A Feasibility Study for Establishing a Beekeeping Farm and Production of Honey in Al-musadder village

‫م‬‫ش‬‫ر‬‫و‬‫ع‬‫م‬‫ص‬‫ن‬‫ع‬‫ل‬‫ت‬‫ع‬‫ب‬‫ئة‬‫أال‬‫ع‬‫ش‬‫ا‬‫ب‬‫ا‬‫لط‬‫ب‬‫ي‬‫ة‬-‫م‬‫حافظ‬‫ة‬‫م‬‫ع‬‫ا‬‫ن‬
1
2018-2019
Prepared by:
Amany A. J.AbuMandeel
Supervised by:
Dr. Mohammed Nayef Othman
Al-Azhar University - Gaza
Faculty of Economics and Administrative sciences
AFeasibilityStudyforEstablishingaBeekeepingFarmand
Productionof Honey in Al-musadder village

Table of contents
Chapter 1 : Introduction
Purpose of the document …………………………………………………………… 7
Brief Description of the project……………………………………………………… 7
Executive Summary………………………………………………………………….. 8
SWOT Analysis………………………………………………………………………. 9
Methodology………………………………………………………………………….. 9
Study Team……………………………………………………………………………10
Chapter 2 : Legal Study
Proposed Business Legal Status……………………………………………………….11
Required Registrations & Contracts & Agreements…………………………………..11
Chapter 3 : Marketing Feasibility Study
The economic situation in Gaza Strip ……………………………………………..… 11
Population Growth …………………………………………………………..………. 16
Apiculture and honey production sector ……………………………..……………….18
Estimated supply and demand………………………………..……………….……….21
Market Gap ……………………………………………………………………...…….22
Target segments ………………………………………………………………...……..22
Market potential ………………………………………………………………...……..22
Customer Analysis ……………………………………………………………...……..23
Product marketing and promotion ……………………………………………...……..33
Competitors analysis …………………………………………………………………..33
Geographic potential for investment …………………………………………...……..36
Market entry timing …………………………………………………………...………36
Chapter 4 : Technical Feasibility Study
Description of the project …………………………………………………………………………..….37
Process of honey ………………………………………………………………...……………………..37
Proposed capacity and rationale ………………………………………………………….……………38
Capital investment requirements ……………………………………...……………………………….38
Site analysis ……………………………………………...……………………………………………40

Technical requirements ………………………………….………………………………………….…42
Land and building requirement ……………………………………….…………………42
Transportation requirement……………………………………………….…..………….42
Furniture requirement ……………………………………………………………………44
Human resources requirement ………………………………………………..…….……44
Chapter 5 : Economics and Financial Feasibility Study
Key Assumptions ………………………………………………………………..... 50
Testing the feasibility of the project using the following investment criteria ......…52
Sensitivity Analysis under the following cases ………………………...……..…...61
Project Financing Plan …………………………………..…………………………65
Chapter 6 : National Feasibility Study
Value Added…………………………………………………………………………68
Employment Effect…………………………………………………………………..72
Conclusions…………………………………………………………………...……..75
Recommendations……………………………………..……………….……..…….76
Annexes & Questionnaire ……...……………..………………..…………..……...77

List of Tables
Table 1economicindicators.............................................................................................10
Table 2Gaza strip demographic profile...................................................................15
Table 3Estimated number of population in GS...............................................................14
Table 4Main information about Apiculture sector..........................................................19
Table5 Major economic indicators..................................................................................20
Table6 Local honey consumption ..................................................................................21
Table7 Market potential .................................................................................................23
Table8 Sales forecasting .................................................................................................23
Table 9 promotion tools ..................................................................................................34
Table10 competitive tools ..............................................................................................34
Table 11 pricing & promotion tools ...............................................................................36
Table12 Proposed capacity of honey and beeswax.........................................................38
Table13Capital investment requirement ........................................................................39
Table14 First year operational expenses ........................................................................39
Table15 Cost of Raw Materials ......................................................................................40
Table16 Utilities requirement .........................................................................................40
Table17 Required building & land..................................................................................42
Table18 Transportation & vehicles .................................................................................42
Table19 Machinery & Equipment requirement .............................................................43
Table 20 Furniture Capital expenditure ..........................................................................44
Table 21 Required labor .................................................................................................44
Table22 Expected staff preparation ...............................................................................47
Table 23 Key Assumptions .............................................................................................48
Table24 Selling prices ....................................................................................................49
Table 25 Future Gross Benefits ......................................................................................55

Table26 Expectedmonthlysalaries(2018-2027).............................................................59
Table 27 Sources of fund.................................................................................................65
Table 28 Income statement & Balance sheet...................................................................65
Table 29 Assessing National Profitability of the project in terms of value added.........................66
Table 30 in terms of initial investment ...........................................................................67
Table 31 in terms of wages .............................................................................................67
Table 32 Human resources and classification .................................................................71
Table of Figures
Figure1Sectors contribution to Palestinians economy………………………………………14
Figure2population distribution in Palestine ……………………….…..…………………………..18
Figure3 population in Gaza Strip ……………………………………..….…………………………15
Figure4 Radar Chart …………………………………………...……………………………..……34

Beekeeping and Honey Production-Al-musaddar village 6
Chapter 1: Introduction
Purpose of the document
The objective of the feasibility study is primarily to facilitate potential entrepreneurs
in project identification for investment. The project feasibility may form the basis of
an important investment decision and in order to serve this objective, the
document/study covers various aspects of project concept development, start-up, and
production, marketing, finance and business management.
The aim of the study was to explore the feasibility of beekeeping farm in AL-
musadder village, with a view to developing value chains and market linkages for
honey and associated products (like beeswax) within Al-musadder village landscape.
The study finding will support the development of nature-based sustainable livelihood
option with a potential of promoting the integrity of Al-musadder village ecosystem.
The specific study objectives are to:
1. Identify and highlight the capacity gaps of the key players in the beekeeping
enterprise, and develop strategies to address these gaps and to improve capabilities to
sustainably develop and manage beekeeping as a nature-based enterprise;
2. Assess the availability and applicability of forage for bees and the necessary
equipment required for a sustainable beekeeping enterprise in terms of quantities,
specifications and costs;
3. Conduct a preliminary market and value addition interview and questionnaire
of honey and associated products (beeswax) in the region in order to have an overview
of market potential and opportunities for value addition and any other information
required to support development and successful operation of the enterprise;
4. Provide a financial return to the owner of the project.
Description of the project
The proposed project envisages the setup of a farm for beekeeping and the production
of honey, which is used as food and in pharmaceutical industry, in addition to the
production of beeswax.
Al-musadder village is selected for its suitable nature for the production of local
honey, its nature helps in protecting bees and their food by transferring pests from one
place to another to ensure good nutrition and healthy environment for bees, and to
obtain honey and bee products that meet international standards in terms of nutritional

value, flavor, smell and appearance.
The feasibility provides information on key aspects of starting a farm for beekeeping
and the production of honey. This project requires an estimated investment55, 264 JD.
The project will consists of 200 beehives, each containing 7 frames; to produce honey.
Total employment required for this project would be 7 persons including the manager
of the project. The project will be established on an area of 2000 square meters.
Executive summary
This feasibility is for establishing a farm for beekeeping and honey products. The total
project cost is JD 55,264. The equity ratio is 100%.
The project is proposed to be set up in AL-musadder village. The project will provide
employment for 7 persons. The proposed capacity of this business is 12,500 units of
beeswax and honey with different sizes per year.
Table (1): Economic indicators for Normal Situation:
Indicator Value ( JD )
Total Investment Cost (Jordan Dinars) 55,264
Internal Rate of Return (IRR) %29.4
Pay-Back Period (Years) (less than 1 year) 0.59
Net Present Value (Jordan Dinars) 201,185
Job Opportunities provided by the Project 7
Total Revenues (For 15 Years) 285,133
Total Operating Expenses (For 15 years) 129,797
Total Net Profit (For 15 years) 138,083

Methodology
Data Collection:
In order to collect the data for this feasibility Study, the primary and secondary sources
have been used such as questionnaire, meetings with business owner, books, journals,
Palestinian Central Bureau of Statistics, published data, researches, papers, thesis, and
web pages are used.
Data Analysis:
The descriptive, financial and quantitative analysis are used to analyze data and
information. The methodology attempted to:
➢ SWOT analysis
➢ Trend Projection Line Method
➢ Economic analysis
➢ Statistical analysis Review the current demand for honey.
➢ Technical analysis for the production process.
➢ Analysis of cost.
➢ Sensitivity analysis for the project
➢ Analysis of different investment criteria ( NPV, IRR, Pay-back period, ARR,
NARR, Profitability Index, Benefit / Cost ratio )
➢ Financial analysis.
SWOT Analysis
Before making the decision, whether to invest in this project or not, one should
carefully analyze the associated risk factors. A SWOT analysis can help in analyzing
these factors, which can play important role in making the decision.
Strengths
• High quality of honey.
• Life experience.
• Good leadership.
• Knowledge on honey and beeswax processing.
• Trained workers and members.
• Ability to sell honey /buy equipment collectively.
• Large numbers of traditional hives.
• Honey is sold in good packaging.

Weaknesses
• Low income of members making the purchase of equipment difficult.
• Poor marketing –honey sold in small quantities locally.
• High rate of bees absconding.
• Low honey production due to drought.
• Traditional bee keeping where ever thing in the hive is harvested and it takes the
bees along time to recover.
• Small farm, limiting the number of hives kept.
• Ignorance of the value of beeswax resulting in wax combs being thrown away
Opportunities
• Easy to enter the market.
• Honey has strong local and unexploited markets.
• Many national channels and webs offering good marketing.
• High educational levels of customer.
Threats
• On-going the imposed siege on the Gaza strip.
• Economic downturn that affect negatively in household spending.
• Unpredictable weather changes.
• Honey theft and colony destruction.
• Using of toxic agro –chemicals, which causing the death of bees.
• Charcoal burning /tree destruction.
• Production of low quality honey rejected by the market
Study Team
This feasibility study has been prepared by Amany Ahmed AbuMandeel,
student of Business Administration at Al-Azhar University.
Chapter 2: Legal Study

