Executive summary

The project going to establish Paper recycling

Paper recycling is a process to convert used paper to the new, re-useable paper. The process is
known as Paper Recycling. The project will help the paper industry to fulfill the rapidly
increasing demand of paper products specifically tissue paper. This project intended the
establishment of a plant for the recycling of waste paper with a capacity of 52.5 tons per annum.

The present demand for the proposed product is estimated at 33,838,000 per annum for year
2018. The demand is expected to reach at 59,181,500 Birr by the year 2023

The total investment requirement is estimated at about Birr 1 million, out of which Birr 540,000
is required for plant machinery. The project will create employment opportunities for 13 persons.

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Section I Project background

These days, the price of most goods is continuously increasing at an alarming rate in Ethiopia
due to the inflationary pressure. Like other products, tissue paper products have similarly
become too expensive due to supply constraints which has resulted in a chronic shortage that
lead to higher price. High degree of urbanization and population increase has also resulted in the
increase in demand of tissue paper and other paper and pulp products.

Customers are forced to buy imported expensive tissue papers. Due to the inability of local paper
industry to meet the demand of paper products, Ethiopia has been importing paper from abroad
which also led to the higher price. The establishment of project like ours will help in increasing
the supply. It will also help in decreasing the import bill of the country and save precious hard
currency.

The project can create employment for 13 persons. In addition to supply of the domestic
Needs, the project will generate tax revenue. The establishment of the project will have a foreign
exchange saving effect to the country by substituting the current imports

2. Project objective
The objective of this project is primarily to investigate and facilitate potential investment
opportunity and provide an overview about paper recycling initially tissue paper markets. The
main purpose of the project is generating income from waste paper and it contributes to local and
global environment.

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Section II -Marketing Analysis

2.1 Market Entry Timing

Various Products and Services have high dependence on their commercialization, timing and
delivery to the Customers but the Paper Recycling Unit can be started at any time during the year
due to the availability of Raw Material and Demand throughout the year.

Proposed Business Legal Status

The said project is planned to be a partnership and even it can be registered under the Country’s
Trade and Industry Minister and get license to operate legally and to fulfill its tax regulation. The
selection totally depends upon the choice of the Entrepreneurs. This feasibility study assumes the
Legal Status of Partnership.

Project Capacity and Rational

The proposed size of the project is capable to produce an average amount of 294,000 tissue paper
at 70% capacity during year one, 336,000 at 80 % during year two, 378,000 at 90 % during year
three, and 420,000 at full capacity for the last two years of the project life-cycle.
Here our assumption is that our manufacturing capacity will increase by 10% up to the fourth
year and during the last year the project’s capacity will be 100% as the fourth year. Considering
the local market demand trends, initially the project would manufacture tissue paper and able to
receive and entertain such number of orders which are required for the project to be
economically viable.

2.2 MARKET DEMAND

The demand for tissue paper has shown a steady increase over the years and is expected to
continue increasing as literacy improves and economic growth takes place. There is a sizable
amount of shortage that our project plans to meet some portion of. The demand for tissue paper
is projected to increase at 10% (Refer to Annex 2 on demand projection)

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2.3 FACTORS AFFECTING DEMAND AND SUPPLY

2.3.1 Demand
The major factors affecting the demand for the products of paper and tissue paper industry
include the following:

 The demographic trend and age group

 The education sector developments and future education policy
 The economic growth trends and projections of Gross National Product
 Trends in industrialization and future projections
 Development of electronic media

Demographic Trends: In developing countries, increase in population and in the standard of

living result in a tremendous demand for tissue paper.
Education: Education facilities in Ethiopia have been expanding overtime but have not kept
pace with the requirements of a modernizing society. It paves the way to our project to get raw
material (waste paper) to manufacture. And also we can provide tissue paper for education
centers as they have started to provide tissue paper for employees. Education centers will prefer
to but our product as our project creates income by buying their waste paper. The significant
development of the Economic Growth Trend: The demand for tissue paper is directly
influenced by the level of economic activity.
In Ethiopia, the annual Gross Domestic Product (GDP) has shown an improvement from time to
time. The increase tempo of economic activity and investment-friendly policies of the
government are expected to lead to greater demand for paper products.
Development of Electronic Media: It is sometimes asserted that the demand for paper might be
adversely affected due to the phenomenal growth and popularity of electronic information
system. It is asserted that we are moving towards the paperless office scenario.
The argument however does not have much force. We may use computers but we still like to
print out our works, as for electronic information, it works only up to appoint.

