39 The cost of machinery and equipment is based on contract signed with supplier. The cost of building and civil work is based on engineers estimate and that of motor vehicles is on current prices prevailing in the country. For other cost like pre production and office furniture, estimation is based on past experience of similar projects.
3.4.3. Financial and economic benefit of Hawassa Pepsi cola bottling plant Profitability The average selling price is determined based on cost buildup which shows the average operational cost of 21.459 per case. Then a 20%
profit margin, a 12 % sales tax and 0.3% standard free is applied to arrive at a final gross selling price of 28 .9181 birr per case. The income statement schedule also shows that the business is profitable on the above mentioned price. That is a reassembly good amount of profit is indicated for consecutive
10 years. The cash flow statement also depicts that the project during its appraisal period maintains positive operational cash flow even after debt servicing and fulfilling expenditures on investment in the later stages of operational period. The NPV calculation shows that the project has a NPV of 11,228,000 birr at the end of the 10
th year when discounted with opportunity cost of capital (This total NPV would naturally increase it the planning horizon opportunity cost of capital, 10.5%. The break even analysis shows that the business breaks even at 65.35% production capacity or 2,614,000 cases.
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