Case Study on SS Dairy Milk Limited Essay

CHAPTER-1 INTRODUCTION 1. 1 Background: Bangladesh is a densely populated developing country. As the country is mainly an agro-based one, the agro-based industrial development might be the better future of our economy. But it is a matter of regret that at this advanced age of science and technology, Bangladesh cannot compete in the international market with its agro-based products mainly due to the lack of advancement in agriculture. As a result, foreign agricultural commodities are playing a dominating role in our market.

Consumers prefer to buy imported commodities at much higher prices because of various reasons. As for the milk based products, there are only a very few companies who are fighting in the market with a limited number of items against a full range of foreign items. These foreign items have various product features such as packaging, flavor, taste, quality, durability, etc. suited to meet different customer options. Consequently, the buying decision of the customers goes in favor of the foreign items even if they are charged much higher prices.

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With this point of view, I have decided to establish a most modern Milk Processing plant to be located at Fuldighi, Bogra Sadar, Bogra, which is meant for the production of various milk based products that will meet different options of the consumers and maintain international standard and quality. The named of my company would be “SS Dairy Milk Limited” 1. 2 Objective: The objective of the study on SS Dairy Milk Limited is to assess the feasibility of its Milk Processing project in terms of market demand as well as technical, financial, economic and environmental viability. 1. 3 Scope of works:

The study on the proposed project was limited to the following aspects: a. To assess the financial and technical viability of the project. b. To analyze the market studies to assess market demand and prospect of the proposed Milk Processing project. c. To assess the socio-economic and environmental implication of the project. 1. 4 Background of the Project: SS Dairy Milk Limited has been founded by its Directors mainly because: – Agriculture sector has appeared to be the most attractive sector in Bangladesh. It is predominantly agriculture-based economy and yet almost no organized industry is in existence. The Government of Bangladesh is encouraging the milk industry and giving high priority for the establishment of milk projects due to the reason that it will make import substitution significantly and that there is an increasing demand of the milk products in the country. – And most importantly, we have got keen interest to devote themselves in this sector. We have acquired considerable knowledge and experience in similar business and have got adequate management capability to run this type of industry successfully. CHAPTER-2 ORGANIZATION & MANAGEMENT 2. 1 Name and location of the Project:

The proposed project will be set up under the name and style of “SS Dairy Milk Limited” and located at Fuldighi, Bogra Sadar, Bogra. The location of the project enjoys all infrastructure facilities including an excellent communication network. The project location is considered to be very much suitable for the project from different perspectives. 2. 2Nature of the project: The project envisages setting up of a most modern Milk Processing Plant which will process fresh cow-milk to produce various milk based products of international standard and quality with state-of-the-art packaging. 2. 3 Size & Capacity:

At 100 percent level of capacity utilization, the proposed milk plant will process 30,000 liters of fresh cow-milk per day. The daily production output of the plant would include the following products: ItemPack SizeQuantity Pasteurized whole milk1 liter bottle5,000 bottles Pasteurized whole milk500 ml bottle11,300 bottles Pasteurized whole milk1 liter pouch2,000 pouches Pasteurized whole milk500 ml pouch10,000 pouches Pasteurized skim milk (low fat)1 liter bottle2,000 bottles Pasteurized skim milk (low fat)500 ml bottle5,400 bottles Pasteurized flavored milk1 liter bottle1,595 bottles

Pasteurized flavored milk180 ml bottle8,330 bottles Pasteurized flavored milk120 ml bottle12,500 bottles Ghee400 gm tin can750 tin cans Ghee900 gm tin can330 tin cans 2. 4 Corporate set-up: The project is a private limited Company formed by the sponsors having incorporation from the Registrar of Joint Stock Companies & Firms, Government of the People’s Republic of Bangladesh. 2. 5 Particulars of Sponsors: NameAddressStatus Sabrina Haque Flat # A/2, Road# 14, Dhanmondi Dhaka Managing Director Shahin Haque Flat # A/2, Road# 14, Dhanmondi Dhaka Director CHAPTER-3

TECHNICAL ASPECTS 3. 1PROJECT DESCRIPTION: 3. 1. 1Project Purpose and Design: The project envisages for setting up of a most modern Milk Processing project under the name and style of “SS Dairy Milk Limited” on an area of land measuring 3. 30 acres at Fuldighi, Bogra Sadar, Bogra. The project is intended to produce various milk based products which are of international standard and quality and have vast market demand in the country as a whole. The project has been designed based on foreign and local machinery & equipments, raw & packaging materials and other supplies.

The fixed cost of project has been estimated at Tk. 2393. 66 lac, while the total cost thereof at Tk 2461. 14 lac including net working capital of Tk 67. 48 lac.. 3. 1. 2Technology & Process: The proposed Milk Processing project includes different processes, the flowcharts of which are shown in an annexure to this report. 3. 1. 3Objective of the project: The objectives of the proposed project are as follows: 1. To establish a special type of most modern Milk Processing project meant for the production of various types of milk based products of international standard and quality. . To carry on the production of internationally standard quality milk products having different pack sizes and attractive packages suited to different customer options. 3. To satisfy various options of the consumers / customers by offering a range of products having good taste, attractive flavor, lucrative and attractive packages. 4. To make import substitution of milk based products and thus save the country from the incurrence of foreign exchange considerably. 5. To make contribution to the ultimate development of the country. 3. 2 PROJECT LOCATION AND ITS SUITABILITY:

The project is proposed to be located at Fuldighi, Bogra Sadar, Bogra. The project site enjoys a good communication network, infrastructure facilities and availability of labor at low wages. The area of the land is adequate and its location is quite suitable from different perspectives for setting up such a milk processing project. The location will facilitate both the procurement and the marketing functions to be carried out safely, conveniently and cost-effectively. 3. 3 LAY-OUT PLAN, STRUCTURAL DESIGN & SPECIFICATION: All these works would be done as per recommendation / suggestion of the machinery supplier. . 4 PROJECT COST ESTIMATION: The estimation of the project cost has been made under the following cost items: 01. Cost of land and land development 02. Cost of buildings and civil works 03. Cost of machinery and equipment 04. Freight and other charges 05. Duty, tax and insurance 06. Manufacturing and installation 07. Cost of transports / vehicles 08. Cost of furniture, fixture and office equipment 09. Security deposits 10. Preliminary expenses 11. Contingencies 3. 4. 1 Cost of Land & Land Development:

The cost of the project land measuring 10 Bigha has been estimated to be Tk 150. 00 lac on the basis of the present market price of Tk 15. 00 lac per Bigha which is the average present market price of land in the locality. The cost of land development has been estimated at Tk 36. 00 lac. 3. 4. 2 Cost of Building & Civil Works: The total cost of constructing required buildings and doing other civil works has been estimated at Tk 435. 20 lac. 3. 4. 3 Cost of Machinery & Equipment: The machinery and equipment required for the project will have cost incurrence to procure the same both locally and from abroad.

The cost of milk processing equipment to be imported from foreign manufacturers / suppliers has been estimated at Tk 1220. 80 lac. Besides, the project will require procuring some items of machinery and equipment locally at an estimated cost of Tk. 95. 00 lac. The above cost has been taken on the basis of competitive price quotations taken from three reputed machinery suppliers, in which case the lowest offers have been accepted. To procure the machinery and equipment, a roughly estimated amount of Tk 10. 00 lac has been considered to be incurred to meet freight and other charges locally. Besides, a sum of Tk 30. 0 lac has been considered for erection and installation purpose. All these charges / expenses have been included in the total cost of machinery & equipment. 3. 4. 4 Cost of Transport / Vehicles: To purchase the required transports / vehicles, a total of Tk 208. 00 lac has been considered to be incurred. 3. 4. 5 Cost of Furniture, Fixture & Office Equipment: In this head of expenditure, a total of Tk 10. 00 lac has been estimated to be incurred. 3. 4. 6 Security Deposits: In order to obtain required power and telephone connections, a roughly estimated amount of Tk. 8. 00 lacs has been considered to be incurred. 3. . 7 Preliminary Expenses: In order to meet the primary expenses such as company incorporation, trade license, feasibility study, survey, project appraisal, documentation, etc. as well as to meet the pre-operating and startup expenses, a sum of Tk. 18. 00 lac is estimated to be incurred. 3. 5 PROJECT SIZE AND CAPACITY: At 100 percent capacity, the project will have a daily capacity of processing 30,000 liters of raw milk and will produce the following products : ItemPack SizeQuantity Pasteurized whole milk1 liter bottle5,000 bottles Pasteurized whole milk500 ml bottle11,300 bottles Pasteurized whole milk1 liter pouch2,000 pouches

Pasteurized whole milk500 ml pouch10,000 pouches Pasteurized skim milk (low fat)1 liter bottle2,000 bottles Pasteurized skim milk (low fat)500 ml bottle5,400 bottles Pasteurized flavored milk1 liter bottle1,595 bottles Pasteurized flavored milk180 ml bottle8,330 bottles Pasteurized flavored milk120 ml bottle12,500 bottles Ghee400 gm tin can750 tin cans Ghee900 gm tin can330 tin cans 3. 6. 0 PROJECT OPERATION: 3. 6. 1 Raw Materials & Supplies: At 100 percent capacity, the project will require to incur a sum of Tk. 2157. 89 lac annually to procure necessary raw materials and supplies. 3. 6. 2 Manpower Requirement & Compensation:

To carry out the normal operational functions of the project, a total of 120 personnel of Different categories will require to be employed. The project will need to incur a salary expenditure of Tk 7,69,000 per month, thus 92,28,000 annually. 3. 6. 3 Stores and Spares: The annual requirement of stores and spares has been estimated @ 0. 5%, 1%, 1. 5%, 2% and 2. 5% of the cost of machinery & equipment for 1st, 2nd, 3rd, 4th and 5th year of operation respectively. 3. 6. 4 Repairs & Maintenance: From 1st to 5th year, the annual cost of repairs and maintenance has been estimated @ 0. 5%, 1%, 1. %, 2% and 2. 5% respectively of the cost of machinery & transports. 3. 6. 5 Insurance Coverage: The main assets of the Company (excluding the value of land) will be under insurance coverage at the cost of 1% of the values thereof annually. 3. 6. 6 Utilities: Water: There will be a deep tube well installed within the project site. As such the project will not have any cost involvement for its required water supply. Power: To facilitate the production operation of the project with required power supply, one 350 KVA Gas Generator will be procured locally. So there will be no cost involvement for production purpose.

Besides the use of Gas Generator, a separate power connection will be obtained from PDB/REB to meet up power consumption for other purposes (office, security, etc. ). The cost of electricity to be consumed for these purposes has been estimated at Tk. 5,000 per month approximately, thus Tk 60,000 annually. Fuel & Lubricant: In order to meet up the fuel requirement of the Gas Generator, which will be kept functioning for a two-shift production operation, an annual expenditure of Tk. 96,00,000 has been estimated to be incurred for gas consumption based on an approximate monthly expenditure of Tk. ,00,000. In addition, the project will have fuel expenditure (petrol, diesel) as well as different lubricants for its vehicles and transports. For this, an annual expenditure of Tk. 30,00,000 has been roughly estimated to be incurred. 3. 6. 7 Environment & Pollution Control: The project, by nature, is environment-friendly. So it will pose no threat of polluting the adjacent environment. 3. 6. 8Safety Provision: Necessary provision will be made to safeguard the project’s assets from fire hazards, for which the project will be equipped with fire fighting equipment.