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Future Demand

The demand of tissue paper is a function of number of parameters. The most important of the
parameter is the per capita GNP which is an Index of the income and purchasing power of the
people. It has been established by study that the demand for tissue paper is strongly related to per
capita GNP. The demand increases rapidly at low levels of per capita GNP and less rapidly at
higher levels of per capita GNP.
A second important parameter is the growth of literacy and education in a country.
A third parameter is the rate of urbanization. Per capita consumption of paper is higher in urban
areas than in the rural sector, at present, the Government checking the urbanization through
several rural development programs. Another significant factor is industrialization. Since most
industries use paper for packing purposes, the consumption of paper will increase as industrial
production increases.

2.3.2. Supply

The domestic tissue paper and paper industry has currently been facing a number of challenges
affecting its supply. The major factors contributing to the present state of affairs are explained
below:
 Devaluation of Birr
 Increase in input costs
 Changes in the level of duties

Devaluation of Birr: The value of birr has been persistently declining interims of foreign
currencies through official policies of adjustment of foreign exchange rates. This has resulted in
increase in birr value of imported tissue paper. By substituting a part of tissue paper to be
imported we can save foreign exchange. For example, people may use our tissue paper instead of
Napkin.
Increase in Input Costs: The increase in the rates of local energy and other input charges have
also contributed to increase in cost of production. The local producers are thus placed at a
comparative disadvantage in competition with imported supplies.

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Changes in the Level of Duties: The industry sources fill that the discriminatory change in the
duty structure, the rising fuel cost and current rate of import duties on imported materials. The
industry is confident that with the proper encouragement on the part of the government Imports
of Paper and Paper Products.
The paper industry (including tissue paper) has achieved the expertise along with modern
technology of the highest repute. However the high cost of imported raw material renders the
industry abandon the game over before going for a kickoff.

 Our project will minimize these problems to some degree as waste paper is planned to be
used as a raw material which available locally.
 Local human power will be employed to create employment opportunity.

2.4 Market segmentation

This project’s output is planned to individuals with low income. This is easy for the project to
achieve this because the owners and managers will be committed to minimize cost and provide
quality product with relatively low price than competitors.
Hence, individuals with low income are the segments of the project whose needs can be satisfied
better.

Target Market
Considering the use of tissue paper, our target customers could be an individual, a corporation or
government. In addition, existing paper manufacturing companies can also use our recycled pulp
for their paper manufacturing, in this way we can also be the raw material provider for the
industry. Individuals and wholesalers (retailers) are proposed to be our major buyers of tissue
paper.

Competitors
Our competitor which may be strong is MAMCO. But the price at which MAMCO is selling is
high price and it is expensive for people with low income to afford. Our project is going to be a
solution for this problem.

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2.5 Promotion-Reaching the Customers

Customers are not waiting for our product to be launched .Instead we are providing them as
substitute to a more expensive product. In order to be successful, we need to introduce ourselves
to the market. For this purpose, we will market our product(s) through distributing flyers, putting
samples at exhibition shows, creating web site for marketing promotion, social media like face
book fan page to make them aware of our product and to attract the young population to buy. In
addition, for buyers with high quantity we will provide a discount, having shelf at retailers shop
and will provide door-to-door service. Different types of awareness programs will be used to
make people buy recycled paper products. We are aware that this sort of awareness programs
costs a lot but this way is the most effective way in case of our product.

 Reaction of Other Firms

Other firms can react/retaliate to establishment of our firm because of the nature of competition.
They may drop their prices to reduce our competitive advantage or they may use other
techniques in order to force us to quit. They may use negative marketing techniques to create
negative impression about our products. We are working on the possible reactions and our
response to them. It is possible by making our products unique and no substitutable with
different and value adding features. We will be committed to produce market research so as to
know the needs of our customers and satisfy them better than our competitors. The information
which we will get from the research may include the actions and strategies, best experiences,
weaknesses, strengths, future direction of our competitors. As a result, it may be easy to retain
customers by adding their switching cost in terms of better quality and relatively low price than
our competitors. And also, the expected and actual changes, potential customers, new
technology, and other changes in the supply chain can be assessed and dealt accordingly.

