1. 1.0. INTRODUCTION
1.1. Back ground information
Morogoro Fruit Processors (MFP) is the income generating project that will center on buying and
processing of mangoes. The main focus of the business is to make sure there is constant supply
of products originated of mangoes. But also to raise the agribusiness sector to the extent that will
be growing in order to increase standard of living. The project also aims to create enough profit
from the business of selling mangoes juices and jams, by covering all internal market and
external market. It has overseen the opportunity of East Africa federation; hence this will be one
of the targeted markets. More ever the business will be friend to the environment since people
will be growing mangoes as the business and not as subsistence as it is now days, where people
are much cutting logs for charcoal making. But also MFP will encourage social development by
employing many labors as possible including skilled and unskilled who are large in number and
faced with the problem of unemployment. It will raise the sense of development to many other
growing firms by acting as the role model to other growing firms and entrepreneur. The project
idea comes from developed countries like China and South Africa, where there is high level of
processing of different fruit including mangoes.
1.2. Purpose of the project
The main purpose is to buy mangoes produced by farmers and process them into various
products, in order to add value of the product. The project will much focus the whole sellers like
supermarket and retailers by opening the office to various centers. The project is intended to hire
many people from Morogoro region at different level like production, processing and marketing
level. There project will use the opportunity that, while a lot of fruits produced in Tanzania are
rotting and many are sold in cheap price, some of the business people are busy on importing
fruits, juice and fruit semi liquid from which juice is manufacture, leading into the stagnation of
local production (Lazaro, 2008). Therefore we noticed that there is high demand of mango
2. product in our country, hence the project will use our strength to exploit that opportunity. Then
after, it will reduce poverty to the mango producers in Morogoro region.
1.3. Objectives of the project
To generate income by producing different mangoes product like Juices and Jam
To reduce new HIV/AIDS infection by keeping people busy to work
1.4. Location of the business
The project will be located at Kihoro ward in Morogoro region. The main criterion used in sitting
the area is the easily accessibility of raw material, infrastructure services ie load and railway,
accessibility of power and presence of labor. At Kihoro ward there is accessibility of land for
building the industry. The business will further expand to other places regarding the growth of
the business.
1.5. Products of the project
Initially MFP will be producing different products of mangoes including; juice and mango Jam.
But at the second phase of the project more products from mango products will be produced. The
juice will be parked at half liter and mango jam will be filled at quarter of little bottle.
1.6. Source of fund
The initial capital of the business will be 250,000,000 from which 80% will be borrowed from
CRDB bank. This makes amount of 200,000,000 to borrow from the bank while only 50,000,000
will be from own source of fund, which makes the proportional of 20% of the all capital.
1.7. Marketing
The targeted customers of the project are retailers. But also the project will be selling the
products to the large retailers like supermarket, and others. This will make our products more
popular and known by the customer. But our product will be exported to near by country
expecting that we will produce high quality products.
3. 2.0. PROJECT ANALYSIS AND TECHNICAL ASPECT
The business will insure constant supply of raw materials by encouraging production of mangoes
though farmers organized groups. The location of the business will be at Kihoro ward at
Morogoro municipal. The area is chosen due to availability of raw materials. But also, there is
constant supply of power at the area. Since the business is expecting to cultivate its own
mangoes, and the place is full potential of fertility, hence its reasonable to allocate the business at
that place.
3.0. MARKETING ANALYSIS
3.1. Product
The main products of the projects are mango juices and mango jams. Product from that project
will be quality product that will make the product more demanded and consumed by the targeted
customer. By offering products in different size and forms will make the product to be consumed
by all level of income. The product will be kept in three sizes; small, half a little and oyne
littenteded to mler juiced while Jam will be in two sizes namely; small with 500gs and large Can
with 1kg.