Proposed Business Legal Status
The proposed legal structure of the business entity is partnership,
consist of three partners with the same proportion of ownership.
Required Registrations & Contracts & Agreements
• License and registrations from Ministry of Agriculture and Al-
musadder Municipality are required.
• Pass the quality test for the materials
• Contracts with employees are required
• Commercial registrations and tax files are required.
Chapter 3: Marketing Feasibility Study
The economic situation in the Gaza Strip:
The Gaza Strip has an area of 365 Km2
. The population in mid-2017 was about 1,79
million; the population in Gaza Strip is about 38.3% from total population of Palestinian
territories (Palestine Central Bureau of Statistics, PCBS, 2017). The Gaza Strip is
located in the Middle East. It has a 51 kilometers (32 mi) border with Israel (occupied
Palestinian territories), and has an 11 km border with Egypt, near the city of Rafah
Khan-Yunis is located 7 kilometers (4 mi) northeast of Rafah, and several towns around
Deir el-Balah are located along the coast between it and Gaza City. Beit Lahia and Beit
Hanoun are located to the north and northeast of Gaza City. The Gaza Strip’s economy
is in “free fall,” a report from the World Bank warned on Tuesday, calling for urgent
action by Israel and the international community to avoid “immediate collapse.
” According to the report, Gaza’s economy contracted by 6 % in the first quarter of
2018. It said unemployment is now over 50 %, and over 70 % among Gaza’s youth.
One of the most affected sectors of the long siege in Gaza is agriculture; the 35 % of
Gaza’s arable land is not accessible; most of the agriculture production is in
greenhouses, most of them still damaged and not properly protected from pests. Lack

of access to inputs and services reduce plant protection, agriculture production thus
profitability. Agriculture plays a key role in the Palestinian economy and food security
situation, providing work for more than 39 % of those working in informal sectors and
supporting a significant proportion of Palestinian families who cultivate their lands for
livelihood. In the second quarter of 2010, the agricultural sector provided job
opportunities and employment to 305, 25011 workers and about14, 000 private
business establishments in the West Bank and Gaza Strip (WBGS). Employment in the
agriculture sector had witnessed an increasing trend since the beginning of the second
Intifada until 2008-9. Agriculture was considered a last resort for people who had lost
their employment due to Israeli measures. The trend was reversed due to reasons such
as waves of drought in the WB and destruction of agriculture land in seam zone and
other in Gaza from 2009.
Figure ( 1): sectors contribution to Palestinian's economy
Table ( 2 ) Gaza Strip Demographics Profile 2018:

Source: Index mundi
Population 1,795,183 (July 2017 est.)
Age structure 0-14 years: 44.78% (male 412,644/female 391,275)
15-24 years: 21.25% (male 192,292/female 189,166)
65 years and over: 2.54% (male 23,729/female 21,936)
(2017 est.)
Dependency ratios Total dependency ratio: 75.8
youth dependency ratio: 70.5
elderly dependency ratio: 5.2
potential support ratio: 19.1
note: data represent Gaza Strip and the West Bank (2015
est.)
Median age Total: 17.2 years
male: 16.8 years
female: 17.5 years (2017 est.)
Population growth
rate
2.33% (2017 est.)
Birth rate 31.4 births/1,000 population (2017 est.)
Death rate 3.1 deaths/1,000 population (2017 est.)
Net migration rate -5.1 migrant(s)/1,000 population (2017 est.)
Urbanization Urban population: 75.7% of total population (2017)
rate of urbanization: 2.75% annual rate of change (2015-20
est.)
note: data represent Gaza Strip and the West Bank
Sex ratio at birth: 1.06 male(s)/female
0-14 years: 1.05 male(s)/female

65 years and over: 0.71 male(s)/female
total population: 1.02 male(s)/female (2016 est.)
Infant mortality rate Total: 16.6 deaths/1,000 live births
male: 17.6 deaths/1,000 live births
female: 15.4 deaths/1,000 live births (2017 est.)
Life expectancy at
birth
Total population: 74.2 years
male: 72.5 years
female: 75.9 years (2017 est.)
GDP (purchasing power
parity)
$21.22 billion (2014 est.)
$20.15 billion (2013 est.)
$19.95 billion (2012 est.)
note: data are in 2014 US dollars; includes Gaza Strip
GDP (official exchange
rate)
$2.938 billion (2014 est.)
note: excludes the West Bank
GDP - real growth rate -15.2% (2014 est.)
5.6% (2013)
7% (2012)
GDP - per capita (PPP) $4,300 (2014 est.)
$4,400 (2013 est.)
$4,600 (2012 est.)
note: includes Gaza Strip
GDP - composition, by
end use
Household consumption: 91.3%
government consumption: 26.7%
investment in fixed capital: 23%
investment in inventories: 0%
exports of goods and services: 20%
imports of goods and services: -61%

note: data exclude the West Bank (2017 est.)
GDP - composition by
sector
Agriculture: 3%
industry: 21.1%
services: 62.5%
Population below
poverty line
30%
Labor force 1.24 million
note: excludes the West Bank (2017 est.)
Labor force - by
occupation
Agriculture: 5.2%
industry: 10%
services: 84.8%
Unemployment rate 26.7% (2017 est.)
26.9% (2016 est.)
note: data exclude the West Bank
Unemployment, youth
ages 15-24
Total: 40.7%
male: 36.4%
female: 60.8%
note: includes the West Bank (2015 est.)
Budget Revenues: $1.314 billion
expenditures: $1.278 billion
note: includes Palestinian Authority expenditures in the
Gaza Strip (2017 est.)
Inflation rate (consumer
prices)
0.8% (2017 est.)
-0.2% (2016 est.)
note: 2.9% excludes the West Bank
Agriculture - products olives, fruit, vegetables, flowers; beef, honey and dairy
products
Industries textiles, food processing, furniture

Industrial production
growth rate
4%
note: see entry for the West Bank (2017 est.)
Current Account Balance -$1.444 billion (2017 est.)
-$1.348 billion (2016 est.)
Exports $1.955 billion (2017 est.)
$1.827 billion (2016 est.)
Imports - commodities food, consumer goods, fuel
Population Growth:
Basedon thelatestsurveysdoneby PCBS in 2017,total numberofpopulation in Palestine has reached
4,952,168. Gaza Strip has reached around 1,876,666 with an increase rate of 2.33% from 2016
year,figurebelowsummarizes population distribution in Palestine by governorates:
Figure (2): population distribution in Palestine by governorates
Table (3): Estimated number of population in Gaza strip (2009 – 2017)

Year North Gaza Gaza Dier al Balah Khan Yunis Rafah Total
1997 178,605 357,768 144,015 195,475 119,659 995522
1998 186,485 370,198 149,456 202,247 124,375 1032761
1999 194,637 382,943 155,052 209,190 129,233 1071055
2000 202,909 395,760 160,696 216,172 134,140 1109677
2001 210,712 407,745 165,988 222,700 138,749 1145894
2002 218,729 419,963 171,397 229,354 143,465 1182908
2003 227,051 432,546 176,982 236,207 148,342 1221128
2004 235,782 445,645 182,811 243,340 153,439 1261017
2005 245,326 459,851 189,148 251,075 158,988 1304388
2006 255,256 474,509 195,705 259,056 164,737 1349263
2007 265,594 489,642 202,493 267,294 170,697 1395720
2008 275,338 505,505 209,306 277,047 176,712 1443908
2009 285,095 521,251 216,087 286,810 182,717 1491960
2010 294,891 536,929 222,857 296,607 188,732 1540016
2011 304,724 552,537 229,615 306,440 194,754 1588070
2012 314,622 568,122 236,380 316,333 200,801 1636258
2013 324,533 583,593 243,114 326,236 206,840 1684316
2014 334,480 598,993 249,837 336,174 212,886 1732370
2015 344,468 614,324 256,547 346,146 218,941 1780426
2016 354,519 629,631 263,265 356,179 225,020 1828614
2017 364,582 644,823 269,946 366,223 231,092 1876666
The data in the table above shows an increasing in the number of population
in the Gaza Strip, which will lead to an increasing in demand for honey and
other related products (beeswax). This is positive indicator for the business.
Figure (3): population in Gaza strip (2009 – 2017)

In the above figure, the researcher used the Trend Projection Line Method
to forecast the number of population in the future, which is important to
estimate the need for honey and other related products (beeswax)
Apiculture and honey production sector:
Apiculture or beekeeping is one of the agriculture’s sub-sectors, where Precision
Agriculture (PA) approaches can be successfully applied. Adaptation of Precision
Agriculture approaches and techniques into Apiculture, as well as integrating
information technologies into beekeeping process can improve the beekeepers
knowledge about behavior of individual bee colonies. Precision Apiculture or
Precision Beekeeping is an apiary management strategy based on the monitoring of
individual bee colonies to minimize resource consumption and maximize the
productivity of bees. One of the objectives of Precision Apiculture in the field of
monitoring is to develop real time on-line tools for continuous monitoring of bees
during their life and production using the automatic solutions avoiding exposure of
bees to additional stress or unproductive activities. The aim of these technical tools is
not to replace but rather to support the beekeeper. In the Gaza Strip, there are nearly
300 beekeepers and honey-production workers. They own approximately 20,000
beehives, each producing around 10 kg (22 lbs.) of honey per year. The total domestic
production in the Strip reaches almost 280 tons and covers 60% of local demand. The
honey-production cycle in Gaza consists of several stages starting from May each year,
during which wooden bars are prepared for the bees to occupy. From Israel, the bee-

farm, or apiary, owners import Italian queen bees and crude wax, from which the bees
build their hexagonal honeycomb cells. The wooden bars are kept in the prepared
wooden boxes and placed in green pastures. In winter, when the bees cannot leave
their hives due to the cold weather, they are fed until harvest season in April.
The unique and peculiar weather of Palestine, in spite of its relatively small area, has
bestowed diversity and multiplicity of life modes especially the wildlife, which
consequently leads to multiplicity of the flowers from which bees feed. The Palestinian
honey is distinguished by not being processed with heat or filtration, so it preserves its
qualities, nutritional and therapeutic values. There are many types of Palestinian
honey: Citrus Honey, Morrar Forks Honey, Sidr Tree Honey, Spring Flowers Honey,
Anise and Nigella sativa Honey. Honey is available in 250g, 500g and 1kg plastic
bottles. Honey has many benefits;
• It helps regulating the blood pressure and increases the ratio of Hemoglobin in the
blood,
• It plays a significant role in the growth and protection of teeth.
• Honey is considered the ideal food for increasing energy and power for sport
exercises. Thus, athletes are advised to have honey due to its enormous benefits.
Table ( 4): Main information about Apiculture sector activities:
Indicator
Numbers of beekeepers 300
Number of hives 20,000
Types of hives Italian, Italian hybrid, a
local hives
Average production per hive 10 kg
Average distance of transhumance
25 km
National production of honey 250 tons
local demand Covers 60%
Table ( 5 ): Major Economic Indicators

Source: index mundi
GDP (official exchange rate) $2.938 billion (2014 est.)
GDP - real growth rate -15.2% (2014 est.)
5.6% (2013)
7% (2012)
GDP - composition by sector agriculture: 3%
industry: 21.1%
services: 62.5%
Population below poverty line 30%
Labor force - by occupation agriculture: 5.2%
industry: 10%
services: 84.8%
Unemployment rate 26.7% (2017 est.)
26.9% (2016 est.)
note: data exclude the West Bank
Inflation rate (consumer prices) 0.8% (2017 est.)
-0.2% (2016 est.)
note: 2.9% excludes the West Bank
Potential Demand for Honey in the Gaza Strip:

The proposed project targets the local market, including supermarkets,
shops and commercial centers, and is based on beekeeping and the
production of honey in quantities suitable to cover the needs of the
individual and the market.
Based on the following table issued by the Department of Statistics on
2013, which is the latest statistics for the volume of consumption of honey,
shows that the consumption rate each year is 2% for local honey.
Table ( 6 ): Local Honey consumption in Gaza Strip:
Year 2010 2011 2012 2013
Consumption of Local Honey (kg) 483,581 493,253 503,118 513,180
The following table shows consumption based on the annual consumption
rate of 1% (2014-2017):
The following table shows consumption based on the annual consumption
rate of 1.5% (2018-2021)
Year 2018 2019 2020 2021
Estimated Supply of honey in Gaza Strip:
According to report was published in 2014, Gaza’s 300 beekeepers own
20,000 beehives between them and are expected to produce 180 tons of
honey this season, therefore, they are expected to produce approximately
400 tons for this year. The official noted that domestic honey consumption
has decreased from 500 to 200 tons due to the deteriorating economic
Year 2014 2015 2016 2017

situation in the besieged territory. His ministry prevents the import of honey
before it is out on the market. Each kilogram is worth between 50 to 80
shekel (JD11 to JD 14).
“The natural production of honey in the Gaza Strip amounts to 500 tons per
year,” Abu Hamad said. “But this year, it will not exceed 200 tons due to
the Israeli war, which destroyed more than 8,000 beehives out of 20,000,
and killed a large number of bees with the use of shells, bombs and rockets
against Gaza.”
Market Gap:
Determining the gap between supply and demand in the target market of
honey is a good indicator, to know how easy or difficult the market strategy
for the goods to be produced is. Market is the difference between supply
and demand.
In 2018, consumption of local honey reached 280,074 kg, and the
production reached 250,000 kg so the shortage rises to about 37000 kg in
2019.
Target segments
The proposed project will target the following segments:
• Households
• Supermarkets
• Individuals
• Honey shops
• Pharmacies
Market potential
The market share of the proposed project represents a certain percentage of
the market size and can be expressed either as revenue or sales volume, as
the market share shows the expected sales volume and expected growth in
sales volume.

