Gross return 155,260 849 Birr/the entire area Cost of cultivation Net returns I Wheat I 65 539 3.307 62 231 i 7.835 136 147 425 713 Rice 91 598 3 497 88 101 47 172 970 1 800 783 I 45 372 187 Maize 81 896 2,591 79.306 143.400.246 4 536,071 138 864 175 — Chick pea 20 124 1 738 18 386 13,473 018 1 163,616 12 309.402 Hancot Dean 36 504 1.907 34.597 24 439 428 — 1,276,570 ■--------------- — 23.162 858 Blacx cumin 46.619 2295 44.324 19 206 946 945 571 18 261 374 Conander 57 876 2 155 55.721 11 922 456 443 829 11 478 627 Onion 146.611 5 029 141 582 30 201 866 1.035,944 29 165 922 Red pepper 28 991 3 873 25 118 5 972.146 79" 883 5 174 263 ' Citrus r--------------------- Avocado 173 440 9,522 163 918 35 728 640 1 961 589 33 767 051 86 720 9,522 77 198 8 932 160 980 794 7 95* 366 Forage crops 121 950 7,289 114 661 87 925 950 5.255 538 _ 82 670,412 It is evident from the analysis that on full realization of yield potential in the 8*h year tne net return tor perennial crops is hignest The annual net returns per na for proposec irrigated crops for 5 years are presented in table 118 WWDSE in Association with ICT Final Feasibility Study Report 79Federal Democratic Republic of Ethiopia-Ministry of Water Resources Feasibility Study and Detail Design of Balo Gadula Project VOL 11 Annex 15 Financial & Economic Analysis Table 11-8 Yearly Economic Net Returns from Irrigated Crops (Birr/Hai No Crops 1st Year (Yr4th) 1 2nd (Yr5th) 3rd Year (Yr6th) 4th ^ear (Yr7th ) 5th Year (Yr8th) 1 Wheat 45 041 49 943 54 039 58 135 62 231 I 2 Rice 50 657 63 675 75 888 81 995 88 101J — 3 Maize 49 932 56 451 64 069 71 687 79 306 4 CnicK Pea 12 550 15 870 17 128 18 386 18.386 5 haricot Bean 24 058 28 513 32 164 34 597 I 34,597 j 6 BlacK Cumin 25 835 33,071 37 894 42,716 44 324 L Coriander 37.232 41 252 46 075 52 506 55 721 I 8 Onion 59 326 89 997 114 432 13C 722 141 582 ; Rea PepDer 17 065 19 682 21 494 23,306 25 118 10 Citrus (10.864 (9 522) (9 522: (9 522' --1-6--3---9-1--8------- 1 11 Avocaao (10 864 (9 522.) 9 522 (9 522: 77,198 12 Forage Crops 72.104 86 121 97 994 108 781 114 661 Total 372 071 465 531 542 133 603 787 905 143 A total of 12 crops will be grown in tne irrigatea conditions Based on the crop budgets discussed earlier tne annual returns on per ha bases are shown in Table 11 8 A perusal of data on returns shows tnat there is a gradual increase in the returns mainly because of higher yields in successive years There will also be gradual .ncrease of irrigated area in the commana Based on tne details of area under irrigation and area aevoted to different crops in eacn year . tne total annual economic returns have been worked out ana the figures are presented in table 11 9 These are the economic croc benefits with projeci WWDSE tn Association with ICT Final Feasibility Study Report 80Fcocrai Democratic Republic of Ethiopia-Ministry of Water Resources Feasibility Study and Detail Design of Bale Gaduia Project VOL 11 Annex 15 Financial & Economic Analysis Table 11-9 Annual Economic Net Benefits from Crop Production under Post Irrigation (000 Bin I ---------I Crop 1st year 2na 3rd year 4th year 5* year 5th yr 7th yr 8th yr r (yr4th t (yrSlhj (yrSth/ (yr7th ) (yr8tn) (yrtJtn , (yrlOth ; (yrlith) (yr 12th ----- ----------------- 1 Wheat 71 072 85 077 98 194 111,857 126 063 126 607 127 696 129 329 131 506 Rice 19 064 25 595 32.199 36 884 41 761 42 145 42.912 43 488 44 256 Maize 59 316 72 238 86 949 102 420 118 650 119.219 120,737 123 015 126 052 Chick pea 5 773 7 867 9 067 10 316 Haricot bean 11 563 14 727 17 634 20 100 11 027 11,125 11 223 11 369 11 369 | 21 489 21 635 21 929 22 223 22223 Black cumin 7 886 10 778 13 093 15,531 17 110 17.274 17,519 17 888 18 052 Conanoer 5 684 6784 8 046 r” 9615 10 774 10815 10 938 11 184 11 348 — Onion 9 147 14 650 19,575 23.557 26 912 27.296 27 924 28 552 29 110 Red Deoper 9 103 10 652 12.458 15 001 16 698 16 753 16917 17 326 17 544 Citrus (1 679) (1 594' (1 716) (1 839) 24 835 24,835 24 835 24 835 33 767 Avocado (839) (797] (858) (919) 5 718 5,718 5718 57)8 7 951 Forage crops 38 990 49 880 60 181 70 430 78 511 79 082 80.152 81 611 82,670 Total 235 081 295 856 354 821 412 952 499 548 502 504 508 501 516 538 I---- :----------- 535 849 The analysis of total economic net returns for each year indicates that a benefit from crop production is increasing in eacn year The next section is devoted to the economic evaluation of the proposed croDpmg pattern Total irrigated land is 5 150 hectares With a croDping intensity of 156% total cultivated area on full development of irrigation will be 8 034 hectares 11.4 ECONOMIC FARM BUDGET . he Economic farm budgets for the existing ano proposed cropping patterns are given in tables 11 10 to 11 11 WWDSE in Association with ICT Final Feasibility Study Report 81Federal Democratic Republic of Ethiopn-Ministry of Water Resources Feasibility Study and Detail Design of Bale Gadula Project VOL 11 Annex 15 Financial & Economic Analysis Table 11-10 Economic Farm Budget for 2.6 Ha Farm at Existing Farming System I Crops Area (%) Land Holding For Typical HH Net Return Area Ha Net Return (Birr/Ha) (Birr/HH) r — Wheat 40 40% 0 8079 27,028 21,836.1 Maize 0.29% 0.0058 27,055 157.2 I—------------------ Chick Pea 2.25% 0.0449 9,760 438 6 H Haricot Bean 0.31% 0.0061 8,473 51.9 Black Cumin | 20.05% 0.4011 19,495 7,819 0 1 Coriander 6.59% 0 1318 13,173 1,736.0 Onion 0.10% 0 0019 33 748 65 4 Red Pepper 0.02% 0.0004 9,380 ---------------------- r • Total 70.00% 2.00 4.0 32,108 1 Table 11-11 Economic Farm Budget For 2 Ha Farm For Cropping Intensity of 156%. Crops Area (%) Land Holding For Typical HH Net Return Area Ha Net Return 1 (Birr/Ha) (Birr/HH) i Wheat 29 49% 0.9200 62,231 57,253 oRice I 6.41% 0 2000 88.101 17,620 | Maize 21 79% 0.6800 79,306 53,928 Chick Pea 8 33% 0.2600 18,386 4,780 Haricot Bean 8.33% 0 2600 34,597 8.995 Black Cumin 5.1% 0.1600 44,324 7,092 Coriander 2.56% 0 0800 55,721 4,458 Onion 2 56% 0 0800 141,582 11,327 Rea Pepper 2 56% 0.0800 25,118 2,009 Citrus 2.56% 0.0800 163,918 13,113 Avocado 1 28% 0 0400 77,198 3,088 Forage Crops 8 97% 1 0.280 114,661 32,105 Total 100.00% 3.12 905,143 215,768 