3.2. Price and Pricing strategy
By considering 4ps of marketing, price is among them, thus MfP will price its product very
strategically. We will the following strategies; Value-based: Based on the buyer’s perception of
value (rather than on the costs). The buyer’s perception depends on all aspects of the product,
including non-price factors such as quality, healthfulness, and prestige, from which we believe
our product, will have great quality. Competitive; Based on prices charged by competing firms
for competing products. But also; Discount: Based on a reduction in the advertised price. A
coupon is an example of a discounted price. MMP will use all strategies in combination in order
to secure good price to the customers.
3.3. Distribution strategies
Appropriate channels will be used to distribute the product from the industry to reach the
targeted customer. This will include direct distribution through various promotions and retails
agent that will be selected by the project. But also indirect distribution will be used, such as to
reach the consumer through supplies that the project will careful select them.
3.4. Market growth
4. Based on the previous investigation done by government through the minister of business and
industry, we found that agribusiness sector is growing by 20% - 39% in the next 15 years. The
growth is favored by the following factors; Tanzanian government recognizes the necessities to
involve youth, mostly in project that are geared up towards national development. There is a
need to improve agricultural productivity throughout the economy as well as enforcing the
growth of industries in the nation.
3.5. ENVIRONMENT IMPACT ASSESSMENT
The project will conduct some environment assessment impact of the project. The project will be
friend to the environment since, will focus on environment conservation. There shall be some
social event to the people around the project so that to facilitate then to conserve the
environment. MMP will have good recycle system of waste disposal lather that disposing the
waste at the environment which may cause problem.
4.0. ECONOMIC ASPECTS
4.1. Contribution of the investment to the country
Investment to be undertaken will increase the government revenue through levy to the rate of
1,200,000 per year. But also, expecting to increase the tax as it makes the profit. But also the
country will benefit in indirect way, since the project is expecting to employ other workers that
will also paying the taxes, hence increasing national revenue.
4.2. Employment creation
The project will create to more than 20 workers in which only 5 are skilled, and others are
unskilled. This will center from the production, processing and marketing of the project. Hence
the project will employ other many people indirectly, like farmers who will be assured their
market of the product.
5.0 FINANCIAL ANALYSIS
The capital needed by the business is TSH 250,000,000. This amount will be distributed as
capital expenditure at time zero by investing TSH 115,000,000, when the project start to be
implemented then in first year of production TSH 214,400,000 will be used to cover the
recurring cost until the project is self-sustaining. As the time going the project will generate its
own money therefore those expenses arise will be paid by the project itself.
5. Assumption
Number of litters of juice produced by in a year will be 48,000 and mango Jam will be
60,000liter per year
The total number of project will take 15 years
One liter will be Juice will be sold at 1,500, while that of jam will be 1,200
The project will have full production of 8 month of the year to assure constant supply of
the raw materials
Sales revenue will increase at 3% of previous year sales revenue annually in year 2 up to
year 5 then will increase by 2% in remaining year
Variable cost in recurring expenditure will increase at 8% of its previous year cost from
year 2 up year 10, and then from year 3 up the last year of the project, variable cost will
increase by average of 3% of its previous year cost.
Depreciation cost @5% on building and depreciation cost@10% on equipment.
Contingency amount is TAS 17,000,000 in all year
6. 5.1. CAPITAL INVESTMENT OUTLAY AND FINANC
5.2. OPERATING COSTS
The project operation cost will be TAS 99,400,000 for the first year which will be used to
purchase, raw mangoes from farmers, chemical and other ingredients, transport. But also other
charges incurred by the business like electricity, insurance, tax, administration.
5.3. SALES, REVENUE AND CHARGE
Annual revenue of the project will be TAS 144,000,000 for the first year, expecting an increase
of 5% for the next five years and 3%. The expected selling price will be 1500 for juice and 1300
for mango Jam, from where the total production per year will be 6000 for mango juice, and 7500
for mango Jam.
