Feasibility Study On

National Coal Center

(Coal Heater Assembling Unit)

SUBMITTED TO:

MA’AM Sobia

SUBMITTED BY:

Maryam Abdul Sattar & Faiqa Momin

Roll Nos:

091631029 & 091631011

Department:

Management Sciences

Dated:- .11.2019

Page 1 of 12
 TABLE OF CONTENTS
Page
Introduction 3
Vision Statement 3
Mission statement 3
Organizational Chart 4
Brief Description of Project & Product 5
Technology 5
Location 5
Product 5
Project process flow 6
Production Cost Summery 6
Project Economics 6
Tables -1 (Project Economics) 6
Tables -2 (Project Financing) 7
Tables -3 (Capital Investment for Project) 7
Tables -4 (Coal Heater capacity-wise estimated cost) 7
Tables -5(Coal Heater Other Costs) 8
Tables -6 (Human Resource Cost) 8
Other Assumptions relating to cost 8
Budgeted cost of goods sold statement (for 08 years) 9
Budgeted Income statement (for 08 years) 10
Budgeted balance sheet (for 08 years) 11
Notes to the budgeted CGS, Income Statement and Balance Sheet 12

Page 2 of 12
Introduction

Coal Heater s used in the controlled sheds of poultry industry and is manufactured at all
major cities of Pakistan particularly at Lahore, Faisalabad, Multan, Gujranwala, Karachi,
Hyderabad, Sukkur, Peshawar and Quetta. There are different capacities of coal heaters i.e for
the controlled sheds (the poultry farms) having area of 150sq.ft, 250 sqr. Ft and 450 square feet.
Total cost estimates for the coal heater with fixed investment for 150sq.ft, 250 sqr. Ft and 450
square feet is of Rs 200,000, 350,000 & 450,000 respectively.

The most critical considerations for success of the project are:

1. Quality of products
2. Seasonality of demands

Vision Statement

To be known as a best coal heater manufacturing unit in the region. Dedication to quality is a
way of life at our unit, so much so that it goes far beyond rhetorical slogans. It is the objective of
National Coal Center to produce and provide products and services of the highest quality. In its
activities the unit will pursue goals aimed at the achievement of quality excellence and succeed
as a profitable business. These results will be derived from the dedicated efforts of each
employee in conjunction with supportive participation from management at all levels of the
Company. To play its role in the economic development of the country and to enhance quality of
life of its people.

Mission Statement

Our mission is to provide the highest quality coal heaters as it will boost the poultry
industry and will save the poultry in its early age from the disaster of the climate changes. We
want to be the recognized industry leader in quality and service, providing more than expected
for our customers, employees and stakeholders. We will accomplish this by maintaining a
tradition of pride in our products, growth through innovation, integrity in the management of our
business, commitment to Team Management and the Quality Improvement Process.

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 ORGANIZATIONAL CHART

Stretegic Business
Technical Staff
Unit Manager

Owner

Labour
Supervisor

Page 4 of 12
Brief Description of Project & Product

Coal heater mainly consist of four channel frames, four MS angles of different lengths,
nine SS Sheets, Twenty SS Pipes in 150 square feet, forty SS pipes in 250 square feet, sixty SS
pipes in 450 square feet, one 4 hp, 7 hp and 10hp electric motor respectively, one small electric
motor of 0.50 hp, 1.0 hp and 1.50hp respectively, one electric penal and different wires. The
electric motor provides hot wind to the shed. There are many ways to commence a full
production unit which needs comparatively much higher fixed investment. The best and the
simple way is to purchase parts/accessories, assemble and distribute. This would likely decrease
the chance of losses in case of exit and will provide a safe exit from the business.

Coal heaters assembling unit business means setting up a workshop/factory where

assembling of the said item will take place and setting of an office area for carrying out general
administrative and marketing the work. The business facility will maintain inventory consisting
of accessories of the coal heaters. The store will be divided into two parts: one side will be used
to store accessories and raw materials while the other part for finished/completed products.