WWDSE m Association with ICT Final Feasibility Study Report 82Federal Democratic Republic of Ethiopia-Ministry of Water Resources Feasibility Study and Detail Design of Bale Gadula Project VOL 11 Annes 15 Financial A Economic Analysis the net returns for a farm household with a landholding of 2 ha is estimated to be Birr 32,108 under the existing conditions and the net return from the same size of farm after the introduction of irrigation with 156% cropping intensity is estimated to be Birr215.768 on a holding of 3 12 ha Study of economic farm budget clearly indicates that farmers are highly benefited with the availability of irrigation water at their command Profits from irrigated crops on their holdings are 6.7 times higher 11.5 ECONOMIC VIABILITY The Economic Analysis of BCR NPV and IRR, has been undertaken by using the data on economic cost and benefit. The analysis shows that the value of base line economic BCR is 2.61 The same for the EIRR is 32 % The value of NPV is MBirr3 221 The results confirm that the project is economically viable The results economic analysis is given in table 1112. Table 11-12 Baseline Economic Analysis r Year Investment OSM Tax 1 Total Cost 1 With Out Project Benefits With Project Benefits (OOOBlrr) Incremental 1 1 Benefits PV Of Costs OOObirr Pv Of Benefits • | |1 ------------------------------1 0 | 82,679 i (82 678 51 81.678 5 1 30853 30.853 3 82,679 1 1113.531 8) ICS 6110 ----------------------------- - 1 2 r ------------------------------ 1 3 70.726 271,653 4 ?91 J ■ - 6 82,679 276 444 3 82 679 (153.404 1) 132.745 6 i '359 122 8| 289 079 ’ 4 - 33.286 31285 b 82.b79 278.376 162 .41! S 86 834 0 208 447 S l5 35.496 35 495 6 82.67M 338.779 220 604 7 82.315 3 235 979 5 .— 6 ' 37.813 17.813 1 82,679 402.961 282 469 $ 78.074 0 26! 103 3 u <3.015 < 82.679 42.205 5 82,679 r 9 10 11 12 40.015 42.205 41.402 41 402 41.402 1 1 41.402 41,402 41.402 41.402 | 4..402 3 ' 41.402 3 82.679 82.679 466.392 558.325 561 426 567.740 576.234 596.116 596.116 596,116 596.116 343.698 2 73.954 4 28 120 2 413.4X1 4 70.022 8 313 054 3 417 345 3 64 718 5 292.830 5 — - I 443 659 0 63.203 3 275.463 9 452.152 9 56.X3 • 260.079 2 1 472.035 1 ' 52.095 9 ------ ■--- ? 250.281 7 13 _________ 14 ' <1.402 a 82,679 41.402 3 82.679 1 41.402 3 82.679 1 4’ 402 3 82.679 i 15 41.402 3 414023 82.679 ' 16 472.035 1 1 48 4b. 3 ' 232,820 2 472.015 1 45.08C 3 1 216,5770 472 CIS . 4 1 935 201466 9 472.035 1 19.009 4 . H741. 1 WWDSE in Association with ICT Final Feasibility Study Report 83Federal Democratic Republic of Etbiopia-Mimstry of Wator Resources Feasibility Study and Detail Design of Balo Gadula Project VOL 11 Annex 15 Financial & Economic Analysis [ f Year investment O&M j Tax Total Cost WlthOut Project Benefits I w,,h Pr°'K' Incremental Ben>ntt (OOOBIrr) Ben.riu OOObirr Pv Of Benefits — IM 41,402 f ■ "— .— 4! 402 41,402 3 82 679 596,116 _____ _________ J I—— 18 i 82,679 596.116 472 035 1 46.287 8 174 335 9 J f 41.402 i------- 41,402 3 82.679 596,116 472 335 1 ! 33756 i 162.172 9 J 1 19 1 41.402 41.402 3 32,679 596,116 4 72 035 1 1 31.4010 150.8515 — [ ' J 11 20 41.402 41.402 3 I 82,679 596,11 ■ . I 140 333 5 ------------------- ---------- 21 41,402 41,402 3 82,679 596,116 4 72.035 1 1 ' 27.172 3 130 542 8 ( —--------- 22 174 41.402 ■— 41.576 5 82,679 596,116 4 71.860 9 1 25.312 1 121 435 2 23 41.402 | — 41.402 3 82,679 5 95,116 4 72.035 1 1 23,513 1 112 9630 R - 24 41,402 41,402 3 82,679 596,116 4 72.035 1 I 21J72 7 105 08! 8 1 r1 R r 41.402 41,402 3 82.679 596 116 ' 472.035 1 20.346 7 97 7S0 5 41.4C2 41.402 3 82 679 596.116 472.035 1 18.927 I | 90 9 30 7 27 41.402 41.402 5 1 82.679 596,116 472.035 1 17 606 6 84,586.7 1- 28 41,402 41.402 3 82.679 59b 116 472.035 1 16 378 3 78 o85 3 29 41,402 i 41,402 3 82,679 5 96,116 4 72.035 1 15.235 o 73.195 7 1 30 41,402 41.402 3 82,679 59T116 • 47: or 14.172 6 c 8 089 0 I 31 i 41,402 41.402 3 1 82.679 f 596,116 472 035 1 13.183 9 | 6 3.338 6 ------- :--------l 41,402 41,402 3 82.679 596,116 472.035 1 12.264 1 58.919 6 R (149,467) 41.402 1108,064 51 82.679 596,116 621.502 0 2.334 lj 54,808 9 Total 223,939 1 1,228,661 1,452.604 2,811 070 6.864.784 , 12.bCl.109 B/C Ratio 2 83 NPV________ 3,221.53b IRR 763 128 4 984.6b4 32 0%____ I1 I1 .L L> r|I I rI ii 11.6 SENSITIVITY ANALYSIS Based on the cropping pattern discussed earlier economic sensitivity analysis is carried out Three alternatives have Deen considered here for sensitivity test. These are. • A 10% increase in the costs and no change in the Denefits • A 10 % decrease in Denefits ana no cnange in costs and • A 5% decrease in Denefits and a 5 % increase in costs II fl r* “11 u WVVDSE in Association with ICT Fmai Feasibility Stuoy Report 84 IIFederal Democratic Republic of Ethiopia-Ministry of Water Resources Feasibility Study and Detail Design of Bale Gadula Project VOL 11 Annex 15 Financial & Economic Analysis The result of sensitivity analysis has shown that assuming an increase in cost by 10% and with no change in benefits and a decrease in benefits by 10% and with no change in costs, as well as a decrease in benefits by 10% and increase in cost by the same amount resulted in BCR more than 1 and IRR also more than 10% Thus, the project is economically viable in the proposed cropDing pattern Considering all the three decision catena used in economic analysis, the project is found to be feasible wnere BCR is greater than 1 The value of IRR is greater than the discount rate of 10 23% used in the analysis The extent of NPV is also greater than zero Thus it has been observed that the project is economically viable Further the project is in a position to bear the shocks of unforeseen risks in terms of reduced benefits and or increased costs of investment and annual operation and maintenance of the project. The project is desirable to implement from the point of view of society as well Table 11-13 Results of Economic Sensitivity Analysis The Entire Project Farmers Financers NO — VanaDles IRR NPV B/C Ratio ----------------~i — IRR NPV B/C Rabo IRR NPV (OOOBirr) B/C (OOOBirr i (OOOBtrr) Ratio 1 1 Base Case — 32 0% 3 221 536 2 83 37 5% 2 559 886 2 83 - 21 4% 661 650 2 83 21 Decline Of Production By 10% 29 1% 2 723 270 2 54 34 2% 2 163 796 254 19 5% 559 273 2 54 Increment Of Cost By — ...... 