7. 48000 × 1500 = 72,000,000
60000 × 1200 = 72,000,000
Hence this marks the total of 144,000,000 for the first year,
Assumption on sales revenue:
Sales will increase at 8% of previous year sales revenue annually in year 2 up to year 10 then
will increase by 2% in remaining year
ESTIMATED SALES
SL. NO PARTICULA PER DAY
PER
MOUNTH PER YEAR 1
1
MANGO
JUICE 200 6,000 48,000
2 MANGOJAM 250 7,500 60,000
REVENUE ESTIMATION
SL. NO PARTICULA PER DAY
PER
MOUNTH PER YAER
1
MANGOJUICE
@1300/LITRE 300,000 9,000,000 72,000,000
2 MANGOJAM 300,000 9,000,000 72,000,000
TOTAL 144,000,000
5.4. CASH FLOW ANALYSIS
The initial capital and the projected cash flow will be displayed in the following table. The
analysis indicates that the business will meet its entire obligation with a confortable balance.
(see the attached Graph to next page)
8. 6.0. METHODOLOGY USED TO EVALUATE THE PROJECT WORTHNESS
6.1. NET PRESENT VALUE AND BENEFIT COST RATIO (NPV)
The NPV of the project is defined as the value obtained by discounting separately for each year;
the cash net flow accruing throughout the life of the project at a fixed predetermined interest rate.
Where
Cft = the cash flow at time t
r = the opportunity cost of capital
By considering the below graph we noticed that
NPV = Discounted present value – Discounted present cost
NPV = 938,045,036 - 312,894,016
NPV = 617,151,020
This project is feasible since the NPV is positive, meaning that, it will earn the profit of that
amount.
6.2. BENEFIT COST RATION (BCR)
BCR =∑discounted present benefit = 938,045,036 =2.998 ~~3.
∑discounted present cost 312,894,016
Hence the project is feasible for implementation since the BRC is greater than one.
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NPV
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11
10. 6.3. INTERNALRATE OF RETURN (IRR)
The IRR is the discount rate at which the present value cash inflows are equal to the present
value cash outflows and NPV is zero. It indicates the actual profit rate of the total investment
outlay. It also indicates the maximum loan interest rate that could be paid without creating any
losses for the project
IRR= R1 + (R2-R1)(NPV1/NPV1 +NPV2)
SL. NO NET BENEFIT
DISCOUNT AT
15%
DISCOUNT AT
50% NET DISCOUNT NET DISCOUNT
BENEFIT AT 15% BENEFIT AT 50%
(250,000,000) 1.0000 1.0000 (250,000,000) (250,000,000)
1 (70,400,000) 0.8696 0.6667 (61,217,391) (46,933,333)
2 54,672,000 0.7561 0.4444 41,339,887 24,298,667
3 67,113,600 0.6575 0.2963 44,128,281 19,885,511
4 80,550,528 0.5718 0.1975 46,055,026 15,911,215
5 95,062,410 0.4972 0.1317 47,262,819 12,518,507
6 110,735,243 0.4323 0.0878 47,873,901 9,721,613
7 126,923,423 0.3759 0.0585 47,715,216 7,428,531
8 146,695,944 0.3269 0.0390 47,955,164 5,723,847
9 167,901,095 0.2843 0.0260 47,727,970 4,367,493
10 185,642,168 0.2472 0.0173 45,887,905 3,219,319
11 212,431,426 0.2149 0.0116 45,660,695 2,455,924
12 222,221,819 0.1869 0.0077 41,534,847 1,712,741
13 231,957,931 0.1625 0.0051 37,699,649 1,191,853
14 241,651,182 0.1413 0.0034 34,152,237 827,773
15 258,854,889 0.1229 0.0023 31,811,838 591,136
TOTAL 295,588,044 (187,079,203)
11. Low discount rate = 15%
High discount rate (R2) = 50%
NPV at 15% = 295,588,044
NPV at 50% = (187,079,203)
IRR = R1 + (R2-R1) (NPV1/NPV1 +NPV2)
IRR = 15% + (50% - 15%) (295,588,044)
(295,588,044 + 295,588,044)
IRR = 36.43%
Therefore the project is feasible at internal rate of return of 36.43%
7.0 Organization structure
GENERAL
MANAGER
MARKETING
MANGER
PRODUCTION
MANAGER
OPERATIONALMANAGER
STORE
KEEPER
SECURITY GUARD
12. 8.0. SENSITIVITYANALYSIS
To analyze the sensitivity of the project the method of finding safety margin and switch value
will be applied by using the operating cost. Aim is to examine the effect on NPV at 20%
discount rate due to increase in operating cost by 15%.