Table (7): Market Share
Market sharesales per yearproducers of honey
36%39000Our project
19%20000Sami Al-musadder
31%34000Zeraey Al-telbani
9%10000Adnan Abed Al-musadder
5%5000honey with brands
Customer analysis
Recurring Tables:
Place of residence:
Frequency Percent
Valid East of Gaza 10 20.0
North of Gaza 12 24.0
West of Gaza 12 24.0
Mid area 16 32.0
Total 50 100.0

The results shown in Table and figure 1 show that 20% of the study sample is from
East Gaza, 24% from North Gaza, 24% from West Gaza and 32% from mid area.
Gender:
Frequency Percent
Valid male 8 16.0
Female 42 84.0
Total 50 100.0
The results shown in Table and figure (2) showed that 16% of the study sample was
male, while 42% of the sample was female.
Use honey product:
Frequency Percent
Valid Yes 43 86.0
No 7 14.0
Total 50 100.0

The results shown in Table and figure (3) showed that 86% of the study sample used
the honey product, while 14% of the sample did not use the honey product.
The product quality is excellent:
Frequency Percent
Valid totally agree 22 44.0
Agree 25 50.0
Dis agree 3 6.0
Total 50 100.0
The results indicated in Table and figure 4 show that 44% of the sample strongly
agreed that the quality of the honey product is excellent and 50% of the sample agreed
that the quality of the honey product is excellent, while 6% of the sample did not
agree. The quality of the honey product is excellent.

average quantity purchased annually of honey:
Frequency Percent
Valid 30 3 6.0
50 20 40.0
80 9 18.0
100 18 36.0
Total 50 100.0
The results indicated in Table and figure show that 6% of the sample of the study was
the average quantity purchased annually of honey 30 kg and 40% of the sample of the
sample was the average quantity purchased annually of honey 50 kg, while 18% Of the
sample of the study was the average quantity purchased annually of honey 80 kg, and
that 36% of the sample of the study was the average quantity purchased annually of
honey 100 kg or more.
effect of the place on the nature of the product:
Frequency Percent
Valid Very
important
27 54.0
Importantnot 16 32.0
Not very
important
7 14.0
Total 50 100.0

The results indicated in Table and figure (6) show that 54% of the sample of the study
said that the place affected the nature of the product and that 46% of the sample of the
study said that the place does not affect the nature of the product.
Intention to repurchase the product:
Frequency Percent
Valid Yes 39 78.0
No 6 12.0
do not
know
5 10.0
Total 50 100.0

The results indicated in Table and figure (7) show that 78% of the study sample said
that they intend to buy honey again, and that 6% of the sample of the study said that
they have no intention to buy honey again, and 10% we do not know.
the price of 30 NIS per half kilo and 60 NIS per kilo is appropriate:
The results indicated in Table and figure (8) showed that 46% of the sample members
agreed that the price of honey is appropriate, while 36% of the sample did not agree
that the price of honey is appropriate.
right price for honey kilo:
Frequency Percent
Valid 30 9 26.0
60 18 56.0
100or more than 23 18.0
Total 50 100.0
Frequency Percent
Valid totally agree 11 22.0
Agree 21 42.0
Dis agree 10 20.0
Totally dis
agree
8 16.0
Total 50 100.0

The results indicated in Table and figure (9) showed that 26% of the sample of the
study said that the appropriate price for kg honey 30, and 56% of the sample of the
study said that the appropriate price for kg honey 60, while 18% The study said that
the right price for 100 kilo honey or more.
prefer imported honey as an alternative:
Frequency Percent
Valid Yes 19 38.0
No 25 50.0
Don’t
know
6 12.0
Total 50 100.0

The results indicated in Table and figure (10) show that 38% of the respondents said
that they prefer imported honey as an alternative, and that 50% of the study sample
said that they prefer imported honey as an alternative and 12% of the study sample.
Descriptive Statistics
N Range
Minim
um
Maximu
m Mean
Age 50 57 20 77 46.00
Valid N (list
wise)
50
From the previous table, the mean age of the age group was 46 years, the lowest age
was 20 years, and the highest age was 77 years.
Descriptive Statistics
N Range Minimum Maximum Mean
Income 50 7280 500 7780 1806.80
Valid N (list wise) 50
From the previous table, the value of the calculation of income was 1806.8 NIS, the
lowest value of 500 NIS, and the highest value of 7780 NIS, and the value of the range
7280.
Table of comparisons between the average quantity purchased and between (age,
income, sex, and place of residence)
H0: There are no differences between the average quantity purchased and between
(age, income, sex, and place of residence).
:H1: There are differences between the average quantity purchased
and between (age, income, gender, and place of residence).

ANOVA
Sum of
Squares Df
Mean
Square F Sig.
Age Between
Groups
1861.450 3 620.483 3.369 .026
Within Groups 8472.550 46 184.186
Total 10334.000 49
Inco
me
Between
Groups
2648015.2
22
3 882671.74
1
.565 .641
Within Groups 71836072.
778
46 1561653.7
56
Total 74484088.
000
49
Gend
er
Between
Groups
1.003 3 .334 2.691 .057
Within Groups 5.717 46 .124
Total 6.720 49
Place
of
resid
ence
Between
Groups
5.158 3 1.719 1.370 .264
Within Groups 57.722 46 1.255
Total 62.880 49
From the previous table, there are no differences between the average quantity
purchased and between income, sex, and place of residence. Greater than 0.05, while
there are differences between the quantity purchased and the age, where the value of
sig. Less than 0.05 and therefore we want to examine where the differences using the
LSD test where the following results emerged:

Multiple Comparisons
Dependent Variable: Age
LSD
Average quantity
purchased from
honey(i)
Average quantity
purchased from
honey(J)
Mean
Differenc
e (I-J)
Std.
Error Sig.
30 50 -22.650-*
8.403 .010
80 -27.889-*
9.048 .003
100 -19.222-*
8.463 .028
50 30 22.650*
8.403 .010
80 -5.239- 5.447 .341
100 3.428 4.409 .441
80 30 27.889*
9.048 .003
50 5.239 5.447 .341
100 8.667 5.541 .125
100 30 19.222*
8.463 .028
50 -3.428- 4.409 .441
80 -8.667- 5.541 .125
➢ The mean difference is significant at the 0.05 level.
It is clear from the previous table that there is a significant difference between the
quantity purchased at 30 and the quantity bought at 50,80, 100 and more since the
value of the sig. Less than 5%. While the difference between the quantity purchased at
50 and the quantity purchased at 80, 100 and more was insignificant, since the value of
the sig. Greater than 5%.

Sales forecasting
Total operation cost of Honey ( 0.5 kg )
yearRaw MaterialsHRUtilitiesMiscellaneous expensesTotal cost
12000150080010005300
22020151580810105353
32040153081610205407
42061154582410305461
52081156183210415515
62102157784110515570
72123159284910625626
82144160885810725682
92166162486610835739
102187164187510945797
112209165788411055854
122231167489311165913
132254169090111275972
142276170791011386032
152299172492011496092
Sales forecasting - Honey (0.5 kg )
Gross profit %Gross profitRevenue
sell
priceoperation cost
Unit
soldYear
62%870014000753002,0001
63%899714350753532,0502
63%929314700754072,1003
64%958915050754612,1504
64%988515400755152,2005
67%11080166507.455702,2506
67%11394170207.456262,3007
67%11708173907.456822,3508
69%12981187207.857392,4009
71%14293200908.257972,45010
73%15646215008.658542,50011
74%1703722950959132,55012
76%18468244409.459722,60013
77%20203262359.960322,65014
78%219882808010.460922,70015

Total operation cost of Honey ( 1 kg )
12500200080010006300
22525202080810106363
32550204081610206427
42576206182410306491
52602208183210416556
62628210284110516621
72654212384910626688
82680214485810726754
92707216686610836822
102734218787510946890
112762220988411056959
122789223189311167029
132817225490111277099
142845227691011387170
152874229992011497242
Sales forecasting - Honey (1 kg )
Gross profit %Gross profitRevenuesell priceoperation costUnit soldYear
84%3220038500763005,5001
84%3248738850763635,5502
84%3277339200764275,6003
84%3305939550764915,6504
84%3334439900765565,7005
84%35929425507.466215,7506
84%36232429207.466885,8007
84%36536432907.467545,8508
85%39198460207.868225,9009
86%41900487908.268905,95010
87%44641516008.669596,00011
87%4742154450970296,05012
88%50241573409.470996,10013
88%53715608859.971706,15014
89%572386448010.472426,20015

Total operation cost of Beeswax ( 1 kg )
1900200080010004700
2909202080810104747
3918204081610204794
4927206182410304842
5937208183210414891
6946210284110514940
7955212384910624989
8965214485810725039
9975216686610835089
10984218787510945140
11994220988411055192
121004223189311165244
131014225490111275296
141024227691011385349
151035229992011495403
Sales forecasting – Beeswax
Gross profit %Gross profitReveneuesell priceoperation costUnit soldYear
75%1870025000563005,0001
75%1868725050563635,0102
79%2369330120664275,0203
78%2368930180664915,0304
78%2368430240665565,0405
78%2367930300666215,0506
81%2873235420766885,0607
81%2873635490767545,0708
81%2873835560768225,0809
83%3383040720868905,09010
83%3384140800869595,10011
85%3896145990970295,11012
85%3898146080970995,12013
84%3900046170971705,13014
86%44158514001072425,14015
For the first financial year the project plans to produce 12,500 kg in optimistic case, of
which each kg of honey will be sold for a wholesale price of 11 JD. To produce at the
mentioned scale we require 200 beehives each of capacity to produce 8 kg per day.