31 10% 3C 6% 3.116 665 2 67 36 5% 2 448 520 2 67 Decline Of Production 2C 4% 658 *.45 2 67 And Simultaneous Cost 41 increment By 5% 29 9% 2 922 70' 261 35 4% 2 307 121 2 61 20 0% 613 586 2 61 WWDSE in Association with ICT Final Feasibility Study Report 85Federal Democratic Republic of Ethiopla-MInlstry of Water Resources Feasibility Study and Detail Design of Bale Gadula Project VOL 11 Annex 15 Financia & Economic Analysis 12 CONCLUSION AND RECOMMENDATION The Balegadula Irrigation Project has as its objective the production of about 1 674 368 qt of crops annually on net harvestable area of 5.150 ha The crops will serve for the consumption and for the market. Under the existing cultivation wheat, maize chickpea haricot bean, black cumin, coriander onion and red pepper crops are grown by the farmers The irngation would commence in about 75% of the net irrigable area in the 4lh year The same would gradually .ncrease and full development of irrigation would take place in the 8 years 12 types of crops are proposed to be grown while it is also currently used largely for farming activities The proposed cropping intensity is 156% with total cropped area of 8 034 hectares The total cost of the project amounts to be MBirr5 544 2 that would be incurred throughout the life of the project. Of this MBirr557 1 is for initial investment. MBirrO 2 for replacement of assets ana MBirr3,586 for taxes and MBirr1,401 for operating costs The initial investment cost of MBirr557 1 consists of MBirr506 7 investment, MBirr44 4 of operating and MBirr6 1 working capital In addition to this the annual organization and management as well as maintenance expenditures would start from the 4,ri year onwards There will be two partners that will participate in the project These two partners are the Financer and the farmers The financer is recommenaed to be a government for the easy mobilization and start of the project The government would take the responsibility of financing the investment costs and fixed annual operating costs On the other hands, the farmers would cover mainly the annual variaole operating costs wnich are directly related to the inputs of tne farming activity Accordingly the government will cover about 32 8% of the total Investment ana operating cost whereas the farmers will cover 67 8% Considering tne payment of income tax, the government will cover about 28 9% and the farmers cover apout 71 1% of the total tax amount. WWDSE in Association with ICT Final Feasibility Study Report KoFederal Democratic Republic of Ethlopia-Ministry of Water Resources Feasibility Study and Detail Design of Bale Gadula Project VOL 11 Annex 15 Financial & Economic Analysis The project would be implemented by the fund that would be obtained in the form of recoverable bank loans. The loan is planned to be repaid within 15 years time at an equal annual payment of MBirrl 12.6 The benefit streams are estimated based on the farm gate prices of the crops The average farm gate selling prices of the proposed 12 types of crops is Birr783/qt consisting of Birr569/qt of the farmers and Birr214/qt of the Financer's share The estimated share is done on the bases of their cost contributions The annual revenue at full scale of development is estimated at MBirr526 4 Currently crop production takes place at a place where the project is going to be implemented The farmers would be involved in the production of crops after the implementation of the project On the basis of the crop budget estimates, the farmers could get a net additional income of Birrl 60 721/ha as the result of the project The level of unskilled rural labor employment will increase from the existing level of 1.3 Million maydays to 3 31 Million man days The viability of the project is evaluated based on financial & economic analysis ano financial statements The result of the analysis snows that the project is viable in all of the viability measures of criteria On top of this sensitivity analysis is conducted by varying important variables It was found that the project could remain viable under all tne sensitivity tests Under the base case scenario ano considering the payment of income taxes the IRR the B/C ratio and the NPV of tne project amount to 26 0% 1 7 and MBirrl 839 respectively The financial discounting factor which is used for tne financial analysis relates to the lending 7 5% interest rate of the Development Bank of Ethiopia The result of the financial IRR is therefore higher as compared to it for both before and after tne payment of taxes Its economic IRR and B/C ratio amounts to 32% and 2 8 respectively The economic discount rate is 10 23% Therefore, it can be concluded tnat Bale Gadula Irrigation project is viable from financial and economic ooint of view The project, if implemented will have WWDSE in Association with ICT Final Feasibility Study Report 81Federal Democratic Republic of Ethiopia-Ministry of Water Resources Feasibility Study and Detail Design of Bale Gadula Project VOL 11 Annex 15 Financial & Economic Analysis significant contributions to the socio-economic conditions of people in the project area and of the region in particular, and the country and national economy in general The income of people due to irrigation in the command area will increase to the level that they can be able to pay for their needs and the social services The increase in agricultural production and employment opportunity will mane further contributions to the local and national economy In view of the above findings, the project deserves priority ana it is recommended that the project be implemented as early as possible WWDSE m Association with ICT Final Feasibility Study Reporr 88Federal Democratic Republic of Ethiopia-Ministry of Water Resources Feasibility Stuay and Detail Design of Bale Gadula Project VOL 11 Annex 15 Financia & Economic Analysis 13 REFERENCE Gittinger J Price (1976) Economic Analysis of Agricultural Projects Johns Hopkins Press Baltimore. USA Ministry of Finance and Economic Development, FDRE (2008). National Economic Parameters and Conversion Factors for Ethiopia, Addis Ababa Water Works Design & Supervision Enterprise in association with ITC PVT Ltd India 2009 Feasibility Financial and Economic analysis of Humera irrigation Project unil Feasibility Study Report 89Federal Democratic Republic of Ethlopia-Minlatry of Water Resource* ANNEXES Annex 5. 