•Packaging- Is designed to be with plastic written ‘KEEP YOUR ENVIRONMENT CLEAN’

on it.
•Labeling- all the ingredients that are a part of the final product will be written on the package.

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2.6 Business Environment Analysis
Potential benefits of environmental analysis include

Specifically, studying organizational environment has the following benefits for our project:
-Increase managerial awareness of environmental changes
-Increases understanding of the context in which industries and market works
-Increases understanding of multilateral settings
-Improve resource allocation needs
-Facilitates risk management
-Focuses attention on the primary influences on strategic changes

Components of Environment
1. General (Macro) environment
-It consists of external factors that shapes and influences the internal environment by posing
threats and opportunities that can bring about the birth and death of an entire industry. The
general environment includes:

A. Political and legal environment- consists of factors related to management of public affairs
and their influence on an organization. Our project is as per the regulation and investment policy
of the country as these regulations and policies welcomes such valuable and promising
investments. Moreover, there is political stability and government commitment towards
development objectives which our project shall contribute.
B. Economic Environment- Economic environment- includes trends in fiscal policies, credit
policies, monetary policy, money supply, inflation rate, interest rate, exchange rate, employment
rate, balance of payment, budget deficit which have great impact. Each of these can serve as an
opportunity and threat. The increasing GDP growth will create economic opportunities for our
project. As more firms get established, their waste paper generation will increase. This project
put in to consideration the positive impacts that it will bring to the economy of the country. For
example it can improve employment rate, reduce exchange rate, and improve balance of payment
by subtitling imports and reducing the need for foreign exchange.

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 C. Social environment- Consists of population density, class structure, rural-urban
mobility, inter-state migration, -nature of social organization, development of social
institution, growth of educational opportunities, change in life-style, age, consumer
behavior etc. which can be opportunities or threats. The project analyzed the social
environment factors with due care to know their effect on serving and satisfying the
customers. For example, Growth of Educational opportunities is forecasted to
increase demand for tissue paper.
D. Technological Environment-
Technology- is the application of scientific or other organized knowledge to practical tasks.
Impact of technology on society
 It affects economic growth, standard of living
 It is very much involved in our daily life.
 It raises our standard of living.
 It allows physicians to prevent epidemics.
 Technology has both favorable and unfavorable effects. E.g.-Air and water
pollution.
 The unfavorable effects arise due to improper use of scientific
developments.

Unfavorable effects of technology on business

1. A new technology may destroy the industry. E.g. - computer destroy typewriter.
2. Introduction of new technology dislocates some workers unless they are well equipped to
work on new machines.
3. It makes jobs require more intellectual and upgraded.
4. It has created antibiotic which cause side effects but the same technology has shown
remedial measures for the side effect.
 Air pollution, Acid rain, industrial waste disposal, toxic effluent, noise and vibrant,
crowding are the side effects of urbanization and industrialization.

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This project is going to use a technology with very low negative impact on environment like
pollution. The project minimizes the pollution that would come because of waste paper.
In addition, the information technology of the country allows us to promote our product by
creating our own web site and be a part of the social media i.e. face book.

E. Cultural Environment
Culture includes knowledge, belief, art, moral, laws, custom, values, norm, accepted behavior
patterns. Human behavior is strongly guided by culture. Business environment should identify
cultural differences and produce products and services which are suitable to a particular culture.
The proposed project is going to be implemented in the environment where there is a difference
in culture. The cultures of customers will be respected in any case in our operation. As much as
possible we designed the tissue paper to fit to every culture though it is not that much sensitive
for cultural issues. The use of tissue paper will not have any negative impact for different culture.

2. Micro (task)-External environment analysis

-It is mainly concerned with industry environment.
Industry- is a group of business whose products are close substitutes.
Market- is a group of customers with specific set of requirement, which may be satisfied by one
or more products.