However, every new financial year we plan to DOUBLE the production of honey by
increasing the number langstoth beehives.
Product Marketing and Promotion
In the Agriculture sector, marketing is considered to be of significant
importance. In honey production, marketing parameters are very limited
and largely associated with the agriculture sector’s performance. Some of
the marketing promotion activities, which should duly be rendered, are
given below:
• Local Population and marketing the product through press and social
media.
• Developing contacts with the Pharmaceutical factories and food
factories, well-known Honey shops.
Table (9): promotion tools
Competitors Analysis
According to published report, the number of beekeepers in Gaza reaches
about 300, and the number of bees in Gaza varies from 40,000 to 60,000
according to the weather conditions.
•Promotion tools
TV
√INTERNT
Magazine
Radio
√Press
Brochures
√Social Media
√Other

Product or Service Quality
Managemen
t skills
HR
Financial
resources
Financial
managemen
t
Sales
Managemen
t
Pricing suger rate purity Total
Weighting 30% 2% 5% 5% 3% 5% 5% 20% 25% 100%
Nayef Al-musadder 9 6 8 7 8 7 9 8 9 71
SamyAl-musadder 6 5 4 5 8 7 8 5 6 54
ZeraeyAl-telbani 7 8 4 8 7 8 6 6 5 59
Adnan Abed Al-musadder 4 7 3 10 2 5 3 5 3 42
Imported Honey 7 5 7 6 4 3 4 3 4 43
Direct competitors:
There are 3 apiaries in al-musadder village:
Samy Al-musadder
Zeraey Al-telbani
Adnan Abed Al-musadder
Indirect competitors
The owners of beekeeping farms who sell the produced
honey directly from their farms and do not hold trademarks
of the project.
Table(10): Competitive Analysis Tool:

Figure ( 5): Differentiation "Radar" chart:
Price Analysis and Pricing Policy
Sale prices vary per kilogram in Gaza due to the presence of many types
produced in Gaza: Sidr, wildness, Citrus, Thorns and Flowers. Prices range
between 6-19 Jordanian Dinars per kilo by type and quality. In Al-musadder
village, Citrus honey and thorns honey are produced and the prices of these
two types vary between 6-11 Jordanian Dinars or 30 - 60 shekels per kilo.
For the project, which will offer honey products with high quality, the
following prices have been approved:
- The price of one kilogram of natural honey is 11 JD.
- The price of one kilogram of beeswax is 7 JD.

Table (11): Pricing and promotion tools strategies
•pricing and promotion strategies2
√Relative to cost
uniformity of prices of different customers
List price
Discount
√Geographical pricing
Price leadership
Product line pricing
Competitive bidding policy
Geographic Potential for investment
Almusadder village suitable place to start set up of the project in it. Because it contains
the following conditions that must be met in the area where the project is to be
established:
• It should be an area rich in fresh nectar crops.
• Easy to access.
• Far from vibrations.
• Non-congested area.
Market Entry Timing
Honey making business depends on activity and movement in Apiculture sector.
Beekeeping farm could be established at any time of the year.
Specially, in spring season. Because there is no need for raw materials.

Chapter 4: Technical Feasibility Study
The Palestinian honey is characterized by its diversity and distinctive structure
due to the diversity of the geographical areas of mountains, plains and valleys,
and small agricultural holdings of various plantations; in addition to the
diversity of wild plants which are mostly medicinal and aromatic plants that
make the Palestinian honey known for its quality compared to the imported
honey, which is mostly produced from one plant source.
Palestinian honey is distinguished from imported honey that most of is not
treated thermally (pasteurization) and is not filtered with automatic filters,
thus conserving its characteristics and nutritional benefits while having a
medical value, but that makes it susceptible to crystallization.
Sources of Raw Beeswax
• Disk covers resulting from the scavenging of disks when sorting honey.
• Waxy appendages, which are built by the workers on, between the farms, or
on the walls of the cell or the cover from the inside.
• Old wax disks that have been used for several years and have been replaced
with new wax foundations.
• Broken wax disks which are re-melted whether old or new to benefit from
them.
Honey cells disks, which are produced when sorting honey from stationary
tablets in cells and considered as the main source of wax.
Description of the production process of Honey
Basic processes in the apiary: examination of groups - bee feeding - bee
dispersion - the grouping - the installation of wax foundations - the
preparation of communities to collect honey - the extraction of discs - the
process of skimming, sorting and packaging - Wax sorting and purification -
Packaging. A set of equipment is needed: feeders, cell-testing tools,
beekeepers’ tools, chimney, wax-melter, travel boxes, and Wasp Trap -
manual tools.

Proposed Capacity and Rationale
Production capacity of the apiary for the proposed products of honey and
beeswax would be 12,500 Kilograms from honey and beeswax per annum.
There are two production types yearly. The proposed capacity for the
project as follow:
Table (12) proposed capacity of honey and beeswax
Capital Investment Requirements
A capital investment is the acquisition of a fixed asset that is anticipated
to have a long life of use before it has to be replaced or repaired. Two of
the most easily recognizable examples of these types of investments are
land and buildings. However, a capital investment is made any time that
a company purchases goods that will be benefit the operation of the
business, but will not be used to cover the operational costs of the
business.
Proposed
production
production /month Annual production
Honey 500 7,500
Beeswax 420 5,000
Total 12,500

Table ( 13 ) : Capital Investment Requirements
Table (14): First year operational expenses
Description Cost (JD)
Raw Materials 6,900
Human resources 37,800
Utilities 8,400
Registrations - permits 1,000
Maintenance 2,000
Land Rent 200
Miscellaneous expenses 1,000
Total cost 57,300
Description Unit Cost (JD)
Capital Cost
Land 0
Buildings 200
Machinery 41,564
Furniture & Fixtures 1,500
Vehicles ( Assets ) 7,000
Total Capital Cost 50,264
Working Capital
Equipment Spare Part Inventory 500
Raw Material Inventory 500
Upfront Insurance Payment 1000
Cash 3000
Total Working Capital 5,000
Total Project Cost 55,264

Table ( 15 ) : Cost of Raw Material
Raw materials Cost (JD)
Sugar ( Glucose, fructose, and small
Additions of other sugars )
2,000
Propolis 1,500
Dextrin 1,500
Wax 900
Organic acids 500
Aromatic compounds 500
Total cost 6,900
Table ( 16 ) : Utilities Requirements
Description cost (JD)
Electricity 2,000
Water 2,500
Vehicle expenses 3,000
Advertising & promotion 900
Total cost 8,400
Comment: Annual increase in utilities is 10%.
Site Analysis
Beekeepingisbasedonmethodsthathelpinprotectingbeesandtheirfoodbytransferringpests
from one place to another to ensure good nutrition and healthy environment for bees, and to
obtainhoneyandbee productsthat meet internationalstandardsinterms ofnutritional value,
flavor,smellandappearance.

The following conditions must be met in the area where the project is to be established:
•Itshouldbeanarearichinfreshnectar crops.
•Easy toaccess.
•Far fromvibrations.
•Non-congestedarea.
In addition, provided with the service requirements of:
• Cultivationofwindbreaksofcamphortrees.
• Cultivationofflowersaroundtheapiary,suchascespan,whichisaneffectivesourceof
pollen
• Thelandoftheapiaryispreparedtobeplowedandwellsettledandthelandisdivided into
terracesfromeasttowestwithawidthofabouttwometers.
• Construct umbrellas with a width of 2 meters of wooden beams, up from 2-2.5 m that fold
sothatloofahorgrapescanclimbonthemtogiveanaturalshadeduringthe summeror
coveredwithmats.
• Cultivationofthespacesbetweentheterraceswithleafytreessuchasflowers,Zinpia, Rizda,
sunflowerandwaxedcalenduladuringrecession.
• Watersourceand220voltsofelectricityforlightingandequipment.

Technical Requirements
Land requirement
Theprojectneedsatotalareaof2000sqm.Thefollowingtableshowstherequiredlandfor
the proposedproject
Table (17) Required Building &Land for the Project
Land Cost (JD) Area sq.m
The required land 0 2,000
Room for operations 200 400
Total 200
Transportation and Vehicles requirement
Table (18) Transportation and Vehicles Requirement
Transportation and
Vehicles
Quantity Unit
Cost/JOD
Total
Cost/JOD
Pick up 1 7,000 7,000
Total 7,000

Machinery and Equipment requirement
Table (19) Machinery and Equipment
Machinery and equipment Quantity Cost /
JD
Total Cost
Beehive 200 70 14,000
A proper dress 5 30 150
Separator 1 500 500
Plastic queen barrier 100 4 400
Hives Frames 2000 2 4,000
Honey producer 100 10 1,000
Iron Post 200 5 1,000
Feeder 200 5 1,000
Chimney 4 16 64
Nucleolus divider 50 10 500
Fraser 6 frames 1 500 500
Honey table with a capacity of
200 kg
2 100 200
Honey table with a capacity of
100 kg
2 50 100
50 kg honey table with electric
heater
2 100 200
Honey Sorting Tools 2 100 200
Honey Moisture Testing Device 1 70 70
Convyer 10 15 150
Wax fixing adapter on the frame 2 15 30
JUNTERequipmentfortheproductionof
royalfood
2 135 270
Total (JD) 24,264

Furniture requirement
Table(20) Furniture Capital Expenditure
Furniture and
furnishings
Quantity Cost /
JD
Total Cost
Building a fence - - 1,500
Total 1,500
Required Human Resources
This project requires an agricultural engineer specialized in plant production and in the
production of honey and beekeeping inaddition to marketing the product to targeted markets,
and agricultural workers, manufacturing workers, driver and guard. The project needs
temporary employment at seasonalintervalstocollectthecrop.Thefollowingtableshows
therequiredlaborfortheproject:
Table ( 21 ) Required labor forthe project
Job title No.
Project Manager 1
Marketing Officer 1
Guard 1
Total indirect staff 3
Job title No.
Direct employees
Agricultural engineer 1
Full time workers 3
Total direct staff 4
Total staff 7

ProjectManager:proposinggeneralpolicyforthefarm,preparingplansandfollowingup
on their implementation, technical and administrative supervision of
employees, developing proceduresandsecuringtherequirementsof
occupationalsafetyandhealth.
Agricultural Engineer: studies and advises on the use of engineering science and technology
in thefieldofagriculturalproductionandmanagementofnaturalresources. Inadditionto
applying engineering knowledge and skills to solve problems related to such issues as
permanent agricultural production, environmental impacts of agriculture and post-
harvest processingof agriculturalproducts.
Agricultural engineer tasks:
• Planningandsupervisingofagriculturalprojectsandmanagement.
• Constructionofirrigationanddrainagechannelsandwatercontrol.
• Planningandsupervisingtheconstructionoffarmsandotherrelated
buildingssuch as (beehouses,aquaculture,silosandstorage)
• Supervising of land preparation, sowing and harvesting, and post-harvest
(processing, packagingandtransportequipment)
Seasonal workers: workers who have experience in collecting honey from cells,
and do their workduringtheseasonsof collectinghoney.
Fulltimeworkers:responsibleforarrangingthecellsandprovidingfoodforthemand
maintain thecleanlinessofthefarm.