YEAR COST BENEFIT DECREASING
INCREASING
OF DISCOUNT DISCOUNTED DISCOUNTED
BENEFIT BY
15%
COST BY
15%
FACTOR AT
20%
NEW
BENEFIT NEW COST
- - - - 1.0000 - -
1 214,400,000 144,000,000 122,400,000 246,560,000 0.8333 102,000,000 205,466,667
2 100,848,000 155,520,000 132,192,000 115,975,200 0.7561 99,956,144 87,693,913
3 100,848,000 167,961,600 142,767,360 115,975,200 0.6575 93,871,857 76,255,577
4 100,848,000 181,398,528 154,188,749 115,975,200 0.5718 88,157,918 66,309,197
5 100,848,000 195,910,410 166,523,849 115,975,200 0.4972 82,791,783 57,660,171
6 100,848,000 211,583,243 179,845,757 115,975,200 0.4323 77,752,284 50,139,279
7 101,586,480 228,509,903 194,233,417 116,824,452 0.3759 73,019,536 43,918,639
8 100,094,750 246,790,695 209,772,090 115,108,963 0.3269 68,574,868 37,629,324
9 98,632,855 266,533,950 226,553,858 113,427,784 0.2843 64,400,746 32,243,255
10 102,214,498 287,856,666 244,678,166 117,546,673 0.2472 60,480,701 29,055,740
11 98,453,773 310,885,200 264,252,420 113,221,839 0.2149 56,799,267 24,336,267
12 94,881,085 317,102,904 269,537,468 109,113,247 0.1869 50,378,480 20,394,046
13 91,487,030 317,102,904 269,537,468 105,210,085 0.1625 43,807,374 17,099,580
14 88,262,679 329,913,861 280,426,782 101,502,081 0.1413 39,632,341 14,345,153
15 97,452,081 356,306,970 302,860,924 112,069,893 0.1229 37,219,937 13,772,772
TOTAL 1,038,843,235 776,319,580
13. New BCR = (1,038,843,235/776,319,580)
BCR = 1.34
NEW NPV AT 15% CHANGE = 1,038,843,235 - 776,319,580 = 262,523,655
Percentage change in operation cost=0.15
New NPV= 262,523,655
Original NPV= 617,151,020
Percentage of change in NPV= (262,523,655/617,151,020)*100
Percentage change in NPV= 42.54%
Safetymargin= (%change in operation cost/%change in NPV)*100
. (0.15/0.4254)*100 = 13.87% ≈ 35.26%
SWITCH VALUE = (original value - (original value*safety margin))
617,151,020 - (617,151,020 × 35.26%)
617,151,020 – 217,613,195 = 399,537,825.
Concluding to sensitivity analysis
An increase of 15% in operation cost and decrease of benefit by 15%, will reduce NPV (at
discount of 20%) by 42.54%. To decrease the NPV to zero operating cost will have to increase
only by 35.26%. And in order to break even the value of NPV must be 399,537,825
9. CONCLUSIONS
Project appraisal shows that the project is worth to implement. Since it have positive NPV,
BRC>1, and IRR which constitute to zero NPV. Therefore this firm will conduct monitoring and
evaluation periodically, to make sure that the project is operating as planned and archives its
desirable goal and objectives.