Why analysis of industry and market?

 to identify other industries core competencies
 To understand the nature of customers and their need
 To identify new markets to exploit
 To identify threats from existing and potential competitors
 To understand market to obtain resources

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Porter’s five forces’ model of industry analysis
1 .The threat of new entrants
 Some major barriers are as follows-
A. Capital cost of entry- if it is high, it discourages firms to join an industry.
B. Brand loyalty and switching cost- if customers are loyal for the current brand and
switching cost for customers is high, it discourages new entrants.
C. Economies of scale- larger firms can produce goods at lower cost than small ones.
D. Access to distribution channels-new competitors may find difficult to gain access to
channel of distribution.
E. Resistance offered by existing business: existing competitors may choose to resist new
entrants strongly.

This project has initial cost of 1 million birr which is difficult for firms to join the industry. As
we are going to provide the selected market segment a moderate quality product with relatively
low price which can be achieved by economies of scale and waste minimization, it will be easy
to make our customers loyal and high switching cost and resist new entrants.

2 . The threat of substitute product

Substitute product-product which meets the same needs as the product in any industry.
 The extent of threat from particular substitute depends on:
A. The extent to which price and performance of the substitute can match industries product.
If it matches, there will be high competition.
B. The willingness of buyers to switch to the substitute.
Low switching cost--buyers are more willing to change substitutes- -high competition.
3. Bargaining power of buyers
Buyers of an industry product can exert bargaining power over that industry by forcing prices
down, reducing the amount they purchase, and by demanding better quality for the same price.
 Buyers tend to be powerful relative to the firm they are buying from
when-
i-they are concentrated as in cooperatives

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ii-products are undifferentiated
iii-when the product represents a large portion of the total cost of buyers
Iv-buyers are earning low profits
v-the product is not critical for the buyer
vi-there is a threat of back ward integration by buyers to make the product of suppliers

We can minimize the bargaining power of the buyers by making our product critical for them,
helping them earn high profits, making the product different we can retain customers.

4. Bargaining power of suppliers

Suppliers have power over their customers through their ability to set price and control quality,
delivery time, and order quantity.
-The power of suppliers is high when:
 There are few and concentrated suppliers
 Product is differentiated
 Customers’ switching costs are high
 There is little pressure of substitutes on suppliers
 Suppliers have the capability to integrate forward.
We have given much emphasis for our suppliers. We will minimize the bargaining power of
suppliers by making switching costs low, by having many options of suppliers, and by
integrating with them (backward integration).

5. Intensity of rivalry
Some industries appear “sleepy” because of low level of rivalry among competitors.
On the other hand, some industries are characterized by a high level of competitive activity.
Competition is high when:
 Relative equilibrium in size and power among a large number of competitors
 Slow or stagnant growth of industry
 Undifferentiated product
 Low switching cost
 High fixed costs and perish ability

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  Small capacity additions generate large volume increases which raise pressure to cut
price.
 High exit barriers causing firms to bear low or negative returns on investment.
 High range of strategies and types of firms.
The industry looks sleepy. We heard that individuals at different times have planned and started
to recycle paper but they could not sustain their operation due to different factors. We will work
hard to exploit this and other opportunities to be strong competitor for the potential and current
competitors.

SWOT Analysis
Strength
The envisaged project has the following strength
1. Low price
2. Environment Friendly (minimizes pollution) by recycling
3. Low resource consumption
4. Less garbage in the society
5. Local source of inputs

Weakness
1. Unavailability of Machinery
2. Lack of Human expertise in recycling in Ethiopia
3. Lack of established markets for collected materials
5. Shortage of funding for recycling
6. Poor participation by resident ‘sin materials collection

Opportunities

The project is expected to

1. Create employment Opportunities
2. Bridge the Demand Supply Gap, and creates a room for our business
3. Purchasing power of the people will be increased so they will favor our products.

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Threat
1. Firms may react on this establishment and may negatively affect our profitability and
sustainability.
2. Unfavorable attitude of customers on recycled paper

MARKET STUDY
1. Past supply and Present Demand

Paper has become an important necessity of our day to day life. Modern life depends on paper
and millions of tons of it are made and used each year. The range of possible uses of paper is
limitless and new ways of using it are being devised daily.
Companies use paper for news prints, magazines, writing, printing, packaging, sanitary purpose
and household uses. Books, exercise books, report cards, receipts, envelops greeting cards,
calendars, diaries, wall papers, toilet tissue, towels are a few among the usages of paper.
The supply of paper in Ethiopia is dominated by imported products. The only paper producing
factory in Ethiopia is Ethiopian Pulp and Paper Share Company which is located at Wonjj. This
factory has a production capacity of 8,000-10,000 tons, annually. Due to the limited production
capacity of the country's sole producer of paper, the country imports a large quantity of paper
from oversees.