1: Crop Budget without the Project VOL 11 Annex 15 Flnancle 5 Economic Analysis Wheat Table A1: CROP BUDGET FOR Existing PRODUCTION PER HECTARE SN ITEMS QT/UNIT Total In Each Years 1st Year (Yr4th) 1 COST 11 Man-day/Ha 60 Unit Price (Birr/Man-day) 20 1.200 12 Pair Of Oxen/Ha 10 Unit Price (Birr/Pair Of Oxen Day) 30 300 1.3 Seed/Seedlings Qt/Ha 1 25 Unit Price Of Seed (Birr/Qt) 718 897 5 14 UREA (Qt/Ha) 1.5 Unit Price (Birr/Qt) 720 1.079 30 15 Depreciation Of Farm Implements 20 16 Land Tax 24 17 Miscellaneous 3 00% I 106 Total Cost 3,626.40 2 Return 2.1 Yield (Qt/Ha) 28 5 Gross Return In Birr 718 20.463 22 Yield (Qt/Ha) 20 Gross Return 150 3,000 23 Total Gross Return 23,463 2.4 Net Return In Birr 19,837 Maize Table A2: CROP BUDGET FOR Existing PRODUCTION PER HECTARE S N. I ITEMS QT/UNIT Total In Eacn Years 1st Year (Yr4th ) 1 COST 11 Man-aay/Ha 55 - Unit Price (Birr/Man-oay) 20 1 100 12 Pair Of Oxen/Ha 15 - ' Unit Price (Birr/Pair Of Oxen Day) 30 450 1.3 Seed/Seedlings Qt/Ha 0.25 - Unit Price Of Seed (Birr/Qt) 988 247 14 DAP (Qt/Ha) 1.5 - Unit Price (Birr/Qt) 720 1,079 15 Depreciation Of Farm Implements 20 16 Land Tax 24 17 Miscellaneous 3 00% 88 - Total Cost 3,008 2 Return 2.1 Yield (Qt/Ha) 30 WWDSE tn Association with ICT Final Feasibility Study Report 90Federal Democratic Republic of Eth.opia-Mrnistry of Water Resources FeaiIbllityStud^n^)etal^esigno^al^Gadui^fojec1^^^^_ VOL 11 Annex 15 Financial & Economic Analysis Maize Table A2: CROP BUDGET FOR Existing PRODUCTION PER HECTARE 1 «JUie SN. ITEMS QT/UNIT Total In Each Years 1st Year (Yr4th) Gross Return In Birr 800 24,000 22 Yield (Qt/Ha) 20 Gross Return 150 3,000 2.3 Total Gross Return 27,000 2.4 Net Return In Birr 23,992 Chick Pea Table A3: CROP BUDGET FOR Existing PRODUCTION PER HECTARE Total In Each Years S.N. ITEMS QT/UNIT 1 st Year (Yr4th ) 1 COST 11 Man-day/Ha 40 Unit Pnce (Birr/Man-day) 20 800 12 Pair Of Oxen/Ha 15 - Unit Price (Birr/Pair Of Oxen Day) 30 450 13 Seed/Seedlings Qt/Ha 0.6 Unit Price Of Seed (Birr/Qt) 1,100 660 1.4 DAP (Qt/Ha) 0 - Pesticides (Lit/Ha) 3 15 Unit Price (Birr/Lit) 94 281 16 Depreciation Of Farm Implements 20 1.7 Land Tax 24 18 Miscellaneous 3 00% 67 - Total Cost j 2,302 2 Return I 2.1 Yield (Qt/Ha) 9 - Gross Return In Birr 1.000 9,000 2.2 Yield (Qt/Ha) 6 1I ------------------------------- - Gross Return 150 900 2.3 Total Gross Return I 9,900 24 Net Return In Birr I 7,598 Haricot Bean Table A4: CROP BUDGET FOR Existing PRODUCTION PER HECTARE S.N. ITEMS QT/UNIT Total In Each Years 1st Year (Yr4th ) 1 COST 11 Man-day/Ha 32 - Unit Pnce (Birr/Man-day) 20 640 12 Pair Of Oxen/Ha 15 - Unit Pnce (Birr/Pair Of Oxen Day) 30 450 13 Seed/Seedlings Qt/Ha 08 - Unit Pnce Of Seed (Birr/Qt) 1 000 800 14 DAP (Qt/Ha) 0 WWDSE in Association with ICT Final Feasibility Study Report 91Fvderal Democratic Ro public of Ethiopia-Mlnistry of Water Resource* Feasibility Study and Detail Design of Bale Gaduli Project VOL 11 Annex 15 Financial & Economic Analysis Chick Pea Table A3: CROP BUDGET FOR Existing PRODUCTION PER HECTARE Total In Each Years S.N. ITEMS QT/UNIT 1st Year(Yr4th) 15 Pesticides (Lit/Ha) 3 - Unit Pnce (Birr/Lit) 94 281 16 Depreciation Of Farm Implements 20 17 Land Tax 24 18 Miscellaneous 3 00% 66 Total Cost 2,281 2 Return 2.1 Yield (Qt/Ha) 8 - Gross Return In Birr 1,000 8,000 2.2 Yield (Qt/Ha) 6 - Gross Return 150 900 2.3 Total Gross Return 8,900 24 Net Return In Birr 6,619 Black Cumin Table AS: CROP BUDGET FOR Existing PRODUCTION PER HECTARE S.N. ITEMS QT/UNIT Total In Each Years 1st Year(Yr4th) 1 COST 11 Man-day/Ha 36 Unit Price (Birr/Man-day) 20 720 1.2 Pair Of Oxen/Ha 12 Unit Pnce (Birr/Pair Of Oxen Day) 30 360 1.3 Seea/Seedlings Qt/Ha 0.12 Unit Price Of Seed (Birr/Qt) 1,500 180 14 DAP (Qt/Ha) 1 Unit Pnce (Birr/Qt) 720 720 15 Depreciation Of Farm Implements 20 16 Land Tax 24 1.7 Miscellaneous 3 00% - Total Cost _________________ 2,084 I 6Li 2 Return l 21 Yieid (Qt/Ha) 13 - Gross Return In Birr 1,500 19.500 2.2 Yield (Qt/Ha) 6 Gross Return 60 360 23 Total Gross Return 19.860 2.4 Net Return In Birr 17,776 WWDSE in Association with ICT Final Feasibility Study Report 92Federal Democratic Republic of Ethlopla-Ministry of Water Resources Fea aiblllty Study and Detail Design of BaleGadulaP^ect^^^^^ VOL 11 Annex 1S Financial & Economic Analyst* Coriander Onion Table A7; CROP BUDGET FOR Existing PRODUCTION PER HECTARE S.N. ITEMS QT/UNIT Total In Each Years 1st Year (Yr4th) 1 COST 1.1 Man-day/Ha 60 - Unit Pnce (Birr/Man-day) 20 1,200 1.2 Pair Of Oxen/Ha 16 - Unit Price (Birr/Pair Of Oxen Day) 30 480 13 Seed/Seedlings Qt/Ha 15 - Unit Pnce Of Seed (Birr/Qt) 400 6.000 1.4 DAP (Qt/Ha) 2 - Unit Price (Birr/Qt) 720 1,439 15 Depreciation Of Farm Implements 20 16 Land Tax 24 ' 1.7 Miscellaneous 3 00% - Total Cost 9,438 275 i 2 Return 2.1 Yield (Qt/Ha) 100 -------------------------------- 1 I4 - Gross Return In Birr 400 40.000 | 2.2 Yield (Qt/Ha) 5 -------------- -- —1 - Gross Return 50 250 I 2.3 Total Gross Return 40 250 24 Net Return In Birr , 30 812 I WWDSE in Association with ICT Final Feasibility Study Report 93Federal Democratic Republic of Ethiopia-Ministry of Water Resources Feasibility Study and Detail Design of Bale Gadula Project VOL 11 Annex 15 Financial A Economic Analysis Red Pepper PER HECTARE Total In Each Years SN. ITEMS QT/UNIT 1st Year (Yr4th) 1 COST 11 Man-day/Ha 60 Unit Pnce (Birr/Man-day) 20 1,200 12 Pair Of Oxen/Ha 15 Unit Price (Birr/Pair Of Oxen Day) 30 450 13 Seed/Seedlings Qt/Ha 2.5 Unit Price Of Seed (Birr/Qt) 400 1,000 14 DAP (Qt/Ha) 1.5 Unit Pnce (Birr/Qt) 720 1,079 1.5 Depreciation Of Fam Implements 20 16 Land Tax 24 1.7 Miscellaneous 3.00% 113 Total Cost 3,887 2 Return 2.1 Yield (Qt/Ha) 22 • _ Gross Return In Birr 500 11,000 22 Yield (Qt/Ha) 10 Gross Return 50 500 23 Total Gross Return 11,500 24 Net Return In Birr 7,613 Annex 5. 