Further, all personnel working in the factory will be adequately trained on safety measures and on risk involved in operating the machinery. CHAPTER-4 MARKETING ASPECTS 4. 1 RATIONALE: The proposed Milk Processing Project would be a remarkable addition to the agricultural production in Bangladesh. Among all others in the market, this project will be a most modern one that will produce a variety of milk based products of international standard and quality. Consequently, its products will be able to create their place in the market and to make import substitution to a great extent.

For this project we have got a number of valid reasons, as follows, for taking up the project with sophisticated technology : – Vast market of the milk products throughout the country – Increasing market demand of the milk products – Huge demand-supply gap prevailing in the country – Minimum labor cost – Govt priority and patronization in setting up agro-based industries – Opportunity to serve the mass level people with health products – High viability of the project. . 2 SOURCE OF RAW MATERIALS: The main source of raw materials of the project (fresh cow-milk) would include the milk producing dairy farms and household milk producing farmers in the project surrounding areas. The whole of the northern region of the country is well known to produce a huge quantity of cow-milk, which is available in much cheaper prices in the region than the other areas of the country. Consequently, the project will face no trouble in procuring its required quantity of raw milk at less prices.

As a means of an easy method of procuring the raw milk, special arrangement would be made to organize both the milk producing farmers as well as the dairy farms in groups who will deliver their produced milk to the designated spots of the company. The company’s road milk tankers will then collect this milk from these spots. 4. 3 PRODUCT-MIX, PACKSIZE & PRICE: The project will produce and market a variety of products. A list of the products, together with their pack-size and prices, is included hereunder: ItemPack SizeQuantityPrice (Tk) Pasteurized whole milk1 liter bottle5,000 bottles30. 0 Pasteurized whole milk500 ml bottle11,300 bottles16. 00 Pasteurized whole milk1 liter pouch2,000 pouches28. 00 Pasteurized whole milk500 ml pouch10,000 pouches14. 00 Pasteurized skim milk (low fat)1 liter bottle2,000 bottles30. 00 Pasteurized skim milk (low fat)500 ml bottle5,400 bottles16. 00 Pasteurized flavored milk1 liter bottle1,595 bottles40. 00 Pasteurized flavored milk180 ml bottle8,330 bottles 8. 00 Pasteurized flavored milk120 ml bottle12,500 bottles 6. 00 Ghee400 gm tin can750 tin cans 150. 00 Ghee900 gm tin can330 tin cans 250. 00

As shown above, most of the products will carry different pack-sizes. While determining pack-sizes of the products, careful consideration has been given on different options of the consumers, while the issue of pricing has been determined on the basis of market conditions. Besides, special emphasis has been given on the necessity and use of most appropriate packaging materials in consideration of their suitability with the products as well as the trend of world market. 4. 4. 0 THE MARKET OF THE PRODUCTS: 4. 4. 1 Market Size & Potentiality: Being the mass level consumer items, the market of the milk products is an enormous one.

The target market of the products includes almost all classes of people of the country. People tend to buy and consume them, more or less, regardless of their status, affordability, age, health condition, etc. So the market of these products will include the whole territory of the country which will continue to grow higher day by day with the rise in population. Besides, the government is giving high priority and offering various types of assistance to develop this sector. The market is increasing because of two main reasons: a) the industry is growing, and ) The consumers, in general, are increasingly becoming health conscious and switching to well packaged and branded quality products. So when the industry will be even matured, the market for the milk processing industries will grow for the second reasons stated above. Moreover, after the success of processing industry, which is already started in our country, the industry is expected to have a boom. 4. 4. 2 Demand: There is no definite figure as to the requirement of dairy products in Bangladesh. The nutritional expert group has recommended 300 grams milk for children and 200 grams for adult men/women per day in case of vegetarians.

For the non vegetarians, the recommended rate varies from 200 grams for children to 160 grams for adults. On the whole, minimum nutritional requirement per head per day is roughly 228 grams. 4. 4. 3 Distribution: In the long run, the market of the company’s products will cover the whole of Bangladesh. However, at the initial stage the company plans to include Dhaka, Chittagong, Sylhet and the districts under Rajshahi Division as its primary market territory. In order to sell its products to the end-users (consumers), the company will have option to use the following distribution channels on an alternative basis : a.

Company ——- Agents ——-Wholesalers ——-Retailers ——– Consumers b. Company —— Wholesalers ——- Retailers ——– Consumers c. Company —— Retailers ——– Consumers 4. 5. 0 PROMOTIONAL ISSUES: In order to promote the products of the proposed project, an integrated marketing network between the buyers and the company will be developed directly by its marketing executives through a quick and effective communication system. The company will take appropriate measures and strategies to communicate with its target customers and develop its market position. As a second major step towards product romotion, it will also arrange to communicate the highlighting features of its products such as product quality, benefit, availability, contact address, etc. The steps that the company will take to promote its products are narrated briefly hereunder: 4. 5. 1Advertising & Publicity: Adequate marketing efforts will be given to promote the products in the nationwide market. The company would make: – TV spots – Radio commercial – Newspaper advertisements – Advertisement through billboard, hoardings, neonsign, etc. to build up mass awareness among the population about product quality, benefit, availability and so on. . 5. 2 Personal Selling: To conduct direct selling activities, the company would deploy sales people who will be provided with insulated rickshaw vans. These vans will collect the milk products from the company’s certain distribution spots. They will then start selling the products by moving themselves to such places or sales points where they can get in touch with the consumers or customers. The probable sales points include bus-stops, school and college campus, university campus, hospital fronts, parks, lakes, gardens, stadium locations, market fronts, and other crowd places.