The existence of such companies makes easy the access of input materials which is waste paper.
Looking into the above all reasons, our project decided to buy waste paper from the above
companies to manufacture tissue paper.
Expected Market Share
In initial stages we are not expecting to capture huge market share because of the limitation of
the resources employed. However, we can say that in 5 year time, we can cover up to 11.87% of
the market share.

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Market share can be increased by means of marketing and creating awareness amongst
individuals. Low priced and moderate quality recycled tissue paper will be popular in low-
middle income individuals, small industries and households.

Demand Projection
Assuming supply was driven by demand, the average annual supply for the period under
reference, which constitutes domestic production and imports, is considered as the effective
demand for the product.
Demand for the product is increasing with population growth, urbanization, expansion of
education and other social services. A conservative estimate of 15% rate of growth is therefore
adopted in estimating the demand for the product. The demand for the product (2018) is thus
estimated at 33,838,000 Birr, 11.1% of it is going to be covered by our project.
It is clearly shown that the increment in supply for tissue paper is much lower than the demand.
For example, in 2018/19 the demand for tissue paper is forecasted to be Birr 38,913,000 while
supply is only Birr 11,698,118.74 for the same year. The difference Birr 27,214,881.26 will be
filled by our proposed project.

For the reason stated above a rate of growth of 10% is adopted in projecting the demand for
tissue paper and supply by 10%. Assuming the market share of other firms is around 88% (which
is 88.94% for the first year, 90.30% for the second year, 88.25% for the third year,88.13% for the
fourth year, and 89.21% for the last year. The envisaged projected project is expected to have a
projected market share of 11.06%,9.70%,11.75%,11.87%,and 10.79% for each consecutive year.

 Strategy of Competition
Primarily we have planned to provide tissue paper at relatively low price than competitors. Since
the cost of the inputs is relatively low and the technology that we are going to use is efficient it is
easy to produce it with low cost so as to minimize selling price.
-The current wholesale price of tissue paper (MAMCO) is 11br per unit. One packet of tissue
paper holds 48 pieces and its price is 336 birr.
-Fortunately our project is going to provide it with 5 birr per unit.

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 Distribution Strategy

The following model of distribution will be used by the project

Manufacturers Wholesalers Retailers Customer

 It will be difficult to reach every customer at his/her home. Hence, we will provide our
product to wholesalers so that customers can buy it from wholesalers or from Retailers
based on accessibility and choice.
 We also plan to distribute our product by our pick-up to deliver it door-to-door to our
major buyers/wholesalers

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Section 3.Technical Analysis of the project.

3.1 PRODUCT DESCRIPTION

Waste paper recycling is a process by which waste paper, agricultural residues, waste cotton, old
rugs, tailor cuttings, waste jute; hosiery cuttings are processed together with some chemicals like
caustic soda, dry staffs, resin, etc., to produce such products as duplicating paper and tissue paper
and others. The resulting paper from the recycling process has almost the same quality as paper
made out of "virgin" fibers and can be used to make most of the paper products.
This project plans to produce tissue paper.

3 2. Raw Material

Waste Paper

The main inputs for the project will be newspapers, magazines, carton boxes, shredded paper,
phone books, mail, office paper and corrugated carton. The waste paper collected at offices and
factories such as government offices, Addis Ababa University, private colleges, bank and wasted
newspapers are the main sources of raw material for the projected recycling paper. It is estimated
that adequate quantities of waste paper are available for use in paper recycling given the huge
paper waste products generated by the different offices. Most waste paper products in Ethiopia
are usually not given due concern since their economic value is underestimated and sometimes
waste papers are considered to be without any economic value. This creates an opportunity for
our project since we realize the huge importance of waste paper as a raw material, and its impact
on mitigating the pollution of the environment.