Guard:protectshoneyandhoneybeesfromtheft.
MarketingOfficer:preparingforreceivingtheproduct,inspectingitandmatchingitsquantities, typesandspecificationswiththepurchase
order,inspectingitsvalidityforhumanconsumption, fillingtheformsofthereceiptanddeliveryprocess,followinguptheprocessofloading,
unloading and receiving, sorting the packages for the product and arranging them according to type, and assists customers in selecting their
needs, responding to their inquiries, securing their requests, following up their processing, packing them according to customers' request, selling
the product,, editing invoices, inventorying the contents of the stores and identifying the needs of the company. Organization of sales records and
financial records. Mobilization of business models. Application of occupational safety and health procedures and instructions.

Table (22) Expected staff preparation
Job title Quantity Monthly salary Total Monthly salary Annual salary
Project Manager 1 600 600 7,200
Marketing Officer 1 400 400 4,800
Guard 1 200 200 14,400
Total indirect staff 3 1,200 1,200 14,400
Agricultural engineer 1 450 450 5,400
Full time workers 3 500 1,500 18,000
Total direct staff
Grand Total
7 1,050
2,250
3,150
4,350
23,400
37,800

Chapter 5:Key Assumptions
Table ( 23 ) : Key Assumptions :
Operational cost growth rates assumptions
Growth rate / annum 5%
Cost of wages and salaries / annum 5%
Cost of utilities rate / annum 10%
Cost of land rent rate / annum 5%
Cost of Registrations and permits rate / annum 15%
Cost of Maintenance rate / annum 10%
Cost of Miscellaneous expenses rate / annum 10%
First Year Operation Cost ( OC ) 57,300
Revenue and Sales Assumptions
Selling price for honey (0.5kg) 30 NIS per unit / 7 JD
Selling price for honey (1kg) 60 NIS per unit / 11 JD
Selling price for Beeswax 20 NIS per unit / 5 JD
Working days 6 days a week
Production days 6 days a week
Maximum capacity of honey (0.5kg) 2000 jars
Maximum capacity of honey (1kg) 5,500 jars
Maximum capacity of Beeswax 5000 frames
Daily working hours 6 hours a day
Tax Rate % 20%

Discount Rate % 15%
Economic and Financial Assumptions
Project life 15 years
Taxes growth rate / annum 20%
Discount rate 15%
Minimum acceptable rate of return ( hurdle rate ) 20%
Sources of finance 100 Equity
Operational Assumptions
Operation Rate during the project life respectively
80%, 85% , 90%, 95% ,
100%, 105%, 110%, 115%,
120%, 125%
Table ( 24 ) : Selling prices
# Honey jar size & beeswax Price per unit in NIS Price per unit in JD
1 Honey (0.5kg) 30 7
2 Honey (1kg) 60 11
3 beeswax 20 5

Chapter 6:Economics and Financial Feasibility study
The following formulas will be used for calculation:
Payback period:
Payback period is the time in which the initial cash outflow of an investment is expected to be recovered from the cash
inflows generated by the investment. It is one of the simplest investment appraisal techniques.
Formula
The formula to calculate payback period of a project depends on whether the cash flow per period from the project is even or
uneven. In case they are even, the formula to calculate payback period is:
Payback Period =
Initial Investment
Cash Inflow per Period
When cash inflows are uneven, we need to calculate the cumulative net cash flow for each period and then use the following
formula for payback period:
Payback Period = A +
B
C
In the above formula,
A is the last period with a negative cumulative cash flow;
B is the absolute value of cumulative cash flow at the end of the period A;
C is the total cash flow during the period after A

Discounted Payback period:
One of the major disadvantages of simple payback period is that it ignores the time value of money. To counter this limitation,
an alternative procedure called discounted payback period may be followed, which accounts for time value of money by
discounting the cash inflows of the project.
Formulas and Calculation Procedure
In discounted payback period we have to calculate the present value of each cash inflow taking the start of the first period as
zero point. For this purpose the management has to set a suitable discount rate. The discounted cash inflow for each period is
to be calculated using the formula:
Discounted Cash Inflow =
Actual Cash Inflow
(1 + i)n
Where,
i is the discount rate;
n is the period to which the cash inflow relates.
Usually the above formula is split into two components which are actual cash inflow and present value factor (i.e. 1 / (1 + i) ^n). Thus,
discounted cash flow is the product of actual cash flow and present value factor.
The rest of the procedure is similar to the calculation of simple payback period except that we have to use the discounted cash flows as
calculated above instead of actual cash flows. The cumulative cash flow will be replaced by cumulative discounted cash flow.
Discounted Payback Period = A +
B
C
Where,
A = Last period with a negative discounted cumulative cash flow;
B = Absolute value of discounted cumulative cash flow at the end of the period A;
C = Discounted cash flow during the period after A.

Pay-off back period rate of returns =
Net Present Value
NPV =
NR1
+
NR2
+
NR3
+ ... − Initial Investment
(1 + i)1 (1 + i)2 (1 + i)3
Where,
i is the target rate of return per period;
R1 is the net cash inflow during the first period;
R2 is the net cash inflow during the second period;
R3 is the net cash inflow during the third period, and so on...
Average Rate of Returns = ARR:
Average Rate of Return is calculated using the following formula:
ARR =
Average Net Returns
Initial Investment
=
1
Payback Period

CF1
+
CF2
+ CF( 1 + r )1
( 1 + r )2
( 1 + r )3
3
+ ...− Initial Investment = 0
Discounted Average Rate of Returns = Discounted ARR :
Discounted Average Rate of Return is calculated using the following formula:
Discounted ARR =
Average Net Returns using discounted values
Initial Investment
Net Average Net Returns = Net ARR :
Net Average Rate of Return is calculated using the following formula:
Net ARR =
1/n ( ƩNR – Initial Investment )
Initial Investment
Internal rate of return (IRR)
Internal rate of return (IRR) is the discount rate at which the net present value of an investment becomes zero. In other words,
IRR is the discount rate which equates the present value of the future cash flows of an investment with the initial investment.
It is one of the several measures used for investment appraisal.
IRR Calculation
The calculation of IRR is a bit complex than other capital budgeting techniques. We know that at IRR, Net Present Value (NPV)
is zero, thus:
NPV = 0; or
PV of future cash flows − Initial Investment = 0; or
Where,

r is the internal rate of return;
CF1 is the period one net cash inflow;
CF2 is the period two net cash inflow,
CF3 is the period three net cash inflow, and so on ...
Profitability Index :
Profitability index is an investment appraisal technique calculated by dividing the present value of future cash flows of a
project by the initial investment required for the project.
Profitability Index
=
Present Value of Future Cash Flows
Initial Investment
= 1 +
Net Present Value
Initial Investment

Tables ( 25) : Future Gross Benefits and Total Revenues Generation
Revenue generated from selling honey " 0.5 k.g "
Year Price Operation Rate % Quantity TR (1)
1 7 0.80 2,000 11,200
2 7.0 0.85 2,050 12,198
3 7.0 0.90 2,100 13,230
4 7.0 0.95 2,150 14,298
5 7.0 1.00 2,200 15,400
6 7.4 1.05 2,250 17,364
7 7.4 1.10 2,300 18,722
8 7.4 1.15 2,350 19,999
9 7.8 1.20 2,400 22,378
10 8.2 1.25 2,450 24,985
11 8.6 1.30 2,500 27,841
12 9.0 1.35 2,550 30,964
13 9.4 1.40 2,600 34,378
14 9.9 1.45 2,650 38,105
15 10.4 1.50 2,700 42,171
Table ( 26-2 ) : Revenue generated from selling honey "1 k.g "

1 11 0.80 5,500 48,400
2 11 0.85 5,550 51,893
3 11 0.90 5,600 55,440
4 11 0.95 5,650 59,043
5 11 1.00 5,700 62,700
6 12 1.05 5,750 69,733
7 12 1.10 5,800 77,373
8 13 1.15 5,850 85,667
9 13 1.20 5,900 94,664
10 14 1.25 5,950 104,416
11 15 1.30 6,000 114,980
12 15 1.35 6,050 126,417
13 16 1.40 6,100 138,792
14 17 1.45 6,150 152,174
15 18 1.50 6,200 166,636

Table ( 26-3 ) : Revenue generated from selling royal jelly
1 5 0.80 5,000 20,000
2 5 0.85 5,010 22,357
3 6 0.90 5,020 24,905
4 6 0.95 5,030 27,659
5 6 1.00 5,040 30,631
6 6 1.05 5,050 33,837
7 7 1.10 5,060 37,295
8 7 1.15 5,070 41,020
9 7 1.20 5,080 45,033
10 8 1.25 5,090 49,352
11 8 1.30 5,100 53,998
12 9 1.35 5,110 58,994
13 9 1.40 5,120 64,363
14 9 1.45 5,130 70,132
15 10 1.50 5,140 76,326
Total Revenue for the whole project

Year TR 1 TR 2 TR 3 TR
1 11,200 48,400 20,000 79,600
2 12,198 51,893 22,357 86,447
3 13,230 55,440 24,905 93,575
4 14,298 59,043 27,659 100,999
5 15,400 62,700 30,631 108,731
6 17,364 69,733 33,837 120,935
7 18,722 77,373 37,295 133,390
8 19,999 85,667 41,020 146,686
9 22,378 94,664 45,033 162,074
10 24,985 104,416 49,352 178,753
11 27,841 114,980 53,998 196,819
12 30,964 126,417 58,994 216,376
13 34,378 138,792 64,363 237,534
14 38,105 152,174 70,132 260,411
15 42,171 166,636 76,326 285,133

Table ( 26 ) : Future Operational Cost
Year
Raw
material
increase by
5%
Human
Resources
increase by 5%
Utilities
increase by
10%
Land Rent
increase by
5%
Registrations and
permits increase by
15%
Maintenance
increase by 10%
Miscellaneous
expenses increase by
10%
Total
Operation
Cost
1 6900 37800 8400
200
1000 2000 1000 57100
2 7245 39690 9240
210
1150 2200 1100 60625
3 7607 41675 10164
221
1323 2420 1210 64398
4 7988 43758 11180
232
1521 2662 1331 68440
5 8387 45946 12298
243
1749 2928 1464 72773
6 8806 48243 13528
255
2011 3221 1611 77421
7 9247 50656 14881
268
2313 3543 1772 82411
8 9709 53188 16369
281
2660 3897 1949 87773
9 10194 55848 18006
295
3059 4287 2144 93538
10 10704 58640 19807
310
3518 4716 2358 99743
11 11239 61572 21787 326 4046 5187 2594 106426
12 11801 64651 23966
342
4652 5706 2853 113630
13 12391 67883 26363
359
5350 6277 3138 121403
14 13011 71278 28999
377
6153 6905 3452 129797