2: Crop Budget with the Project Wheat I SN. ; Total In Each Years ITEMS QT/UNIT 1st Year (Yr4th) 2nd (Yr5th) 3rd Year (Yr6th) 4th Year (Yr7(h) 5th Year (YrBth) 1 COST 11 Man-uay/ha 40 Unit Pnce (Birr/Man-day) 20 800 800 800 800 800 12 Machinery 1.500 480 480 480 480 I 13 Seed/Seedlings Qt/ha 1.25 Unit Price Of Seed (Birr/Qt) 718 898 898 898 898 898 14 UREA (Qt/Ha) 2 Unit Price (Birr/Qt) 719 6 1,439 1.439 1 439 1.439 1 439 15 Pesticides (Lit/ha) 1.6 Depreciation Of Farm implements 5 00% 75 24 ’ 24 24 24 1.7 Land Tax 24 24 24 24 24 1.8 Miscellaneous 3 00% 142 110 110 110 110 Total Cost 4,878 3,775 3,775 3,775 3,775 2 Return - 2.1 Yield (Qt/ha) 48 52 56 60 64 Gross Return In Birr 718 34.464 37.336 40 208 43 080 45 952, 2.2 Yield (Qt/Ha) 26 28 , 31 33 Gross Return 150 3,938 4.266 4 594 4 922 35. y5o. 23 Total Gross Return 38.402 41.602 , 44 802 48 002 51.202 I 2.4 I Net Return In Birr 33 524 37 827 41 027 44.227 47427 WWDSE in Association with ICT Final Feasibility Study Report 94Federal Democratic Republic of Ethlopla-Ministry of Water Resource* Feasibility Study and Detail Design of BaleGaduUPr^ect====__ VOL 11 Annes 15 Financial A Economic Analysis Rice Table A2: I S.N ;rop BUDGET FOR PROFOStu rr ITEMS UUUU null QT/UNIT Total in Each Years 1 st Year (Yr4th ) 2* (YrSlh) 3rd Year (Yr6lh) 4th Year (Yr7th) Sth Year (Yrfith) 1 COST 11 Man-day/Ha 95 Unit Price (Birr/Man-day) 20 1,900 1,900 1,900 1,900 1 900 12 Machinery 1.500 480 480 480 480 13 Seed/Seedlings Qt/Ha 03 Unit Pnce Of Seed (Brrr/Qt) 1,100 330 330 330 330 330 14 DAP (Qt/Ha) 25 Uml Price (Birr/Qtj 720 1,799 1,799 1.799 1.799 1.799 15 Pesticides (Lit/Ha) 3 16 Unit Pnce (Birr/Lit) 94 281 281 281 281 281 1.7 Depreciation Of Farm Implements 5.00% 75 24 24 24 24 1e Land Tax 24 24 24 24 24 19 Miscellaneous 3.00% 177 145 145 145 145 Total Cost 6,086 4,982 4,982 4,982 4,982 2 Return - - - - 21 Yield (Qt/Ha) -45 55 65 70 75 Gross Return In Birr 1.100 49,500 60.500 71,500 77.000 82,500 2.2 Yield (Qt/Ha) 12 15 17 19 20 - Gross Return 100 1.200 1 457 1,733 1.867 2.000 2.3 Total Gross Return 50,700 61,967 73.233 78.867 84.5C0 2.4 Net Return In Birr 44.514 56,984 68.251 73,884 79.518 Maize Table A3: CROP BUDGET FOR PROPOSED PRODUCTION PER HECTARE Total tn Each Years S.N. ITEMS QT/UNJT 1st Year (Yr4th) 2nd Yr5th) 3rd Year (YrSlh) 4th Year (Yr7th) 5th Year (YrSth ) 1 COST 1.1 Man-day/Ha 40 - Unit Pnce (Birr/Man-day) 20 800 BOO 800 800 800 12 Machinery 1.500 480 480 4B0 480 13 Seed/Seedlings Qt/Ha 03 - Unit Pnce Of Seed (Birr/Qt) 988 247 247 247 247 247 14 DAP (Qt/Ha ) 2 - Unit Pnce (Birr/Qt) 720 1.439 1.439 1.439 1.439 1 439 15 Pesticides (Ut/Ha) 2 I 16 Unit Pnce (Birr/Lit) 93 5 187 187 187 187 — ■ 1 187 1 1 7 Depreciation Of Farm implements 5 00% 75 24 ------------- 24 ---------------- 24 1 8 Land Tax 24 24 -------" — — 24 24 24 1 9 Miscellaneous 3 00% 128 96 96 96 ----------------- 9fi ! - Total Cost 4.400 3,297 3.297 3 297 ------------------ 3 297 | 2 Return ------ 7 , | 21 Yield (Qt/Ha) 56 62 70 78 HR 1 Gross Return in Bin 800 44 800 49 600 56.000 22 - -------------------J---------------------- 1 62 400 KA ROH Yield (Qt/Ha) 29 32 37 41 44 - Gross Return 150 4.395 4 866 5 494 6 122 ft 7<*n 23 Total Gross Return 49,195 54 466 61 494 68 522 75 550 24 Net Return In Birr 44.795 51 169 — 58.197 65,225 72 253 | WWDSE in Association with ICT Final Feasibility Study Report 95Federal Democratic Republic of Ethlopia-Minlstry of Water Resource* Feasibility Study and Detail Design of Bale Gadula^rojec^^ VOL 11 Annex 15 Financial A Economic Analysis Chcfc p*a Table A4: CROP BUDGET FOR PROPOSED PRODUCTION PE.*_HECTAR£ Total In Each Years S.N ITEMS QT/UNIT 1st Year (Yr4th) 2nd (Yr5th) 3rd Year (Yr6lh) 4!h Year (Yr7lh) 5th Year (Yr8th) 1 COST 11 Man-day/Ha 40 Unit Price (Birr/Man-day) 20 BOO 000 800 800 800 12 Machinery 1,500 480 480 480 480 13 Seed'Seedlmgs Qt/Ha 06 Uni! Pace Of Seed (Birr/Qt) 1,100 00 660 650 660 660 660 14 Pesticides (Lit/Ha) 3 Unit Pnce (Birr/Ut) 93 5 281 281 281 281 281 1.5 Depreciation Of Farm implements 5 00% 75 24 24 24 24 16 Land Tax 24 24 24 24 24 17 Miscellaneous 3 00% 100 68 68 68 68 - T olai Cost 3,440 2,337 2,337 2,337” 2.337* 2 Return - - 21 Yield (Qt/Ha) 12 14 15 16 16 - Gross Return In Bin 1.000 12,000 14.000 15.000 16.000 16,000 22 Yield (Qt/Ha) 6 7 8 88 - Gross Return 150 900 1.050 1.125 1.200 1.200 23 Totai Gross Return 12.900 15,050 16,125 — 17,200 17,200 24 Nel Return In Bin 9 460 12.713 13,788 14,863 14.B63 Hancot Bean Table AS: CROP BUDGET FOR PROPOSED Final Feasibility Study Report 96Federal Democntk Republic of Ethiopia-Ministry of Water Resources F—slbility Study end Detail Design of Bale Gadula Project^----------------------- , VOL 11 Annea 15 Financial & Economic Analysis Black Cumin Table AB: ( SN :rop budget for proposed ph ITEMS UUIA. IIWIW QT/UNIT i ----------------—-------------■ - -- ---------- Total in Each Years j 1 st Year (Yr4th) 2nd ( Yr5tti) 3rd Year (YrSth) 4th Year (Yr7th) 5th Year (YrSth ) 1 COST I1 Man-day/Ha 36 Unit Price (0in7Man-day) 20 720 720 720 720 720 12 Machinery 1.500 480 480 480 480 13 Seed/SeedNngs Qt/Ha 0 12 Unit Pnce Of Seed (Birr/Qt) 1,500 00 180 180 180 180 180 14 DAP (Ot/Ha ) 2 Urut Pnce (Birr/Qt) 7196 1 439 1 439 1 439 1 439 1 439 15 Depreciation Of Farm Implements 5.00% 75 24 24 24 24 16 Land Tax 24 24 24 24 24 17 Miscellaneous 3 00% 118 86 86 86 86 Total Cost 4,056 2,953 2,953 2,953 2,953 2 Return - - - - 21 Yield (Qt/Ha) 18 22 25 28 29 Grass Return In Birr 1.500 27,000 33,000 37 500 '42.000 43,500 22 Yield (Qt/Ha) 5 6 7 8 8 - Gross Return 60 298 364 414 463 480 23 Total Gross Return 27,298 33,364 37.914 42 463 43,980 24 Net Return In Birr 23.242 30,411 34,961 39,510 41,027 Conander Table A7: CROP BUDGET FOR PROPOSED PRODUCTION PER HECTARE Total In Each Years S.N. ITEMS QT/UNIT 1st Year (Yr4th ) 2- (Yr5th) 3rd Year (Yr6th) 4lh Year (Yr7th) 5th Year (Yr8th) 1 COST 11 Man-oay/Ha 30 - Unit Pnce (Bm/Man-day) 20 600 600 600 600 600 12 Machinery 1.500 480 480 480 480 13 Seed/Seedlings Qt/Ha 01 - Unit Pnce Of Seed (Birr/Qt) 719 