The collection will be in a systematic manner with standardized procedures. We will also be
proactive in our relationship with the wastepaper suppliers by contacting them in advance, and
by making it convenient for them to provide us the materials. We will go to their premises collect
the papers. Since the quality of recovered paper is critical to the project’s successful recycling,
the waste paper collections unit will make a concerted effort to make sure that the paper ;s
quality is monitored and other unwanted materials are separated and disposed. The waste paper
collections unit is a critical function and is organized under production department

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3.3. Engineering and Technology

After the paper gets collected and transported to the recycling center, it is sorted from plastic,
staples, paper clips, glass or any other contaminants. Then the paper is fed into the plumper,
where it is mixed with water and chemicals and turned into pulp (paper fibers used to make
paper). Then the pulp is poured into the de-inking machine that separates ink, glue residues and
adhesives from the pulp. Then the fibers are refined (beaten to make fibers swell) and bleached
since white tissue paper will be produced.

3,3.1 Production Process

The major operations involved in waster paper recycling are:
- Raw materials sorting, cutting and dusting
- Digesting (Cooking)
- Beating
- Lifting and couching
- Pressing and drying
- Tub sizing
- Calendaring
- Sorting and cutting

(a) Sorting, cutting and Dusting

The various raw materials (waste paper, rugs, waste cotton, etc) are sorted thoroughly for
removal of all impurities, that is, all non fibrous materials such as nails, buttons, wood chips, etc.
are eliminated.
(b) Digesting (Cooking)
The cooking or digestion of the rags and other materials is carried out with a mixture of 1 to 3%
of caustic soda or lime and kept at boiling point for about five to six hours. Then they are washed
thoroughly and sent to the beater.
( c) Lifting and Couching
The beater is filled with the required quantity of water, and the digested materials are added
gradually. Bleaching power (1 per cent) is then added. After allowing sufficient time for
bleaching, the materials are washed thoroughly by lowering the washing drum. The time

18
required for pulping is about six to eight hours where good hydration is desired. Titanium
dioxide or other fillers are then added along with optical bleaching agents (for white tissue
paper). Rosin soap and alum are added later.
(d) Lifting and Couching
From the beater, the pulp is sent to storage vats near the lifting vat and mixed with sufficient
quantity of water to dilute it to form a uniform suspension and free it from clumps, knots, etc. A
certain quantity of diluted pulp is then lifted from vats on a wire screen.
(e) Pressing and Drying
When a sufficient number of tissue paper rolls have been formed, they are put under a press to
remove the water. The tissue paper rolls are then separated and, to avoid shrinkage, placed under
absorbent boards and pressed again. The tissue paper rolls are then hung to dry in bunches of
three to six, according to thickness.
(f) Tub Sizing
To remove dirt specks from the tissue paper, they are again dried and cleaned with a brush or
cotton wadding.

(g) Sorting and Cutting

The tissue paper rolls are carefully sorted and cut to size.
In most cases almost 100 per cent of the input raw materials end up in the finished product. In
some cases there will be a loss of up to 50% of the dry weight when the non-cellulose element in
some agricultural wastes is extracted in the cooking and washing stages.
Some of the process water will go to waste. How much waste water is produced depends on the
amount of washing and bleaching to be carried out. The waste water contains only very small
traces of chemicals and would be safe to use for irrigation. If the cost of water justifies it, the
waste water can be purified and used again.
3.4 Paper Recycling Machine
The machine aids in the process of recycling recovered paper by turning it from waste to a new
paper product. In a paper recycling mill, multiple types of machines help complete the recycling
process. Each machine has its own role (pick-up, sort, pulp, filter, de-ink, bleach, make paper) in
the recycling process and becomes interconnected by conveyors that transport the paper from
one step (machine) to the other.

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3.5 PLANT CAPACITY AND PRODUCTION PROGRAMME

A Plant Capacity

According to the market study, the demand of recycled paper in the year 2018 will be Birr
33,838,000, whereas this demand will grow to 59,181,500 Birr by the year 2022. Taking in to
account the availability of the main raw material and the economic scale of production, the
envisaged plant will have an annual production design capacity 105 tons of recycled paper.
Production capacity is based on a schedule of 300 working days per annum and 1 shift of eight
hours per day.

B, Production Program

Production Program will be designed in such a way that at initial year the plant will be made to
operate at 70% of its capacity (294,000 units) at full capacity in its final years, followed by 80%
(333,200 units) in second year and increasing. It gradually to produce . Then production build-up
will follow 90% (372,400 units) in year 3 and 100% of plant capacity (420,000 units) in year
four and five,
3.6 Manpower Requirement
Manpower required by the plant consists of both direct and indirect labor. The direct labors are
those that will be engaged in operating the production machinery and equipment, and those that
will provide direct assistance to the operation. These include daily laborers, technician, driver,
cleaners. Indirect labors are General Manager, Production manager, Finance manager, Marketing
manager, Human resource Manager and a secretary.