In addition to the above arrangement, the company will also carry out its personal selling activities by way of making door-step delivery of the products to retailers from where the direct consumers buy them. The retailers of the products include general stores, fast food restaurants, hotels, and so on. The company will have provision for offering sales incentives to the sales people meeting specified target levels. 4. 5. 3 Sales Promotion: The company will take a number of effective ways and means, as follows, to motivate and encourage the product promotional efforts: Offer of attractive incentives to the sales personnel -Offer of incentives to the members of the distribution channel that is the direct sellers of the products to consumers. – Offer of special price discounts to the channel members on target achievement – Offer of training courses to channel members to develop selling skills – Invitation to channel members to visit places of interest at company cost There may be many other strategies that the company would adopt to enhance the sales promotional activities depending on situation. CHAPTER-5 FINANCIAL ASPECTS . 1Assumptions for Financial Analysis: The following assumptions have been made to conduct relevant financial analyses: 1) The economic life of the project has been considered to be 10 years without major replacement. 2) The milk processing unit will work throughout the year (365 days). 3)The cost of inputs / raw materials as well as sales have been assumed to remain constant throughout the project years on the assumption that the increase in prices of inputs/raw materials will be offset by the proportionate increase in the selling price of output. )There will be 5% increase in salary and wages per year and one month’s salary will be given as bonus every year. 5)Deprecations are charged at the rate of 5% on buildings, 10% on machinery & equipments and 20% on vehicles & other assets on straight-line method. 6) The project will go into commercial production after 12 months from the date of starting construction works. 5. 2Cost of the Project: The summary of the total project cost is given hundred: (Tk. in “000”) ParticularsCost Total Fixed Cost 239366239366 Net Working Capital 6748 6748 Total Project Cost246114246114 5. 3Means of Finance:

The cost of the project is proposed to be financed as under: (Tk. in “000”) Debt:Total Long term bank loan143620 Deferred pmt. of int. due 16077 Total:159697 Equity: Owner’s equity 79669 Net working capital 6748 Total: 86417 Total debt and equity:246114 Debt-Equity Ratio 65 : 35 5. 4Financial Performance: (Tk. in “000”) FactorsYear-1Year-2Year-3Year-4Year-5 Sales revenue271317292723312263331786351310 Gross profit 825658859494661100692106719 Operating profit6677072098772538235987448 Net profit3407739461447194994455155 5. 5Profitability Position: The financial analysis shows a healthy position of the project.

The Internal Rate of Return (IRR) of the project is found to be 40%. 5. 6Pay-back Period: The payback period of the project is calculated to determine the period required to return the original investment outlay through the profits earned by the project. The calculated payback period is found to be 2 years and 8 months. 5. 7Break-even Analysis: The break-even analysis has been carried out on the basis of cost and sales data of 4th year of operation and is shown in its worksheet. The project is expected to break even at 36% of the assumed capacity with sales revenue of Tk 1200. 4 lac. 6. 0 EMPLOYMENT GENERATION: After starting up the project, 120 employees will be required to run the project successfully. Moreover, during the 6-months construction period, hundred of labors, technical persons will be required for successful implementation of the proposed project which will create an additional positive impact on the peripheral economy and the job market of the project area. Sl. DesignationNumber 01. Administrative & Marketing50 02. Technical & Direct Labor70 Total: 120 CHAPTER-7 SWOT ANALYSIS S Strengths: All the promoters of the project are well educated and have got long experience in business management. – The promoters have achieved remarkable success in their respective business ventures and have earned wide reputation in the business arena. – Both the promoters are financially sound and have the affordability of equity participation against their respective shareholdings in the company. W Weakness: – In order to have competitive edge and cost-benefit advantage, the production volumes should be considerably high which may be difficult to achieve without adequate financial support / assistance. Because of having no technical background, the entrepreneurs have to depend on hired technical professionals to run the production operation of the project. O Opportunities: – There is a vast market of the milk products throughout the country. Due to a large and growing population, the market is increasing rapidly. – The main raw material (cow-milk) is available locally and the region is very well known as a milk producing zone. – Manpower required to run the production operation of this type of industry are available locally at cheaper costs. The project enjoys a very good communication network. – Unlimited growth potential of the agro-processing sector will create backward linkage. T Threats: – Milk is a very sensitive to health, especially child health. So the quality of products is to be ensured cautiously. – As the market is a competitive one, huge promotional efforts would be required to penetrate into the market. – Some companies with good brand image (e. g. Milk Vita, Aarong, Aftab, Savar Dairy) have got strong footage. So the company will have to struggle to compete with them. CHAPTER-8

CONCLUSION AND RECOMMENDATION The overall financial forecast shows that the project is a viable one considering all aspects. The owners are well educated and experienced in various trades and businesses and have the real capability in overall business management. All the owners are financially sound and have the affordability of their respective equity participation in the company. The demand for the milk products in the country is very high and there exists a huge demand-supply gap in the relevant sector. New entrants with milk products having advanced technology and innovation will face much less competition to penetrate into the market.

The SWOT analysis shows that having a number of strengths (e. g. education, business experience, success and reputation, financial capability etc. of the promoters) the company would be able to overcome its insignificant weak points. The analysis also shows that the company can exploit a good number of opportunities as against some negligible threatening factors. Considering all aspects we can come to the conclusion that the project has potentials for investment and the Bank / Financial institution may consider financial assistance for the implementation of the project and thus make contribution to the ultimate development of the country.