Case 1 : Net Returns under the normal situation
Year
Total
Revenue
Operation
Cost
Depreciation Total Cost
Profit before
tax
Tax 20%
Profit after
tax
Net returns
= profit afetr
taxes +
Depreciation
PV@15%
Actual
NR@15%
0 0 55,264 -55,264 1 -55,264
1 79,600 57,300 3,684 60,984 18,616 3,723 14,893 18,577 0.87 16,162
2 86,447 60,165 3,684 63,849 22,598 4,520 18,078 21,763 0.756 16,452
3 93,575 63,173 3,684 66,858 26,718 5,344 21,374 25,059 0.658 16,489
4 100,999 66,332 3,684 70,016 30,982 6,196 24,786 28,470 0.572 16,285
5 108,731 69,649 3,684 73,333 35,398 7,080 28,318 32,003 0.497 15,905
6 120,935 73,131 3,684 76,815 44,120 8,824 35,296 38,980 0.432 16,839
7 133,390 76,787 3,684 80,472 52,919 10,584 42,335 46,019 0.376 17,303
8 146,686 80,627 3,684 84,311 62,375 12,475 49,900 53,584 0.327 17,522
9 162,074 84,658 3,684 88,342 73,732 14,746 58,985 62,670 0.284 17,798
10 178,753 88,891 3,684 92,575 86,177 17,235 68,942 72,626 0.247 17,939
11 196,819 93,336 3,684 97,020 99,799 19,960 79,839 83,523 0.215 17,958
12 216,376 98,002 3,684 101,687 114,689 22,938 91,751 95,435 0.187 17,846
13 237,534 102,903 3,684 106,587 130,947 26,189 104,757 108,442 0.163 17,676
14 260,411 108,048 3,684 111,732 148,679 29,736 118,943 122,627 0.141 17,290
15 285,133 113,450 3,684 117,134 167,999 33,600 134,399 138,083 0.123 16,984
NPV 201,185
IRR 29.4%
Accept the project because IRR is bigger than hurdle rate PI 3.64
Discounted
ARR
0.93
Pay-back period =14,924/ 25,059 = 0.59 Pay-off period rate of returns = 1 / 0.59 = 169.5%
The first 2 years = 40,340
55,264 – 40,340= 14,924 Comment : Net returns = Profit after tax + Depreciation

Sensitivity Analysis for the project :
1. If total revenue decreases by 10%, citrus paribus.
2. If operation cost per unit increases by 10% , citrus paribus.
3. If total revenue decreases by 10% and operation cost per unit by increases by 10% , citrus paribus.
4. If discount rate increases to 20% , citrus paribus.
5. If tax rate is 30% and discount rate is 15% , citrus paribus
6. If tax rate is 20% , discount rate 15% and project life span decreased to 10 years , citrus paribus
7. If the taxes increased by 10%
8. If the discount rate increased by 10%
9. If the quantity sold decreased by 10%
10. If the price per unit decreased by 10%

Case 2 : Sensitivity analysis when TR decreases by 10%
Year
New Total
Revenue
Operation
Cost
Profit before
tax
Tax 20%
Profit after
tax
Net
returns PV@15% NR@15%
0 0 0 55,264 1 -55,264
1 71,640 57,300 3,684 60,984 10,656 2,131 8,525 12,209 0.87 10,622
2 77,802 60,165 3,684 63,849 13,953 2,791 11,163 14,847 0.756 11,224
3 84,218 63,173 3,684 66,858 17,360 3,472 13,888 17,573 0.658 11,563
4 90,899 66,332 3,684 70,016 20,883 4,177 16,706 20,390 0.572 11,663
5 97,858 69,649 3,684 73,333 24,525 4,905 19,620 23,304 0.497 11,582
6 108,841 73,131 3,684 76,815 32,026 6,405 25,621 29,305 0.432 12,660
7 120,051 76,787 3,684 80,472 39,580 7,916 31,664 35,348 0.376 13,291
8 132,018 80,627 3,684 84,311 47,706 9,541 38,165 41,849 0.327 13,685
9 145,867 84,658 3,684 88,342 57,524 11,505 46,019 49,704 0.284 14,116
10 160,878 88,891 3,684 92,575 68,302 13,660 54,642 58,326 0.247 14,407
11 177,137 93,336 3,684 97,020 80,117 16,023 64,094 67,778 0.215 14,572
12 194,738 98,002 3,684 101,687 93,051 18,610 74,441 78,125 0.187 14,609
13 213,780 102,903 3,684 106,587 107,193 21,439 85,755 89,439 0.163 14,579
14 234,370 108,048 3,684 111,732 122,638 24,528 98,110 101,794 0.141 14,353
15 256,620 113,450 3,684 117,134 139,485 27,897 111,588 115,273 0.123 14,179
NPV 141,840
IRR 20.6%
Accept the project because IRR is more than hurdle rate
PI 2.57
Discounted
ARR
0.24
B / C ratio 3.57
Case 3 : Sensitivity analysis when OC increases by 10%
Year Total Revenue
New
Operation
Cost
Profit before
tax
Tax 20%
Profit after
tax
Net
returns
PV@15% NR@15%
0 0 55,264 1 -55,264
1 79,600 63,030 3,684 66,714 12,886 2,577 10,309 13,993 0.87 12,174
2 86,447 66,182 3,684 69,866 16,581 3,316 13,265 16,949 0.756 12,814
3 93,575 69,491 3,684 73,175 20,401 4,080 16,321 20,005 0.658 13,163
4 100,999 72,965 3,684 76,649 24,349 4,870 19,479 23,164 0.572 13,250
5 108,731 76,613 3,684 80,298 28,433 5,687 22,747 26,431 0.497 13,136
6 120,935 80,444 3,684 84,128 36,807 7,361 29,445 33,130 0.432 14,312
7 133,390 84,466 3,684 88,150 45,240 9,048 36,192 39,876 0.376 14,993
8 146,686 88,690 3,684 92,374 54,312 10,862 43,450 47,134 0.327 15,413
9 162,074 93,124 3,684 96,808 65,266 13,053 52,213 55,897 0.284 15,875
10 178,753 97,780 3,684 101,464 77,288 15,458 61,831 65,515 0.247 16,182
11 196,819 102,669 3,684 106,353 90,465 18,093 72,372 76,057 0.215 16,352
12 216,376 107,803 3,684 111,487 104,889 20,978 83,911 87,595 0.187 16,380
13 237,534 113,193 3,684 116,877 120,656 24,131 96,525 100,209 0.163 16,334
14 260,411 118,852 3,684 122,537 137,874 27,575 110,299 113,983 0.141 16,072
15 285,133 124,795 3,684 128,479 156,654 31,331 125,323 129,007 0.123 15,868
NPV 167,054
IRR 23.7%
Accept the project because IRR is bigger than hurdle rate
PI 3.02
Discounted
ARR
0.27
B / C ratio 4.02

Case 4 : Sensitivity analysis when TR decrease by 10% and OC increases by 10%
Year
New Total
Revenue
New
Operation
Cost
Profit before
tax
Tax 20%
Profit after
tax
Net
returns
PV@15% NR@15%
0 0 55,264 1 -55,264
1 71,640 63,030 3,684 66,714 4,926 985 3,941 7,625 0.87 6,634
2 77,802 66,182 3,684 69,866 7,937 1,587 6,349 10,034 0.756 7,585
3 84,218 69,491 3,684 73,175 11,043 2,209 8,834 12,519 0.658 8,237
4 90,899 72,965 3,684 76,649 14,249 2,850 11,399 15,084 0.572 8,628
5 97,858 76,613 3,684 80,298 17,560 3,512 14,048 17,732 0.497 8,813
6 108,841 80,444 3,684 84,128 24,713 4,943 19,771 23,455 0.432 10,132
7 120,051 84,466 3,684 88,150 31,901 6,380 25,521 29,205 0.376 10,981
8 132,018 88,690 3,684 92,374 39,644 7,929 31,715 35,399 0.327 11,576
9 145,867 93,124 3,684 96,808 49,058 9,812 39,247 42,931 0.284 12,192
10 160,878 97,780 3,684 101,464 59,413 11,883 47,530 51,215 0.247 12,650
11 177,137 102,669 3,684 106,353 70,784 14,157 56,627 60,311 0.215 12,967
12 194,738 107,803 3,684 111,487 83,251 16,650 66,601 70,285 0.187 13,143
13 213,780 113,193 3,684 116,877 96,903 19,381 77,523 81,207 0.163 13,237
14 234,370 118,852 3,684 122,537 111,833 22,367 89,466 93,151 0.141 13,134
15 256,620 124,795 3,684 128,479 128,140 25,628 102,512 106,197 0.123 13,062
NPV 107,708
IRR 15.2%
Reject the project because IRR is less than hurdle rate
PI 1.95
Discounted
ARR
0.20
B / C ratio 2.95
Case 5 :Sensitivity analysis when discount rate increases to 20%
Year Total Revenue
Operation
Cost
Profit before
tax
Tax 20%
Profit after
tax
Net
returns
PV@20% NR@20%
0 0 55,264 -55,264 1 -55,264
1 79,600 57,300 3,684 60,984 18,616 3,723 14,893 18,577 0.833 15,475
2 86,447 60,165 3,684 63,849 22,598 4,520 18,078 21,763 0.694 15,103
3 93,575 63,173 3,684 66,858 26,718 5,344 21,374 25,059 0.579 14,509
4 100,999 66,332 3,684 70,016 30,982 6,196 24,786 28,470 0.482 13,723
5 108,731 69,649 3,684 73,333 35,398 7,080 28,318 32,003 0.402 12,865
6 120,935 73,131 3,684 76,815 44,120 8,824 35,296 38,980 0.335 13,058
7 133,390 76,787 3,684 80,472 52,919 10,584 42,335 46,019 0.279 12,839
8 146,686 80,627 3,684 84,311 62,375 12,475 49,900 53,584 0.233 12,485
9 162,074 84,658 3,684 88,342 73,732 14,746 58,985 62,670 0.194 12,158
10 178,753 88,891 3,684 92,575 86,177 17,235 68,942 72,626 0.162 11,765
11 196,819 93,336 3,684 97,020 99,799 19,960 79,839 83,523 0.135 11,276
12 216,376 98,002 3,684 101,687 114,689 22,938 91,751 95,435 0.112 10,689
13 237,534 102,903 3,684 106,587 130,947 26,189 104,757 108,442 0.093 10,085
14 260,411 108,048 3,684 111,732 148,679 29,736 118,943 122,627 0.078 9,565
15 285,133 113,450 3,684 117,134 167,999 33,600 134,399 138,083 0.065 8,975
NPV 129,306
IRR 24.0%
PI 2.34
Accept the project because IRR is more than hurdle rate
Discounted
ARR
0.22
B / C ratio 3.34