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 Human Resource Requirements, Qualifications and Salary

Categories Salary
No. of
Function Skil Qualification
Prof. Unskilled Staff Monthly Annually
led

General Manger- Bisrat

X Degree 1 5000 60,000
Ayele

Production Manager- Abel

X Degree 1 4000 48,000
Tesfaye

Finance Manager- Demesu

X Degree 1 4000 48,000
Admasu

Marketing manager –Tsehay

X Degree 1 4000 48,000
Dino

Human Resource Manager X Degree 1 4000 48,000

Secretary 1500 *12 Read &

Driver 1400*12 X write/third 3 58,800

Technician 2000 *12 driver license

Daily laborers
4*1200*12= X Read & write 5 69,600
Guards 1000*12

Total 13 380,400

3.7 UTILITIES
Electricity, water and steam are the three major utilities required by the plant. Steam is
Supposed to be generated by electric boilers; hence, its cost to the project are included in
electricity and water cost

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3.8 Proposed Location

The following are the important factors, which determine the viability of the Paper recycling
project.

 Availability and supply of desired quality raw material.

 Sufficient supply of electrical power.
 An ample supply of water.
 Adequate facilities for effluent and waste disposal.
 Availability of suitable labor and technical staff.
 Access infrastructure facilities

Considering the above factors, Akaki area is selected since it fulfills the access to raw materials
(the waste paper from Addis Ababa). It is also an industrial zone with reliable power and water
supply. Labor can also be acquired at lower cost from the area around Akaki. Transportation cost
to transport both raw material and finished goods (tissue paper) is also minimized by locating it
near Addis Ababa.

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Section 4 .FINANCIAL ANALYSIS OF THE PROJECT
The financial analysis of paper recycle project is based on the data presented in the previous
chapters and the following assumptions:-
Projected Life of the Project in Years 5
Source of finance 40 % loan
60 % equity
Repair and maintenance 5 % of the total plant and machinery
Operating Assumptions
No of Working Days in One Year 300
No. of Shift 1
No. of hours in one shift 8
Annual production capacity 105 t
Initial year capacity utilization 70 %
Capacity growth rate 10 %
Maximum capacity utilization 100 %
Revenue Assumptions
Selling price per unit 5 birr
Raw material tone price per tone
Waste material 126 685.71
Caustic soda 3.15 3258.50
Rosil( soap) 2.15 4952.16
Alum (non-ferric) 26250 0.12
Starch (maize) 6.3 2142.85
Titanium dioxide 1.05 19285.71
Formaldehyde 0.42 5612.24
Optical bleaching agent 84 19.132
Project Cost
Having completed the study of technical feasibility, the project team should then have sufficient
information to determine the costs that are likely to be involved in production. Additionally, the
market survey will have supplied information about the sales price that could be achieved for the

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 product. The project team are therefore in a position to calculate the expected income and
expenditure and hence the gross profit/loss that can be achieved. The project team are therefore
in a position to calculate the expected income and expenditure and hence the gross profit/loss
that can be achieved

Projected Income Statement

The following table shows the projected Revenue and Expense of paper recycle project for 5
years
Projected Income statement
Year1 Year2 Year3 Year4 Year5
Sales 1,470,000 1,666,000 1,862,000 2,100,000 2,100,000

Cost of manufacture 190,988.25 214,131.65 235,043.6 255,871.05 259,704.33

Gross margin 1,279,011,75 1,451,868.35 1,626,956.40 1,844,128.95 1,840,295.67
Operating expense
Selling expense 264,600 302,400 340,200 378,000 378,000
Rent expense 22,000 22,000 22,000 22,000 22,000
Utilities 120,000 132,000 145,200 159,720 175,692
General & 322,800 322,800 322,800 322,800 322,800
administrative
expense
Depreciation 27,000 27,000 27,000 27,000 27,000
Total Operating 648,400 806,200 857,200 909,520 925,492
Expenses
Profit Before Interest 630,611.75 645,668.35 1,004,800 934,608.95 914,803.67
and Taxes
Interest expense 7% 41,921.22 52,097.19 58,093.299 67,801.95 64,804.02
Profit before tax 588,690.53 593,571.16 946,706,70 866,807 849,999.65
176,607.16 178,071.35 284,012.01 260,042.1 254,999.90
Tax (30%)
Net income 412,083.37 415,499.81 662,694.69 606,764.9 594.999.76

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 Projected Cash Flow Statement
The following table shows the projected cash inflows and outflows for 5 years.