CALCULATIONS SS Dairy Milk Limited COST OF THE PROJECT (Tk. in “000”) Sl. ItemsCost to be incurredTotal $$TK 01. Land & Land Development-18600 18600 02. Buildings & Civil works-43520 43520 03. Machinery and Equipment 12208022656144736 04. Furniture, Fixture & Office Equipment- 1000 1000 05. Transport / Vehicles-20800 20800 06. Security Deposits- 800 800 07. Preliminary Expenses- 1800 1800 08. Depreciation (5% on Sl. 2 – 7 above) -10633 10633 09. Interest During Construction Period @ 12%-16077 16077 Fixed Cost of the Project:122080117286239366 10. Net Working Capital- 6748 6748

Total Cost of the Project: 122080124034246114 SS Dairy Milk Limited BREAK-UP OF PROJECT COST ITEMS (Tk. in “000”) Sl. Items$$TKTotal Cost 01. Land : a)Cost of land – 10 Bigha b)Land development cost – – 15000 3600 15000 3600 Sub-Total : -18600 18600 02. Buildings & Civil works -43520 43520 Sub-Total :-43520 43520 03. Machinery & Equipments : a) Imported : -Machinery Cost -Duty, tax, insurance, etc. (7. 5%) -Clearance, transportation & others (LS) 122080 – – – 9156 1000 122080 9156 1000 Sub-Total : 12208010156132236 b) Local : -350 KVA Gas Generator -Miscellaneous equipment – – 9000 500 9000 500 Sub-Total :- 9500 9500 ) Erection & installation – 3000 3000 Sub-Total (c) :- 3000 3000 Total :12208022656144736 (Tk. in “000”) Sl. Items$$TKTotal Cost 04. Furniture, fixture & office equipment : a)Furniture & fixture b)Office & Safety equipment – – 700 300 700 300 Sub-Total:- 1000 1000 05. Vehicles/Transports – 20800 20800 Sub-Total: -2080020800 06. Security Deposits: a)Power b)Others – – 800 – 800 – Sub-Total:- 800 800 07. Preliminary Expenses : a)Company incorporation, survey, consultancy, documentation etc. b)Salary & Wages (30 days) c)Raw materials (10 days) d)Initial promotional expense e)Miscellaneous – – – – – 300 300 200 00 500 300 300 200 500 500 Sub-Total: – 1800 1800 08. Depreciation: (5% on costs to be incurred) – 10633 10633 Sub-Total:-1063310633 09. Interest During Construction Period – 16077 16077 FIXED COST OF THE PROJECT122080117286 239366 10. Net Working Capital- 6748 6748 TOTAL COST OF THE PROJECT122080124034246114 COST OF LAND & LAND DEVELOPMENT Sl. DescriptionAmount 01. Value of land: Area = 10 Bigha Value = Tk 15,00,000 / Bigha x 10 Bigha = Tk 1,50,00,000 1,50,00,000 02. Cost of land development: Area = 10 Bigha = (14,400 x 10) square feet = 1,44,000 sft Cost = (1,44,000 sft x 5’ ht) cft x Tk 5. 0 / cft = Tk 36,00,000 36,00,000 Total cost of land & land development: 1,86,00,000 CONSTRUCTION & CIVIL WORKS Sl. DescriptionArea/QtyRate (Tk)Amount (Tk) 01. Factory Building 25,000 sft1,380/sft3,45,00,000 02. Cold Storage1,250 sft1,200/sft15,00,000 03. Office Room (60’ x 25’) 1,500 sft 850/sft12,75,000 04. Garage (60’-0” x 20’-0”) 1,200 sft 550/sft6,60,000 05. Security Office cum Reception300 sft 850/sft2,55,000 06. Septic Tank (200 Users)01 No. L. S. 1,50,000 07. Septic Tank (50 Users)01 No. L. S. 1,00,000 08. Soak Well ( 200 Users)01 No. L. S. 50,000 09. Soak Well ( 50 Users)01 No. L. S. 30,000 10. Boundary-L.

S. 20,00,000 11. Pump01 No. L. S. 5,00,000 12. Internal Road-L. S. 7,00,000 13. Over Head Tank-L. S. 8,00,000 14. Deep Tubewell01 No. L. S. 10,00,000 Total: –4,35,20,000 MACHINERY & EQUIPMENTS Sl. Description Quantity Unit Price(Tk) Value (Tk) Imported: 01. Complete Milk Processing Plant having processing capacity of 30,000 liters of milk per day 12,20,80,000 Sub-Total: – – 12,20,80,000 Local: 02. Gas Generator (300 KVA) 01 No. 90,00,000 90,00,000 03. Misc. equipment – 5,00,000 Sub-Total: – – 95,00,000 Total: – – 13,15,80,000 COST OF TRANSPORT / VEHICLES Sl. Description Qty Unit Price Amount 01. Road Milk Tanker

Capacity: 6,000 lt 03 30,00,000 90,00,000 02. Product Delivery Van (Refrigerated) 02 35,00,000 70,00,000 03. Pick-up Van (2 MT) 01 12,00,000 12,00,000 Total – – 17,200,000 COST OF FURNITURE, FIXTURE & OFFICE EQUIPMENT SlDescription of itemQuantityUnit price Total (Tk) Furniture & Fixture: Every thing needed –4,60,000 Office Equipment: As per requirement5,40,000 Total:10,00,000 PRELIMINARY EXPENSES Sl. ParticularsAmount (Tk ‘000’) Primary Expenses: 01. Company incorporation, trade license, amendment etc. 1,00,000 02. Survey, soil test and other incidental expenses 50,000 03. Charges for overall consultancy2,00,000 04.