6 85 86 B6 86 86 14 DAP (Qt/Ha ) 2 - Unit Pnce (Birr/Qt) 719 6 1.439 ~~ .......... - 1 439 1.439 1 439 1 439 15 Depreciation Of Farm Implements 5 00% 75 24 24 24 24 16 Land Tax 24 2< 24 24 24 17 Miscellaneous 3 00% 112 80 80 — 80 ------------------- £Z_i 80 i - Total Cost 3,836 2.733 2 733 , 2 733 , 2 733 2 Return I .I 21 Yield (Qt/Ha) 25 27 30 34 36 - Gross Return In Birr 1 500 37 500 40,500 45 000 51.000 54 000 2.2 Yield (Qt/Ha) ri 8 8 9 10 I - Gross Return 60 417 450 500 567 --------------------------J Ann 23 Total Gross Return 37 917 40.950 45 500 51 567 54 600 24 Net Return In Birr 34 080 I 38,217 42.767 48 834 5V867 WWDSE in Association with ICT Final Feasibility Study Report 97Federal Democratic Republic of Ethiopie-MInlstry of Water Resource* Feasibility Study and Detail Design of Balo Gaduia Project VOL 11 Annex 16 Financial A Economic Analysis Onion T1a«bDleI V DR HECTARE Total In Each Years SN AnBo:. CROP BUdDwGuEucT iFrOurRsPrnRuOrvPoOLSMED PRO ITEMS UCTION PE QT/UNlT 1st Year (Yr4tn) 2* (Yr5th) 3rd Year (Yr6lh) 4th Year (Yr7th) 5th year (YrtJth) 1 COST 11 Man-day/Ha 50 Unit Price (Birr/Man-day) 20 1,200 1.200 1,200 1,200 1.200 12 13 Machinery 1,500 480 480 480 480 Seed/Seedhngs Ot/Ha 3 Unit Price 01 Seed (Birr/Qt) 7196 2,159 2,159 2 159 2.159 2.159 14 DAP (Qt/Ha) 25 Unit Price (Birr/Qt) 719 6 1.799 1,799 1,799 1 799 1.799 . 16 15 Depreciation Of Farm implements 5 00% 75 24 24 24 24 Land Tax 24 24 24 24 24 17 Miscellaneous 3 00% 203 171 171 171 171 Total Cost 6,959 5,856 5,856 6.856 5,856 2 Return -J - • - 2 1 I Yieid (Qt/Ha) 120 , 175 220 250 270 Gross Return In Birr 500 60.000 87,500 110,000 125.000 135.000 2.2 Yield (Qt/Ha) 2 3 4 5 5 Gross Return 50 111 162 204 231 250 23 Total Gross Return 60.111 87,662 110,204 125,231 135.250 24 Net Return In Birr 53.152 81,806 104,348 119,375 129,394 Red Pepper Table A9 CROP BUDGET FOR PROPOSED PRODUCTION PER HECTARE Total In Each Years SN ITEMS QT/UNIT 1st Year (Yr4th) 2nd (YrSth) 3rd Year (Yr6th) 4th Year (Yr7th) 5th Year (Yr8th) 1 COST 11 Man-day/Ha 60 Unit Price (Birr/Man-cay) 20 1,200 1.200 1.200 1,200 1 200_ 12 Macnine'y 1.500 480 480 480 480 13 Seed/Seedbngs Qt/Ha 3 • Unn Pnce Of Seed (Birr/Qt) 500 1.500 1.500 1 500 , 1,500 1 500 14 DAP (Qt/Ha) 25 - Unit Price (Birr/Cf) 720 1.799 1 799 1.799 1.799 J 799 Depreciation Of Farm implements 5 00% 75 24 24 24 ~Z2 16i Land Tax 24 24 24 24 —— -U 17 “r Miscellaneous 3 00% 183 151 151 151 J51 Total Cost 6.281 5,178 5 178 , 5.17B 2 Return ____ 21 Yield (Qt/Ha) 48 52 56 60 64 , - Gross Return in Birr 400 19.200 20 800 22 4nn 24 000 25 600. 22 Yield (Qt/Ha) 26 28 31 33 J5 Gross Return 50 1,313 ---------------- 1 422 1 531 1 641 23 Total Gross Return 20,513 22 222 23 931 25 641 27j50 24 Net Return In Birr — 14.232 17 044 18.754 20.463 Final Feasibility Study Report 98Federal Democratic Republic of Ethiopia-Ministry of Water Resources VOL 11 Annex 15 Feasibility Study and Detail Design of Bale^adulaProject^^^_^_ Financial & Economic Analysts Citrus t.m. am- crap RimfiPT FOR PROPOSED PRODUCTION PER HECTARE--------------------------------- Total In Each Years S.N. ITEMS QT/UNIT 1st Year (Yr4th ) 2’ (YrSth) 3rd Year (YrSth) 4th Year (Yr7th) 1 COST 11 Man-day/Ha 220 Unit Price (Birr/Man-day) 20 4.400 4400 4.400 4 400 4.400 12 Machinery 2.500 800 800 800 800 13 Seed/Seedhngs Seedlings (Birr/HaJ 4.000 4.000 4.000 4.000 4.000 14 DAP (Qt/Ha) 6 Unit Price (B*rr/Qt) 719 6 4.317 4317 4.317 4,317 4.317 15 Depreciation Of Farm implements 500% 125 40 40 40 40 16 Land Tax 24 24 24 24 24 17 Miscellaneous 3 00% 461 407 407 407 407 Total Cost 15.827 13.983 13,989 13,989 13,989 2 Return - - - 21 Yield (Qt/Ha) - 400 Gross Return In Birr 400 160.000 22 Yield (Qt/Ha) 23 Total Gross Return 160.000 24 Nel Return in Bxr -15827 -13.989 -13.989 -13,989 146.011 Avocado Table A11: CROP BUDGET FOR PROPOSED PRODUCTION PER HECTARE Total In Each Years S.N ITEMS QT/UNIT 1st Year (Yr4th) 2* (Yr5th) 3rd Year ( Yr6lh) 4th Year (Yr7lh) Sth Year (YrBth) 1 COST 1.1 Man-day/Ha 200 - Unit Pnce (Birr/Man-day) 20 4.000 4 000 4.000 4 000 4 000 12 Machinery 2.500 800 800 . 800 800 1.3 Seea/Seedlmgs • Seedlings (Birr/Ha) 4.000 4.000 4.000 4 000 4 000 14 DAP (Qt/Ha) 6 - Unit Price (Birr/Qt) 719 6 4.317 4.317 4.317 4.317 --------------------- -- 4 317 15 Depreciation Of Farm implements 5.00% 125 40 40 40 40 16 Lana Tax 24 24 24 24 24 17 Miscellaneous 3 00% 449 395 395 ---------- ----------- -4 395 1 • Total Cost 15.415 13,577 13 577 13 577 , *577 1 2 Return --------------- — - i 21 Yield (Qt/Ha) - 1 700 Gross Return in Birr 400 - 1 Rn non 22 Yield (Qt/Ha) 23 Total Gross Return - 24 Net Return In Birr 1' } RO 000 -15415 I -13 577 -13577 I -13.577 1 66 423 WWDSE in Association with ICT Final Feasibility Study Report 99 w 85 5t Federal Democratic Republic of Ethiopia-Mlntotry of Water Reeowrcee ^•ailbillty Study and Detail Design of Balo Gadute Project _____ VOL 11 Annex 15 Financial A Economic Analysis ForneCrow Table A12: CROP BUDGET FOR PROPOSED PRODUCTION PER HECTARE Total in Each Years S.N ITEMS QT/UNIT 1al Year (Yr4lh) 2nd (Yr5lh) 3rd Year (YrSlh) 4th Year (Yr7th) 1 COST 11 Man-day/Ha 100 1 l Unit Pace [Birr/Man-day) 20 2,000 2 000 2,000 2.000 2.000 12 Machinery 2,500 800 800 800 BOO 13 Seed'Seedlmgs Seedlings (Birr/Ha) 2,000 2,000 2.000 2.000 2000 14 DAP (Ql/Ha J 6 • Unit Pnce (Birr/QQ 7196 4,317 4.317 4,317 4.317 4.317 15 Depreaation Of Farm Implements 5 00% 125 40 40 40 40 16 Land Tax 24 24 24 24 24 17 Miscellaneous 3.00% 329 275 275 275 275 Total Cost 11,295 9 457 9,457 9.457 9,457 ! 2 Return - - 2.1 Yieid (Qt/Ha) 993 1,149 1.295 1,428 1.530 | Gross Return In Birr 75 74 480 86.172 97,125 107.076 112 500 22 Yield (Qt/Ha) 23 Total Gross Return 74,480 86.172 97 125 107,076 112,500 1 24 , Net Return In Birr - 63.184 | 76 715 87,668 97,619 103.043Federal Democratic Republic of Ethiopia-Minlalry of Water Reaourcca Feasibility Study and Detail Doslgn of Balo Gadula Project VOL 51 Annea 15 Flnancla A Economic Analysla Annex 9. 