Projected cash flow

Cash flow from Year1 Year2 Year3 Year4 Year5

Operating Activities
Sales 1,470,000 1,666,000 1,862,000 2,100,000 2,100,000
Cash paid for expenses 621,400 779,200 830,200 882,520 898,492
Net cash provided by 848,600 886,800 1,031,800 1,217,480 1,201,508
operating activities
Cash flow from investing
activity
Purchase Machinery 540,000 - - - -
Office furniture and equip. 20,000 - -
Vehicle 150,000 - - - -
Building & civil work 200,000 - - - -
Cash flow from investing (910,000)
Cash flow from financing
activity
Investment by owner 600,000 - - - -
Cash from borrowing 400,000
cash inflow from financing 1,000,000
176,607.16 178,071.35 284,012.01 260,042.1 254,999.90
Tax payable
Loan payable 108,000 108,000 108,000 108,000 108,000

Cash out flow from 284,607.16 286,071.35 392,012.01 368,042.1 362,999.9

financing

Net cash provided by 715,392.84 (286,071.35) (392,012.01) (368,042.1) (362,999.9)

financing activity
Cash balance 653,992.84 600,728.65 639,787.99 849,437.90 838,508.1

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TOTAL INITIAL INVESTMENT COST
The total investment cost of the project including working capital is estimated at Birr 1 million,
of which 54 per cent will be required in foreign currency.
The major breakdown of the total initial investment cost is shown in Table

Sr. Total Cost

No. Cost Items
1 Land lease value 110,000
2 Building and Civil 200,000
Work
3 Plant Machinery 540,000
and Equipment
4 Office Furniture 20,000
and Equipment
5 Vehicle (used) 150,000
6 Pre-production 30,000
Expenditure
7 Working Capital 40,000
Total Investment cost 1,000,000
.

NPV

Discounted Cash inflow

Year 1 Year 2 Year 3 Year 4 Year 5 Total

Cash 653,992.84 600,728.65 639,787.99 849,437.90 838,508.1
balanc
e
PVF 0.892855 0.797193 0.71178 0.635518 0.567426
@
12%

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DCF 583,920.77 478,896.68 455,388.3 539,833.07 475,791.3 2,533.830.12

NPV= Discounted Cash inflow- Total Investment cost

=2,533.830.12-1,000,000=1,533.830.12

Payback Period

653,992.84 600,728.65 639,787.99 849,437.90 838,508.1

653,992.84 254,721.49 894,509.48 1,743,947.38 2,582,455.48

Payback period=1+346,007.16/600,728.65
=1+0.576
=1.576

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Projected Balance sheet statement
The following table shows the projected Balance sheet for paper recycle project for 5 years

Projected balance sheet

Year1 Year2 Year3 Year4 Year5

Assets

Current asset 653,992.84 600,728.65 639,787.99 849,437.90 838,508.1

Fixed asset 710,000 683,000 656,000 629,000 602,000

Total asset 1,295,787.9

1,363,992.84 1,283,728.65 9 1,478,437.90 1,440,508.10

Liability

Salary& wage 380,400 380,400 380,400 380,400 380,400

payable

Rent payable 22,000 22,000 22,000 22,000 22,000

Loan payable 108,000 108,000 108,000 108,000 108,000

A/p for maintenance (158,490.53) (242,171.16) (477,306.70) (238,727.00) (264,891.66)

Total liability 351,909 268,229 33,093 271,673 245,508

Capital contributed 600,000 600,000 600,000 600,000 600,000

by owners

Profit of the year 412,083.37 415,499.81 662,694.69 606,764.90 594999.76

Total liability & 1,363,992.84 1,283,728.65 1,295,787.99 1,478,437.90 1,440,508.10

equity

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