Project appraisal fee, legal fees/charges, documentation2,50,000 05. Site inspection, entertainment and other expenses1,00,000 06. Printing & stationery, books of accounts, system development1,00,000 Pre-operating & Startup Expenses: 07. Cost of trial production, initial salary/wages & other expenses3,00,000 08. Travel, food & lodging for expatriate engineers3,00,000 09. Initial promotional & utility expenses4,00,000 10. Miscellaneous expenses2,00,000 Total Preliminary Expenses:20,00,000 WORKING CAPITAL (Tk. “000”) A. Current Assets:Duration1st Year2nd Year3rd Year4th Year5th Year Raw materials (cow-milk)01 day315338360383405

Work in process02 days10241102117512471320 Finished goods02 days10191102117412471320 Packaging materials60 days50905453581761806544 Supplies & additives60 days84190196110211081 Stores & Spares90 days179357536714893 Receivables (at cost)03 days15201643175218601969 Other expenses30 days12601370148015901700 Total Current Assets:-1124812266132551389715232 B. Current Liabilities: Working capital loan-45004500450045004500 C. Net Working Capital:-674877668755939710732 EARNING FORECAST (Tk. in “000”) Sl. ItemsYr-1Yr-2Yr-3Yr-4Yr-5 01. Sales Revenue (net) 271317292723312263331786351310 02. Cost of Goods Sold188752204129217602231094244591 3. Gross Profit 825658859494661100692106719 04. Admin & Selling Expenses1579516496174081833319271 05. Operating Profit6677072098772538235987448 06. Financial Expenses1970317594 15486 13376 11267 07. Net Profit before Tax4706754504617676898376181 08. Income Tax —– 09. Net Profit (NP) after Tax4706754504617676898376181 10. Bond Purchase (30%)1412016351185302069522854 11. NP after Bond Purchase3294738153432374828853327 12. Return on Bond (8%) 1130 1308 1482 1656 1828 13. NP after Return on Bond3407739461447194994455155 14. Retained earnings3407773538118257168201223356 Ratios: a. Gross Profit (%)30. 4330. 2730. 3130. 530. 38 b. Op. Profit to Sales (%)24. 6124. 6324. 7424. 8224. 89 c. Net Profit to Sales (%)12. 5613. 4814. 3215. 0515. 70 d. Return on sponsors’ equity39. 4345. 6651. 7557. 7963. 82 e. Return on total capital (%)13. 8516. 0318. 1820. 2922. 41 SALES ESTIMATE (Tk “000”) ItemsYear-1Year-2Year-3Year-4Year-5 Sales at rated capacity391879391879391879391879391879 Assumed capacity70%75%80%85%90% Sales at assumed capacity274315293909313503333097352691 Add: Opening WIP (2 days)-1024110211751247 Total WIP274315294933314605334272353938 Less: Closing WIP (2 days)15031616172418321939 Production of goods272812293317312881332440351999

Add: Opening FG (2 days)-1019110211741247 Total finished goods272812294336313983333614353246 Less: Closing FG (2 days)14951613172018281936 Sales revenue271317292723312263331786351310 Less: tax—– Net Sales Revenue271317292723312263331786351310 ASSUMPTIONS: 1) Production Period: The production unit will work throughout the whole year, i. e. 365 days in a year. 2) Raw Materials Intake: The processing capacity of the proposed project involves 30,000 liters of fresh milk intake in a two-shift operation per day, thus 10,950,000 liters annually. 3) Daily Production Output: IntakeProduction OutputQuantity 0,000 lt Milk Pasteurized Whole Milk (3. 5% fat, 8. 5% SNF)17,650 Ltr Cream (37% fat) 540 Ltr 5,000 lt Milk Pasteurized Skim / Low Fat Milk (1. 5% fat, 8. 5% SNF) 4,700 Ltr Cream (37% fat) 405 Ltr 5,000 lt Milk Pasteurized Flavored Milk (1. 5% fat, 8. 5% SNF, 8% Sugar, 0. 85% Cocoa, 0. 25% Stabilizer, etc. ) 4,595 Ltr Cream (37% fat) 405 Ltr 1,350 lt Cream Ghee 500 kg 4) Estimate of Sales: At 100% capacity, the daily sales of the project have been estimated as follows: ItemPack SizeQuantityPrice (Tk)Total (Tk) Pasteurized whole milk1 liter bottle5,000 bottles30. 01,50,000 Pasteurized whole milk500 ml bottle11,300 bottles16. 001,80,800 Pasteurized whole milk1 liter pouch2,000 pouches28. 0056,000 Pasteurized whole milk500 ml pouch10,000 pouches14. 001,40,000 Pasteurized skim milk (low fat)1 liter bottle2,000 bottles30. 0060,000 Pasteurized skim milk (low fat)500 ml bottle5,400 bottles16. 0086,400 Pasteurized flavored milk1 liter bottle1,595 bottles40. 0063,800 Pasteurized flavored milk180 ml bottle8,330 bottles 8. 0066,640 Pasteurized flavored milk120 ml bottle12,500 bottles 6. 0075,000 Ghee400 gm tin can750 tin cans 150. 001,12,500 Ghee900 gm tin can330 tin cans 250. 082,500 Total:—10,73,640 Therefore, annual sales at 100% capacity stands at: Tk. 10,73,640 / day x 365 days = Tk. 39,18,78,600. COST OF GOODS SOLD (Tk. in “000”) ParticularsYear-1Year-2Year-3Year-4Year-5 Raw Materials & Supplies151052161842172631183421194210 Salary & Wages53825651593362306542 Stores & Spares7241448217228963620 Repairs & Maintenance9421884282637684710 Rent, Tax, Insurance22082208220822082208 Depreciation2081020810208102081020810 Water, Power & Fuel88209450100801071011340 Other expenses9001000110012001300 Total cost of production190838204293217750231243244740 Add: Opening WIP (2 days)-1046112511991274