Case 6 : Sensitivity when tax rate 30% and discount rate 15%
Year Total Revenue
Operation
Cost
Profit before
tax
Tax 30% Profit after tax
Net
returns
PV@15% NR@15%
0 0 55,264 -55,264 1 -55,264
1 79,600 57,300 3,684 60,984 18,616 5,585 13,031 16,715 0.87 14,542
2 86,447 60,165 3,684 63,849 22,598 6,779 15,819 19,503 0.756 14,744
3 93,575 63,173 3,684 66,858 26,718 8,015 18,703 22,387 0.658 14,731
4 100,999 66,332 3,684 70,016 30,982 9,295 21,688 25,372 0.572 14,513
5 108,731 69,649 3,684 73,333 35,398 10,619 24,779 28,463 0.497 14,146
6 120,935 73,131 3,684 76,815 44,120 13,236 30,884 34,568 0.432 14,933
7 133,390 76,787 3,684 80,472 52,919 15,876 37,043 40,727 0.376 15,313
8 146,686 80,627 3,684 84,311 62,375 18,713 43,663 47,347 0.327 15,482
9 162,074 84,658 3,684 88,342 73,732 22,119 51,612 55,296 0.284 15,704
10 178,753 88,891 3,684 92,575 86,177 25,853 60,324 64,008 0.247 15,810
11 196,819 93,336 3,684 97,020 99,799 29,940 69,859 73,544 0.215 15,812
12 216,376 98,002 3,684 101,687 114,689 34,407 80,282 83,967 0.187 15,702
13 237,534 102,903 3,684 106,587 130,947 39,284 91,663 95,347 0.163 15,542
14 260,411 108,048 3,684 111,732 148,679 44,604 104,075 107,759 0.141 15,194
15 285,133 113,450 3,684 117,134 167,999 50,400 117,599 121,283 0.123 14,918
NPV 171,822
IRR 26.0%
PI 3.11
Discounted
ARR
0.27
B / C ratio 4.11
Case 7 : Sensitivity when tax rate 20% , discount rate 15% and project life span 10 years
Year Total Revenue
Operation
Cost
Profit before
tax
Tax 20%
Profit after
tax
Net
returns
PV@15% NR@15%
0 0 55,264 -55,264 1 -55,264
1 79,600 57,300 3,684 60,984 18,616 3,723 14,893 18,577 0.87 16,162
2 86,447 60,165 3,684 63,849 22,598 4,520 18,078 21,763 0.756 16,452
3 93,575 63,173 3,684 66,858 26,718 5,344 21,374 25,059 0.658 16,489
4 100,999 66,332 3,684 70,016 30,982 6,196 24,786 28,470 0.572 16,285
5 108,731 69,649 3,684 73,333 35,398 7,080 28,318 32,003 0.497 15,905
6 120,935 73,131 3,684 76,815 44,120 8,824 35,296 38,980 0.432 16,839
7 133,390 76,787 3,684 80,472 52,919 10,584 42,335 46,019 0.376 17,303
8 146,686 80,627 3,684 84,311 62,375 12,475 49,900 53,584 0.327 17,522
9 162,074 84,658 3,684 88,342 73,732 14,746 58,985 62,670 0.284 17,798
10 178,753 88,891 3,684 92,575 86,177 17,235 68,942 72,626 0.247 17,939
NPV 113,431
IRR 27.2%
PI 2.05
ARR 0.20
B / C ratio 2.05

Case 8: If the taxes decreased by 10%
Year
Total
Revenue
Operation
Cost
Profit before
tax
Tax 10%
Profit after
tax
Net returns
= profit afetr
taxes +
Depreciation
PV@15%
Actual
NR@15%
0 0 55,264 -55,264 1 -55,264
1 79,600 57,300 3,684 60,984 18,616 1,862 16,754 20,438
0.87
17,781
2 86,447 60,165 3,684 63,849 22,598 2,260 20,338 24,022 0.756
18,161
3 93,575 63,173 3,684 66,858 26,718 2,672 24,046 27,730
0.658
18,247
4 100,999 66,332 3,684 70,016 30,982 3,098 27,884 31,568
0.572
18,057
5 108,731 69,649 3,684 73,333 35,398 3,540 31,858 35,542
0.497
17,665
6 120,935 73,131 3,684 76,815 44,120 4,412 39,708 43,392
0.432
18,745
7 133,390 76,787 3,684 80,472 52,919 5,292 47,627 51,311 0.376
19,293
8 146,686 80,627 3,684 84,311 62,375 6,238 56,138 59,822
0.327
19,562
9 162,074 84,658 3,684 88,342 73,732 7,373 66,358 70,043
0.284
19,892
10 178,753 88,891 3,684 92,575 86,177 8,618 77,560 81,244
0.247
20,067
11 196,819 93,336 3,684 97,020 99,799 9,980 89,819 93,503 0.215
20,103
12 216,376 98,002 3,684 101,687 114,689 11,469 103,220 106,904
0.187
19,991
13 237,534 102,903 3,684 106,587 130,947 13,095 117,852 121,536
0.163
19,810
14 260,411 108,048 3,684 111,732 148,679 14,868 133,811 137,495
0.141
19,387
15 285,133 113,450 3,684 117,134 167,999 16,800 151,199 154,883
0.123
19,051
NPV
230,548
IRR
32.7%
Accept the projet because IRR is bigger than hurdle rate
PI
4.17
Discounted
ARR
1.03

Case 9 : If the discount rate increased by 10%
Year
Total
Revenue
Operation
Cost
Profit before
tax
Tax 20%
Profit after
tax
Net returns =
profit afetr taxes +
Depreciation
PV@
%
Actual
NR@20%
0 0 55,264 -55,264 1 -55,264
1 79,600 57,300 3,684 60,984 18,616 3,723 14,893 18,577 0.87
16,323
2 86,447 60,165 3,684 63,849 22,598 4,520 18,078 21,763 0.756
16,452
3 93,575 63,173 3,684 66,858 26,718 5,344 21,374 25,059 0.658
16,489
4 100,999 66,332 3,684 70,016 30,982 6,196 24,786 28,470 0.572
16,285
5 108,731 69,649 3,684 73,333 35,398 7,080 28,318 32,003 0.497
15,905
6 120,935 73,131 3,684 76,815 44,120 8,824 35,296 38,980 0.432
16,839
7 133,390 76,787 3,684 80,472 52,919 10,584 42,335 46,019 0.376
17,303
8 146,686 80,627 3,684 84,311 62,375 12,475 49,900 53,584 0.327
17,522
9 162,074 84,658 3,684 88,342 73,732 14,746 58,985 62,670 0.284
17,798
10 178,753 88,891 3,684 92,575 86,177 17,235 68,942 72,626 0.247
17,939
11 196,819 93,336 3,684 97,020 99,799 19,960 79,839 83,523 0.215
17,958
12 216,376 98,002 3,684 101,687 114,689 22,938 91,751 95,435 0.187
17,846
13 237,534 102,903 3,684 106,587 130,947 26,189 104,757 108,442 0.163
17,676
14 260,411 108,048 3,684 111,732 148,679 29,736 118,943 122,627 0.141
17,290
15 285,133 113,450 3,684 117,134 167,999 33,600 134,399 138,083 0.123
16,984
NPV 201,347
IRR 29.4%
Discounted ARR 0.93

Case 10: If the quantity sold decreased by 10%
Year
Total
Revenue
Operation
Cost
Profit before
tax
Tax 20%
Profit
after tax
Net returns
= profit after
taxes +
Depreciation
PV@15%
Actual
NR@15%
0 0 55,264 -55,264 1 -55,264
1 78,812 57,300 3,684 60,984 17,828 3,566 14,262 17,946 0.87 15,613
2 85,591 60,165 3,684 63,849 21,742 4,348 17,394 21,078 0.756 15,935
3 92,649 63,173 3,684 66,858 25,791 5,158 20,633 24,317 0.658 16,001
4 99,999 66,332 3,684 70,016 29,982 5,996 23,986 27,670 0.572 15,827
5 107,654 69,649 3,684 73,333 34,321 6,864 27,457 31,141 0.497 15,477
6 119,738 73,131 3,684 76,815 42,922 8,584 34,338 38,022 0.432 16,426
7 132,070 76,787 3,684 80,472 51,598 10,320 41,278 44,963 0.376 16,906
8 145,234 80,627 3,684 84,311 60,923 12,185 48,738 52,422 0.327 17,142
9 161,407 84,658 3,684 88,342 73,064 14,613 58,451 62,136 0.284 17,647
10 176,983 88,891 3,684 92,575 84,408 16,882 67,526 71,210 0.247 17,589
11 194,870 93,336 3,684 97,020 97,850 19,570 78,280 81,965 0.215 17,622
12 214,233 98,002 3,684 101,687 112,547 22,509 90,037 93,722 0.187 17,526
13 235,182 102,903 3,684 106,587 128,595 25,719 102,876 106,560 0.163 17,369
14 257,832 108,048 3,684 111,732 146,100 29,220 116,880 120,565 0.141 17,000
15 282,310 113,450 3,684 117,134 165,176 33,035 132,141 135,825 0.123 16,706
NPV 195,522
IRR 28.5%
Discounted ARR 0.91

Case 11 : If the price per unit decreased by 10%
Year
Total
Revenue
Operation
Cost
Profit before
tax
Tax 20%
Profit
after tax
Net returns
= profit afetr
taxes +
Depreciation
PV@15%
Actual
NR@15%
0 0 55,264 -55,264 1 -55,264
1 79,010 57,300 3,684 60,984 18,026 3,605 14,421 18,105 0.87
15,751
2 86,447 60,165 3,684 63,849 22,598 4,520 18,078 21,763 0.756
16,452
3 93,575 63,173 3,684 66,858 26,718 5,344 21,374 25,059 0.658
16,489
4 100,999 66,332 3,684 70,016 30,982 6,196 24,786 28,470 0.572
16,285
5 108,731 69,649 3,684 73,333 35,398 7,080 28,318 32,003 0.497
15,905
6 120,730 73,131 3,684 76,815 43,915 8,783 35,132 38,816 0.432
16,769
7 133,168 76,787 3,684 80,472 52,697 10,539 42,157 45,842 0.376
17,236
8 146,375 80,627 3,684 84,311 62,064 12,413 49,652 53,336 0.327
17,441
9 161,727 84,658 3,684 88,342 73,385 14,677 58,708 62,392 0.284
17,719
10 178,366 88,891 3,684 92,575 85,791 17,158 68,632 72,317 0.247
17,862
11 196,389 93,336 3,684 97,020 99,369 19,874 79,495 83,179 0.215
17,884
12 215,898 98,002 3,684 101,687 114,211 22,842 91,369 95,053 0.187
17,775
13 237,004 102,903 3,684 106,587 130,417 26,083 104,333 108,018 0.163
17,607
14 259,824 108,048 3,684 111,732 148,092 29,618 118,474 122,158 0.141
17,224
15 284,485 113,450 3,684 117,134 167,350 33,470 133,880 137,565 0.123
16,920
NPV 200,056
IRR 29.2%
Discounted ARR 0.92

Sources of Funding
ThefinancingstructureoftheprojectconsistsofEquity.Theinvestmentcostofthis project is estimated at (55,264) JD, where 100%
oftheprojectwillbefinancedthroughEquity.Thefollowingtable summarizesthegeneralstructureoftherequiredfinancing:
Table 27 Sources of Funding
Table (29) Balance Sheet
Table ( 28 ): Income Statement
Funding Sources Amount Percentag
e
Equity (Self Financing) 55,264 %100
Total 55,264 %100
Description Value (JD)
Assets:
Vehicles 7,000
Machinery 41,564
Furniture 1,500
Land & building 200
Total assets 50,264
Liabilities 0
Owner equity 50,264
Returned earning 0
Total liabilities & equity 50,264
Description Value ( JD)
Revenue 79,600
Less: Operating Expenses
Depreciation 3,684
Utilities expenses 8,400
Other expenses 1,000
Total expenses 13,084
Operating Income before Tax 66,516
Tax expenses 20% 13,303
Net income 53,213

Absolute Efficiency Test = Total Revenue - (Material Inputs + Depreciation ) > wages and Salaries
Chapter 7: National Feasibility study
Assessing the national feasibility study for the project will be prepared using the Value Added and Employment Effect
Testing the value added for the project using the Absolute Efficiency Test
Social Surplus = Value Added - Total Wages Accept the project if : ( Value Added > Total Wages ) OR
Social Surplus must be (+) in a normal year. In this project we assumed that year (5) is the normal year
Table ( 29) Testing the value added for the project using the Absolute Efficiency Test
Absolute Efficiency Test " Es = TR - ( MI + D ) > w
Absolute Efficiency Test is used to select the accepted projects and exclude the rejected
projects
Year
Total
Revenue
Material
Inputs
Depreciation
Value
Added =
TR - (MI +
D)
Total Wages
increases
by 7%
Social Surplus =
Value Added - Total
Wage
1 79,600 6,900 3,684 69,016 37,800 31,216
2 86,447 7,452 3,684 75,311 40,446 34,865
3 93,575 8,048 3,684 81,843 43,277 38,566
4 100,999 8,692 3,684 88,622 46,307 42,316
5 108,731 9,387 3,684 95,659 49,548 46,111
6 120,935 10,138 3,684 107,112 53,016 54,096
7 133,390 10,949 3,684 118,757 56,728 62,029
8 146,686 11,825 3,684 131,176 60,699 70,478
9 162,074 12,771 3,684 145,618 64,947 80,671
10 178,753 13,793 3,684 161,275 69,494 91,782
11 196,819 14,897 3,684 178,238 74,358 103,880
12 216,376 16,088 3,684 196,603 79,563 117,040
13 237,534 17,375 3,684 216,474 85,133 131,341
14 260,411 18,765 3,684 237,961 91,092 146,869
15 285,133 20,267 3,684 261,182 97,469 163,714
According to the results : In year (5), the ( Value Added > Total Wages ) where Social Surplus = + 46,111. So the project has positive
national impact on the community.