1: Projected Income Statement OOOBIfT Yr Sales Total Annual Variable Costs Total Overheads Total Operating Cost Depreciation Unpaid Interest Interest Paid Bank Service And Commitment Charge Business Tax Nel Profit After Tax Cumulative Nel Profit After Tax 3 4.064 4,064 (4,064) £4,064) 4 243 078 6,504 40,313 10,133 213 192.419 188.355 5 6 7 296 418 33 809 36 627 7 (804 44 430 10.133 46 241.808 430,163 353.184 409.225 39 444 42.261 45,079 45,079 45.079 45 079 45.079 8.173 47,617 10.133 5 883 289.551 719,714 50,804 10.133 48 348239 1.067.953 0 9 10 11 12_J 13 491 492 494 249 499 874 507 428 525 402 525,402 8.543 8.574 53 653 10.133 436.505 74,523 72 (83.395) 984,559 7.696 52.775 10,133 71,670 2 359 668 1.344.227 7.696 7,696 7,696 52.775 10.133 68.603 5 368 358 1,712,585 52,775 10.133 65.305 6 150,059 229,149 1 941,734 52.775 10,133 81,761 16 156.191 244.527 2.186.261 45,079 7.696 52.775 10,133 57.950 156,191 248,353 2,434,614 14 15 525,402 45.079 7,696 52,775 10,133 53,854 156.191 252,449 2,687.063 525.402 45,079 7,696 52.775 10.133 49,450 156.191 256.853 2 943,916 16 525 402 45.079 I 7,696 62,775 10,133 44.717 156,191 261.587 3,205,502 17 18 19 20 [ 525402 525 402 525 402 _ ±25.402 45 079 45,079 7,696 7.696 52,775 10,133 39,628 156.191 266 675 3.472.178 52,775 10,133 34,158 156.191 272.146 3 744.323 45.079 7.696 52.775 10,133 28.277 156,191 278.027 4.022,350 .<5,07# [. 7.696 52.775 10,133 21,955 156,191 284,348 4,306,698 WWDSE In Association with ICT Final Feasibility Study Report lOIFodoral Democratic Republic of Ethiopia Ministry of Water Resources Feasibility Study and Detail Design of Bale Gadula Project VOL 11 Annex 15 Financial 8 Economic Analysis ■ OOOBirr Yr Sales Total Annual Vaiiable Costs Total Overheads Total Operating Cost Depreciation Unpaid Interest Interest Paid Bank Service And Commitment Charge Business Tax Net Profit After Tax Cumulative Nel Profit After Tax 21 525,402 45 079 7.698 52,775 10,133 15,159 156.191 291,144 4,597,842 22 525.40 45 079 7696 52.775 10.133 7.654 156,191 298 450 4.896 292 23 525,402 45.079 7,696 52,775 10,133 • 156,191 306,303 5 202.596 24 525.402 45.079 7.696 52,775 10,133 156 191 306 303 5 508 899 25 525.402 45.079 7.696 52.775 10,133 156,191 306,303 5 815 202 26 525402 45 079 7696 52,775 10,133 n 156,191 306 303 6.121.505 27 525.402 45 079 7.696 52.775 10,133 158191 306.303 6 427.809 28 525 402 45.079 7.696 52.775 10,133 156 191 306 303 6 734 112 29 525.402 45,079 7,696 52,775 10.133 158,191 306 303 7,040.415 30 525,402 45 079 7.690 52,775 10.133 156.191 306,303 7 346.719 31 525.402 45,079 7.696 52.775 10,133 156.191 306,303 7.653.022 32 525.402 45.079 7.696 52,775 10,133 156.191 306 303 7,959 325 33 525,402 45 079 7.696 52,775 10,133 156.191 306,303 8 265.629 14.853.799 1,324.190 | 236 071 1.560.261 303,996 436,505 694.864 6,292 3.586,253 8,265.629 120,957.499 WWOSE In Association with ICT Final Feasibility Study Roport 102Federal Democratic Republic of Ethiopia-Mlniatry of Walor Rosourcea Feasibility Study and DotaJ Design of Bale Giduf^Projecf VOL 11 Annas 15 Financla A Economic Anolywla Annex 9. 2: Projected Cash Flow OOOBirr Yl Financer Revenue Total Cash Inflow Investment Costa Increments Walking Capiial O per all ng Costs Interest On Loan Loan Repayment Bank Service And Commitment Charge Company Income Tax Total Cash Outflow Net Cash Flow Cumulative Balance C/F 0 557.138 557.138 a a a 557,138 557.130 1 42.503 a a a a 42,503 142,503) 514.635 2 92,049 a a 92,049 192,049} 422,586 3 372,100 a 4,064 a 378,171 (376 171) 46.415 4 243 070 24 3.070 2 835 40,313 213 43.361 199,717 246,132 5 296 410 296,410 618 44,430 46 a 45,093 251,325 497.457 6 353,104 353.104 654 47,617 5 883 a 64,154 299,030 796,487 7 409,225 409 225 644 50,804 a 48 61,497 357.728 1,154.215 fl 491 492 491.492 959 53,653 74,523 30,044 72 167,251 324.240 1.478,455 9 494,249 494 249 ’ 32 52,775 71,670 40,897 2 165,376 328 873 1.807.328 10 499 074 499 874 64 52.775 68.603 43.964 5 165,412 334.463 2.141.791 11 507.420 507 420 a 66 52.775 65,305 47,262 6 a 165,435 341.993 2.483.784 12 525 402 525.402 J 210 52,775 61,761 50,806 16 150.059 315,628 209,775 2.693,559 13 525.402 ... 525,402 ! 52.775 57,950 54.617 156,191 321.533 203.869 2.897,420 14 525 402 525.402 52,775 53,854 58.713 156,191 321,533 203.869 3,101,297 15 525 402 525 402 52.775 49,450 63,117 156,191 321,533 203,869 3.305,167 16 I 525 402 525,402 52.775 44.717 67,850 156,191 321,533 203.869 3.509,036 525.402 525,402 52.775 39,628 72,939 w 156,191 321,533 203.869 3,712,905 WWDSE In Aaaoclatlon with ICT Final Feasibility Study Report 103Federal Democratic Republic of Ethlopla-Mrnietry of Water Resources VOL 11 Annex 15 Financial A Economic Analysis -----------r OOOBirr Yf Ftnancei Revenue Total | Cash Inflow Investment Cosis Inc/emenlal Working Capital Operating Costs Interesl On Loan loan Repayment Bank Service And Commitment Charge Company Income Tax Total Cash Outflow Net Cash I Flow Cumulative Balance C/F U 525 402 525 402 52.775 34 158 78 410 156,191 321,533 203.869 3.916 775 19 525 402 525 402 52.775 28.277 84,290 156.191 321,533 203.869 4,120 644 20 525 402 , 525 402 52 775 21.955 90.612 156 191 321,533 203.869 4 324,513 21 525,402 525,402 52.775 15,159 97.408 156,191 203 869 4,528.383 22 525,402 525,402 194 52.775 7.854 104,714 156,191 321,727 203.676 4,732 059 23 525,402 525,402 52,775 156 191 208,966 318,437 $,048,495 24 525.402 525 402 52,775 156,191 208.966 316.437 5,364.932 25 525,402 525,402 52,775 156,191 208,966 316,437 5.681,368 26 525,402 525 402 52 775 156,191 208,966 316.437 5 997 805 27 525 402 525 402 52.775 156,191 208,966 316437 6.314241 28 525,402 525 402 52.775 ----------------- p- 156.191 208.966 316 437 6 630.678 29 525.402 525 402 52.775 Z 156.191 208,966 316437 6 947,114 30 525 402 525,402 52,775 156 191 208,966 316.437 7.263 551 31 525,402 525 402 52,775 156.191 208,966 316.437 7,579,997 32 525.402 525,402 52.775 156,191 208,966 316.437 7.896424 33 525.402 525.402 52.775 ‘* 156.191 208,966 316437 8 212 860 0 - (6 102) i (458) 156,191 149,631 (149 631) 8.063 229 total 557,138 14.853,799 15.410 938 506,853 - 1,560,261 694,864 993.644 5 834 3,566 253 7.347.709 8 063.229 133 988.872 WWOSE In Association with ICT Final Feasibility Study Report 104Fcdoral Democratic Republic of Ethlopia-Mlnlstry of Waler Resources Feasibility Study and Detail Doslgn of Balo Gadula Project VOL 51 Anneals Flnancla I Economic Analysis Annex 9. 