Total stock of WIP190838205339218875232442246014 Less: Closing WIP (2 days)10461125119912741348 Cost of goods manufactured189792204214217676231168244666 Add: Opening FG (2 days)-1040112511991273 Total goods available for sale189792205254218801232367245939 Less: Closing FG (2 days)10401125119912731348 Cost of goods sold188752204129217602231094244591 ASSUMPTIONS: 1. Capacity utilization: From 1st to 5th year of operation, the capacities to be achieved have been assumed to be 70%, 75%, 80%, 85% & 90% respectively. 2. Cost of raw & packing materials:

At 100 % capacity, the annual requirement of raw and packing materials have been estimated, as follows, based on 365 working days in a year: (Tk in ‘000’) ItemsAnnual requirementUnit price (Tk)Total amount Fresh milk10,950,000 ltr15. 00 / ltr164250 Sugar (flavored milk)1,46,000 kg48. 00 / kg7008 Flavor, color, etc. -300 Packing materials As per the estimates below-44231 Total : –215789 The above cost figures have been arrived at based on the following calculations : Fresh milk: Annual requirement (30,000 ltr / day x 365 days) = 10,950,000 ltr Price / ltr. ncluding chilling + transportation cost = Tk 15. 00 Annual cost (10,950,000 ltr. x Tk 15. 00 / lt) = Tk 16,42,50,000 Sugar: Annual requirement [(5000 x 8%) / day x 365 days)] = 1,46,000 kg Price / kg = Tk 48. 00 Annual cost (1,46,000 kg x Tk 48 / kg) = Tk 70,08,000 Flavor, Color & Others: Annual cost (L. S. = Tk 3,00,000 Packing Materieals: a. 1 ltr HDPE bottle (8,595 pcs / day x Tk. 3. 50 x 365 days) = Tk 1,09,80,110 b. 500 ml HDPE bottle (16,700 pcs / day x Tk. 2. 50 x 365 days) = Tk 1,52,38,750 c. 180 ml HDPE bottle (8,330 pcs / day x Tk. 1. 75 x 365 days) = Tk 53,20,790 d. 120 ml HDPE bottle (12,500 pcs / day x Tk. 1. 50 x 365 days) = Tk 68,43,750 e. 1 ltr pouch pack (2,000 pcs / day x Tk. 1. 30 x 365 days) = Tk 9,49,000 f. 00 ml pouch pack (10,000 pcs / day x Tk. 1. 00 x 365 days) = Tk 36,50,000 g. 400 gm tin cans (750 pcs / day x Tk. 2. 80 x 365 days) = Tk 7,66,500 h. 900 gm tin cans (330 pcs / day x Tk. 4. 00 x 365 days) = Tk 4,81,800 Annual cost of packing materials (a + b + c + d + e + f + g + h) = Tk 4,42,30,700 Therefore, the cost of raw materials at the assumed capacities are calculated as follows: YearYear-1Year-2Year-3Year-4Year-5 Cost at rated capacity (000)215789215789215789215789215789 Assumed capacity70%75%80%85%90%

Cost at assumed capacity151052161842172631183421194210 3. Salaries & Wages: Technical:No. Total Monthly Salary (Tk)Annual Salary (Tk) All the worker needed for technical support50 3,52,000 42,24,000 Direct Labor: Skilled worker Semi-skilled / unskilled worker 08 12 32,000 30,0003,84,000 3,60,000 Sub-total:2062,0007,44,000 Total:70 4,14,000 49,68,000 (Tk. in “000”) Yr-1Yr-2Yr-3Yr-4Yr-5 Salary49684968521654775751 Increment (5%) -248261274288 Bonus (1 Month’s Salary)414435456479503 Total: 53825651593362306542 4 Repairs & Maintenance:

Cost for repair & maintenance of machinery, transport and bldg. estimated at 0. 5%, 1%, 1. 5%, 2% & 2. 5% in 1st, 2nd, 3rd, 4th & 5th year respectively as follows: ItemsYr-1Yr-2Yr-3Yr-4Yr-5 Buildings218 436 654 8721090 Machinery7241448217228963620 Total: 9421884282637684710 5. Rent, Tax & Insurance: It has been estimated @ 1% of the total fixed cost of the project. Depreciation: ItemsCost (Tk ‘000’)RateAmount (Tk ‘000’) Building 4352005%2176 Machinery 14473610%14474 Transport2080020%4160 Total: –20810 6. Utilities: a)Water: The required supply of water will be met up by sinking a deep tubewell at the project premises.

So there will be no cost for water consumption. b) Power: To facilitate the production operation of the project with required power supply, one 350 KVA Gas Generator will be procured locally. So there will be no cost involvement for production purpose. Besides the use of Gas Generator, a separate power connection will be obtained from PDB/REB to meet up power consumption for other purposes (office, security, etc. ). The cost of electricity to be consumed for these purposes has been estimated at Tk. 5,000 per month approximately, thus Tk 60,000 annually. Total annual power consumption : Tk. 0,000 c) Fuel & Lubricant: In order to meet up the fuel requirement of the Gas Generator, which will be kept functioning for a two-shift production operation, an annual expenditure of Tk. 96,00,000 has been estimated to be incurred for gas consumption based on an approximate monthly expenditure of Tk. 8,00,000. In addition, the project will have fuel expenditure (petrol, diesel) as well as different lubricants for its vehicles and transports. For this, an annual expenditure of Tk. 30,00,000 has been roughly estimated to be incurred. Total annual consumption for fuel & lubricants : Tk. ,26,00,000. Total cost of utilities (a + b + c) = Tk. 1,86,00,000 annually at 100% capacity utilization. ADMINISTRATIVE & SELLING EXPENSES (Tk. in “000”) Sl. ParticularsYr-1Yr-2Yr-3Yr-4Yr-5 01. Director’s remuneration 12001200120012001200 02. Administrative salary46154846508853435611 03. Depreciation & write-off560560560560560 04. Traveling & conveyance (LS)700750800850900 05. Printing & stationery (LS)360370380390400 06. Postage, telegram & telephone600650700750800 07. Legal & audit fee (LS)200250300350400 08. Ad & sales promotion (LS)72007500800085009000 09. Miscellaneous expenses360370380390400