Testing the value added for the project using the Relative Efficiency Test in terms of initial investment
Relative Efficiency Test =
PV ( Value Added) in a normal year
PV ( Initial Investment )
The larger the ratio, the more beneficial the project is from the capital point of view, it could therefore be selected in a situation of capital
scarcity In the hypothetical example. the PV( value added ) in the normal year (5) is JD 45,633 and the total investment is 55,264.
Table ( 30 ) : Testing the value added for the project using the Relative Efficiency Test in terms of initial investment
Year
Total
Revenue
Material
Inputs
Depreciation
Value
Added =
TR - (MI +
D)
Total
Wages
increases
by 7%
Social Surplus PV@15% PV(VA) PV(Wage)
Social
Surplus
@ 15%
discount
rate
1 79,600 6,900 3,684 69,016 37,800 31,216 0.87 60,044 32,886 27,158
2 86,447 7,452 3,684 75,311 40,446 34,865 0.756 56,935 30,577 26,358
3 93,575 8,048 3,684 81,843 43,277 38,566 0.658 53,853 28,476 25,376
4 100,999 8,692 3,684 88,622 46,307 42,316 0.572 50,692 26,487 24,205
5 108,731 9,387 3,684 95,659 49,548 46,111 0.497 47,543 24,625 22,917
6 120,935 10,138 3,684 107,112 53,016 54,096 0.432 46,273 22,903 23,369
7 133,390 10,949 3,684 118,757 56,728 62,029 0.376 44,652 21,330 23,323
8 146,686 11,825 3,684 131,176 60,699 70,478 0.327 42,895 19,848 23,046
9 162,074 12,771 3,684 145,618 64,947 80,671 0.284 41,356 18,445 22,911
10 178,753 13,793 3,684 161,275 69,494 91,782 0.247 39,835 17,165 22,670
11 196,819 14,897 3,684 178,238 74,358 103,880 0.215 38,321 15,987 22,334
12 216,376 16,088 3,684 196,603 79,563 117,040 0.187 36,765 14,878 21,886
13 237,534 17,375 3,684 216,474 85,133 131,341 0.163 35,285 13,877 21,409
14 260,411 18,765 3,684 237,961 91,092 146,869 0.141 33,552 12,844 20,709
15 285,133 20,267 3,684 261,182 97,469 163,714 0.123 32,125 11,989 20,137
The relative Efficiency Test in year 5 = 22,917 / 55,264 = 0.41.
Therefore, a 1 JD of investment generates 0.41 JD of value added. This coefficient seems to be low.

Testing the value added for the project using the Relative Efficiency Test in terms of wages
Relative Efficiency Test =
PV ( Value Added) in a normal year
PV ( Wages )
The larger the ratio, the more beneficial the project is from the capital point of view, it could therefore be selected in a situation of workers
scarcity In the hypothetical example. the PV( value added ) in the normal year (5) is JD 45,633 and the gross wage is 37,800.
Table ( 31 ): Testing the value added for the project using the Relative Efficiency Test in terms of wages
Year
Total
Revenue
Material
Inputs
Depreciation
Value
Added =
TR - (MI +
D)
Total
Wages
increases
by 7%
Social Surplus PV@15% PV(VA) PV(Wage)
Social
Surplus
@ 15%
discount
rate
1 79,600 6,900 3,684 69,016 37,800 31,216 0.87 60,044 32,886 27,158
2 86,447 7,452 3,684 75,311 40,446 34,865 0.756 56,935 30,577 26,358
3 93,575 8,048 3,684 81,843 43,277 38,566 0.658 53,853 28,476 25,376
4 100,999 8,692 3,684 88,622 46,307 42,316 0.572 50,692 26,487 24,205
5 108,731 9,387 3,684 95,659 49,548 46,111 0.497 47,543 24,625 22,917
6 120,935 10,138 3,684 107,112 53,016 54,096 0.432 46,273 22,903 23,369
7 133,390 10,949 3,684 118,757 56,728 62,029 0.376 44,652 21,330 23,323
8 146,686 11,825 3,684 131,176 60,699 70,478 0.327 42,895 19,848 23,046
9 162,074 12,771 3,684 145,618 64,947 80,671 0.284 41,356 18,445 22,911
10 178,753 13,793 3,684 161,275 69,494 91,782 0.247 39,835 17,165 22,670
11 196,819 14,897 3,684 178,238 74,358 103,880 0.215 38,321 15,987 22,334
12 216,376 16,088 3,684 196,603 79,563 117,040 0.187 36,765 14,878 21,886
13 237,534 17,375 3,684 216,474 85,133 131,341 0.163 35,285 13,877 21,409
14 260,411 18,765 3,684 237,961 91,092 146,869 0.141 33,552 12,844 20,709
15 285,133 20,267 3,684 261,182 97,469 163,714 0.123 32,125 11,989 20,137
The relative Efficiency Test in year 5 = 47,625 / 24,625 = 1.93.
Thus, a 1 JD of wages, salaries and fringe benefits paid to the labor helps to generate 1.93JD of value added.

Beekeeping and Honey production- Al-musadder 71
Testing the Employment Effect of the project
Table ( 32) : Human Resources & Classifications
# Human Resources Number Classification Classification
1 Manager 1 Unskilled Admin
2 Agricultural engineer 1 Skilled Technical
3 Full time workers 3 Skilled Technical
4 Marketing officer 1 Unskilled Admin
5 Guard 1 Unskilled Admin
Total 7
The number of direct skilled workers = 4 and unskilled workers = 3
1. Direct Employment Effect for (skilled and unskilled workers) per unit of
investment:
Direct Employment Effect for (skilled and unskilled workers) per unit of investment =
Total number of workers / Initial Investment
Direct Employment Effect for the project = 7 / 55,264 = 0.127
This means that each JD 1000,000 of direct investment creates 127 direct new job
opportunities
2. Direct Employment Effect for the unskilled workers = Number of unskilled
workers / Initial Investment = 3 / 55,264 = 0.55
This means that each JD 1000,000 of direct investment create 55 direct new job
opportunities for unskilled workers
3. Direct Employment Effect for the skilled workers = Number of skilled workers /
Initial Investment = 4 / 55,264 = 0.000072
This means that each JD 1000,000 of direct investment create 72 direct new job
opportunities for skilled workers.

Conclusions
After the above analysis for the project according to different tools, we reached to the following results :
1. There is high demand for honey in the local market.
2. The indicators showed big opportunities to start up such project in the targeted area.
3. Under the normal situation, the project will generate NPV of JD 201,185 after
15 years, and IRR of 29.4% , and a profitability Index of 3.64 which are acceptable.
4. The Payback period for the project is 0.55 years, which is good.
5. If total revenue decreases by 10%, citrus paribus, the NPV will decline to JD 141,840, IRR to 20.6% , and Profitability Index to 2.57.
We accept the project in this case.
6. If operation cost per unit increases by 10%, citrus paribus, NPV will decline to JD 167,054 , IRR to 23.7% , and Profitability Index to
3.02. We accept the project in this case.
7. If total revenue decreases by 10% and operation cost increases by 10% , citrus paribus, NPV will decline to JD 1.07,708 , IRR to
15.2% , and Profitability Index to 1.95. We should reject the project in this case.
8. If discount rate increases to 20% , citrus paribus, NPV will decline to JD 129,306 , IRR to 24% , and Profitability Index to 0.22. We
still accept the project in this case.
9. If tax rate is 30% and discount rate is 15% , citrus paribus, NPV will decline to JD 171,822, IRR to 26% , and Profitability Index to
3.11. We still accept the project in this case.
10. If tax rate 20% , discount rate 15% and project life span decreased to 10years , citrus paribus, NPV will decline to JD 113,431 ,
IRR to 27.2% , and Profitability Index to 2.05. We should accept the project in this case.

11. If tax rate decreases 10%, citrus paribus, NPV will decline to JD 230,548 , IRR to 32.7% , and Profitability Index to 4.17. We should
accept the project in this case.
12. If discount rate increase by 10% citrus paribus, NPV will decline to JD 201,347 , IRR to 29.4% , and Profitability Index to 3.64. We
should accept the project in this case.
13. If unit sold decreases by 10% , citrus paribus, NPV will decline to JD 195,522 , IRR to 28.5% , and Profitability Index to 3.54. We should
accept the project in this case.
14. If price per unit decreases by 10% , citrus paribus, NPV will decline to JD 200,056 , IRR to 29.2% , and Profitability Index to 3.62. We
should accept the project in this case.
Recommendations :
According to the above results of investment criteria and different types of feasibility, we recommended to start up the project.

Annexes
Questionnaire
1-age ………………….
2-average income ………………………
3-place of residence ……………………..
4-gender
A. female( ) B. male ( )
5-The average quantity you buy annually ………………………….
6-Have you used the honey product beforehand ?
A. yes( ) B. No ( )
7- Do you think the product is of excellent quality ?
A. totally agree ( ) B. agree ( ) C. Dis agree ( ) D. totally dis agree ( )
8- Does the place affect the image of your product?
A. Very important ( ) B. important ( ) C. not important ( ) D. not very important ( )
9- Do you intend to buy a honey product again?
A. Yes ( ) B. No ( ) C. I don't know ( )
10- Do you think the price of buying half a kilo of honey is 30 shekels and 60 shekels is a suitable price?
A. Totally agree ( ) B. agree ( ) C. Dis agree ( ) D. totally dis agree ( )
11- What is the appropriate price for the honey kilo from your point of view?
A. 30 Nis ( ) B. 60 Nis ( ) C. 100 Nis or more than ( )
12- Do you prefer imported honey as an alternative?
A. Yes ( ) B. No ( ) C. I don't know ( )

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A Feasibility Study for Establishing a Beekeeping Farm and Production of Honey in Al-musadder village

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