3: Projected Balance Sheet OOOBirt Project Year No Item 0 1 2' 3 < 5 6 7 8 9 10 11 11 F ixod Assets - 42.503 92,0491 372.100 ■ 12 t depreciation - 41 10,133' 10,133 10,133 10.133 10.133 10,133 10.133 10.133 13 •ixed Assets Less Depreciation 42.503 134.552) 506.660 496.526 486,393 476.260 466,127 455.994 445.860 435.727 , 425,594 2 Current Assets 557.138 514,635 I" 422.5861 46,415 253,551 506,508' 807.270 1,166.705 1.493 493 1 822.45cl 2,157.084 2.499,3071 21 Stocks (Materials And Finished Goods) 543 852 766 880 1.045 1,0511 1.061 1.0761 22 Cumulative Balance Cash Flow 557.138 514.635! 422,586 46.415 246,132 497.457 796 487 l 1,154.215 1.478,455 1,807.326 2.141.7911 2,483.7841 23 Accounts Receivable • 6,876 8,400 won 11,611 13.992 14,071 14.232 14.4471 3 Curront Liabilities 5,600 6.678 7.740 9.328 9.381 9.488 159.6911 31 Accounts Payable - 4.584 5.60C 6.67E — 9,320 9,381 9,488 9,631 32 Company tax Payable - - • - » 150,059 4 Not Current Assols 557.131 )l 514.635 422.58C 46.415 248,961 500.90 i' 800,59 2 1.158.96 5 1.484.16! 5 1.813,06' 2.147.59! 2,339.616 5 Total Not Assets 557,13 1 557,138 657,13! 553,075 745,49' 987,30 1 1,276,85 2] 1,625.09 2 1,940,15 J 2,258,92' 2,683,32 3 2,765,210 6 Liabilities L 61 Subsidy • « I 62 Fmancer 557.13 8 557.13 3 557.13 8 557,13 8 557.13 8 557,1; )8l 557.1: J8 557.1: J8l 955 6( )ol 914,70 870.7? I8I 823.4761 63 Cumulative Retained Piofit(loss) -4.06 4 188,3! >5 430,1 53 719,7 14 1,067,9 53 984.5 59 1,344.2 27 1,712.5 85l 1,941,734 7 Total Liabilities 557.13 18 557,13 B 557.13 8 653.07 5 745.41 )3 987,3 01 1,276.8 52 1,625.0 92) 1,940,1 S«l 2,258,9 29 2.683,3 231 2,765,210 8 Balance - - - • - - - ■I • - I WWDSE In Association with ICT Final Feasibility Study Report 105Federal Democratic Republic of Ethiopia Ministry of Wator Resources Feasibility Study and Dotail Design of Balo Gadula Project VOL 11 Annex 15 Financial & Economic Analysis (Continued)________ _____ ________ ________________ _________ ________ ____________________________ 0003tn Project Year No Hem 12 13 14 15 16 17 18 19 20 21 ------------------ n 22 23 11 Fixed Assets 194 | ___ 1_2_ Depreciation 10 133 10,133 10 133 10 133 10,133 10 133 10 133 10 133 10 133 10.133 — - » 10 133 10 133 13 Fixed Assets Less Depreciation 415 461 405.328 395 195 385 061 374.928 364,795 354 662 344 529 334 395 324 262 3K 322 304 159 2 Curront Assots 2.709 642 2.913.511 3.117 381 3.321 250 3,525.119 3,728.989 3 932 858 4 136 728 * 4 340 597 4 544 466 4 748 142 5 064 579 21 Stocks (Materials And Finished Goods) 1.111 1111 1.111 1.111 1.111 1 111 1,111 1 111 1 F 1 111 1.111 22 Cumulative Balance Cash Flew 2 693,559 2 897 428 3.101,297 3.305,167 3 509,036 3.712,905 3 910 775 ----------- -------- 4.120 644 . 4 324 513 4 528 383 1.111 ------------------- 4.732,059 1 111 5 048 495 23 Accounts Receivable 14 973 14 973 14.973 14,973 14 973 14,973 14.973 14 973 14 973 14 973 14 973 14 973 3 Current Liabilities 166 172 166 172 166.172 169.172 166 172 168.172 166,172 166.172 —----------------- 9 982 166 172 166,172 166,172 166 172 31 Accounts Payable 9 982 9982 9 982 9 982 9 982 9982 9 982 9 982 9 992 9 982 9932 ____ 3_2____ Company tax Payable 156.191 156.191 156,191 156.191 156,191 156.191 156,191 156,191 156 191 156 191 156.191 J 156.191 4 Net Curront Assets 2,543.470 2,747,339 2.951.208 3,155,078 3.358,947 3 562 819 3 766 686 3.970 555 4J74.425 4 378 294 4 581.970 4 898 406 5 Total Not Assets 2.958 931 3,152.667 3.346,403 3,540.139 3,733,875 3,927,811 4.121.348 4.315.084 4.508,820 4,702,556 4,898,292 6,202,596 6 Liabilities 61 Subsidy - 1# 62 Financer 772 670 718.053 659 340 596 223 528.373 455 434 377.024 292 734 4 104.714 - 63 Cumulative Retained ProFit(Loss) 2.186 261 2 434.614 2 887.063 2 943,916 3,205.502 3,472,178 3.744,323 4.022.350 -------- a--------- ■ 4.306 698 202 122 4 597,842 4 896 292 5 202 596 7 Total Liabilities 2,958,931 3,152,667 3,346.403 3,540.139 3,733.875 3,927.611 4,121.348 4,315,084 4,508,820 4,702,656 ^896,292 8,202,596 8 Balance • - - - - - - - J-Federal Democratic Republic of Ethlopia-Mlnlslry of Water Resources Foasibllity Study and Detail Design of Bale Gadula Project i VOL 11 Annex 11 Financial < Economic Analysis jContinued]______________________________________________________________________________ QQOBkt Project Year No Item 24 25 28 27 26 29 30 31 32 33 11 Flxod Assola - - 12 Depreciation 10.133 10.133 10,133 10,133 10,133 10,133 10 133 10 133 10133 10.133 13 Fixed Assets Less Depreciation 294 058 283,923 273,790 263,657 253 523 243.390 233257 223.124 212991 202.857 2 Curront Assets 5,381.015 5,697,452 6.013 888 6.330,325 6646,761 6 963,195 7,279 634 7,596 071 7.912.507 8.228 944 21 Stocks (Materials And Finished Goods] 1.111 1.111 1,111 1,111 1 111 1,111 1.111 1,111 1,111 1 111 , 22 Cumulative Balance Cash Flow 5 364,932 5.681,366 5,997.805 6.314,241 6,630,678 6 947.114 7,263,551 7,579 987 7 896 424 8.212,860 23 Accounts Receivable 14,973 14 973 14.973 14.973 14,973 14,973 14,973 14 973 14 973 14 973 3 Current Liabilities 188 172 166.172 166,172 166,172 166,172 166.172 166,172 166,172 166,172 166 172 31 Accounts Payable 9 982 9 982 9.982 9.982 9,982 9.982 9.982 9 982 9982 9.982 32 Company tax Payable 156,191 158,191 156,191 156.191 156,191 156,191 156.191 156,191 156,191 156.191 4 Not Current Assets 5 214 843 5,531,279 5,847.716 6,164.152 6,480.589 6,797,025 7,113 462 7 429 898 7,746.335 8 062,771 5 Total Not Assets 6,508,899 5,815,202 6,121,605 6.427,809 6.734,112 7,040.415 7,346,719 7.653,022 7,959,325 6,265,629 6 Liabilities 61 Subsidy 62 Fmancer • 63 Cumulative Retained Profit(Loss) 5 508 899 5.815,202 6.121.505 6.427,809 6734,1li 7.040.415 7,346,719 7653.022 7.959 325 8 265 629 7 Total Liabilities 5,508,899 5,815,202 6,121,508 6,427.809 6,734,112 7,040,415 7,346,719 7.653,022 7,959,325 8,265,629 a Balance • - WWOSE In Association with ICT Final Feasibility Study Report 107I I I I I 1 1 ! I I I I I I J I II I I I I I I I I I I I I I I
🔊 Read Aloud
⏹ Stop
Summery
<
×
Summery