Total: 1579516496174081833319271 FINANCIAL EXPENSES Particulars Year-1Year-2Year-3Year-4Year-5 Interest on bank’s term loan 17234 15511137881206410341 Interest on def. payment of interest due 1929 1543 1158 772 386 Interest on short-term loan 540 540 540 540 540 Total:1970317594154861337611267 Assumptions: 1) Interest on bank’s term loan: Principal143620143620114896 86172 57448 Installment- 28724 28724 28724 28724 Balance143620114896 86172 57448 28724 Interest on average balance @ 12% 17234 15511 13788 12064 10341 2) Interest on deferred payment:

Interest due (unpaid) 16077 12862 9647 6432 3217 Installment 3215 3215 3215 3215 3217 Balance 12862 9647 6432 3217 – Interest on beginning balance @ 12% 1929 1543 1158 772 386 3) Interest on short-term loan: Working capital loan 4500 4500 4500 4500 4500 Interest @ 12% 540 540 540 540 540 BREAK-EVEN ANALYSIS 1. Sales revenue (4th year) : Tk. 331786 thousand 2. Total cost of operation, administrative & selling, and financial expenses: (Tk “000”) Analysis of total costTotal costFixed costVariable cost Raw materials183421-183421

Salary & wages 6230- 6230 Water, power, fuel 10710- 10710 Stores & spares 2896- 2896 Administrative salary 65436543 – Postage, telegram & telephone 750 150 600 Printing & stationery 390 78 312 Conveyance & traveling 850 170 680 Advertising & sales promotion 8500- 8500 Legal & audit fee 350 350 – Depreciation & write-off 21370 21370 – Miscellaneous expenses 1590 390 1200 Financial expenses 13376 13376 – Total:25697642427214549 3. Break-even point (BEP):

PV Ratio = (Sales – Variable cost) / Sales = (331786 – 214549) / 331786 = 0. 3534 BEP (Sales) = Fixed cost / PV Ratio = 42427 / 0. 3534 = Tk 120054 thousand i. e. 36% of assumed capacity. CASHFLOW STATEMENT (Tk “000”) A. Source of Fund:Const. Yr. Yr-1Yr-2Yr-3Yr-4Yr-5 Owner’s equity796696748—- Depreciation & write-off-2137021370213702137021370 Operating profit-6677072098772538235987448 Long term loan143620—– Return on bond- 1130 1308 1482 1656 1828 Increase in current liabs. – 4500—- Total:22328910051894776100105105385110646 B.

Utilization of Fund: Capital expenditure223289—– Increase in current asset-674810189896421335 Repayment of long term loan-2872428724287242872428724 Repayment of deferred payment of interest due-32153215321532153217 Investment on bond-1412016351185302069522854 Financial expenses-1970317594154861337611267 Total:2232897251066902669446665267397 Cash Surplus (A-B)-2800827874331613873343249 Opening cash balance–280085588289043127776 Closing cash balance-280085588289043127776171025 PROJECTED BALANCE SHEET (Tk in “000”) ParticularsConst. YrYr-1Yr-2Yr-3Yr-4Yr-5

PROPERTIES & ASSETS: Fixed Assets239366217996196626175256153886132516 Current Assets: Cash in hand and at bank-280085588289043127776171025 Investment on bond-1412030471490016969692550 Other current assets-674877668755939710732 Total current assets:-4887694119146799206869274307 Total property & assets:239366266872290745322055360755406823 LIABILITIES & EQUITY: Liabilities: Long term bank loan143620114896861725744828724- Deferred payment of interest due1607712862964764323217- Working capital loan-45004500450045004500 Total liabilities:15969713225810031968380364414500 Sponsors’ Equity:

Paid-up Capital796698641786417864178641786417 Investment on bond-1412030471490016969692550 Retained earnings-3407773538118257168201223356 Total equity:79669134614190426253675324314402323 Total liabilities & equity:239366266872290745322055360755406823 INTERNAL RATE OF RETURN (Tk. in “000”) YearNet Cash FlowNPV disc. @ 30%NPV disc. @ 40% 0(239366)(239366)(239366) 1 881406778062932 2 934685533347669 3 986234487335899 4 1037293630526970 5-10108818 10065761482 11 41778 2340 1044 -67922(3370) IRR =40 + 10 x 67922 (67922 + 3370) = 30 + 9. 53 = 39. 53, say 40%. PAY-BACK PERIOD (Tk. in “000”) 1. Amount to be paid : Tk 159697 thousand 2. Amount available for recovery of the assets as follows: ParticularsYr-1Yr-2Yr-3Yr-4Yr-5 Net profit after return on bond3407739461447194994455155 Depreciation & write-off2137021370213702137021370 Total:5544760831660897131476525 YearAmount to be recoveredAmount available for recoveryBalance 115969755447104250 21042506083143419 34341966089(22670) The payback period will be 2 years and 8 months.

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