Technology

This proposed unit would require tools and equipment for assembling, writing and quality
assurance/testing departments. List of tools and equipment is given in machinery and equipment
section.

Location

The business will be started at Lahore and then steadily will be spread as per business
conditions.

Product

The unit will produce/assemble Coal Hears for which parts and accessories are readily
and easily available in the market. However, in the future there will also be a facility of repairing
of coal heaters.

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Production Process Flow

Basically, this will be an assembling unit which will purchase parts and accessories from
market vendors, assemble it and sell with a new brand name. Process flow can be divided into
following steps.

1. Acquiring a building for workshop and a building for office

2. Buying of raw material
3. Assembling, manufacturing and testing of coal heaters
4. Storage
5. Selling/distribution

Production Cost Summary

A detailed financial model has been developed to analyze the commercial viability of this
project under the Prime Minister’s “Kamyab Jawan Scheme”. Various cost and revenue related
assumptions alongwith tentative results and analysis are outlined in this section.

The projected/budgeted Income Statement, Cash Flow Statement and Balance Sheet are
attached in the report.

Project Economics

The following table shows internal rates of return and payback period for Coal Heaters
assembling unit.

Table-1 (Project Economics)

Description Details/Rates
IRR 71.38%
NPV 2313663
Payback period (In years) 07 years

Page 6 of 12
 Table-2 (Project Financing)

Sr.No. Description Cost (Rs)

1 Total Equity (In first year) 2,500,000
2 Tenure of Loan 07 years
3 Repayment per year 250,000
4 Mark-up 7%

Table-3 (Capital Investment for the Project)

Capital Investment Cost (Rs)

Tools and Equipment acquisition 50,000
Renovation Cost 50,000
Workshop/office furniture 50,000
Motorcycle for local business activities 30,000
Preliminary Expenses 40,000
Total Working capital 2200000
Total project cost (in first year) 2,420,000

Table-4 (Coal Heater Cost (estimated and capacity-wise)

Coal Heater Capacity Cost (Rs)

150 sqr. feet 152,000
250 sqr. feet 283,000
450 sqr. feet 379,000

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 Table-5 (Coal Heater other Cost)

Coal Heater Capacity Cost (Rs)

Rent of building 15,000
Electricity 18,000
Transportation Charges 10,000
Labor wages 75,000
Furniture (one-time expense) 95,000
Total 213,000

Table-6 (Human Resource Cost)

Coal Heater Capacity Cost (Rs)

Strategic Business Unit
25,000
manager/owner
Supervisor 20,000
Technical Staff (02 members) 35,000
Loader 10,000
Total 90,000

Other assumptions relating to cost

1. Considering the industry norms, it has been assumed that 70% sales will be on cash basis
and remaining 30% sales will be on credit basis to local distributors. A collection period
of 30 days has been assumed.
2. A provision for bad debts has been assumed equivalent to 2% of the annual credit sales
3. Keeping in view the poultry sector, some increase in cost, sales and other income
statement factors have been worked out in the budgeted income statement.
4. The business is assumed to be run as a sole proprietorship, therefore, tax rates
applicability on the income of a non-salaried taxpayer are used for income tax
calculations of the business.

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 Budgeted Cost of goods Sold Statement (for 08 years)

Projected Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8

Income
Statement
Opening. - 350,000 385,000 423,500 465,850 512,435 563,679 620,046
Inventory
+ 1,780,00 1,958,00 2,153,80 2,369,18 2,606,09 2,866,70 3,153,37 3,468,71
Purchase 0 0 0 0 8 8 9 6
- Ending 350,000 385,000 423,500 465,850 512,435 563,679 620,046 682,051
Inventory
Cost of 1,430,00
Goods 0 1,923,00 2,115,30 2,326,83 2,559,51 2,815,46 3,097,01 3,406,71
Sold 0 0 0 3 4 1 1

Note:- Ten percent growth per year in each item has been assumed

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 Budgeted Income Statement (for 08 years)

Heads Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8

Revenue 2,200,000 2,530,000 3,036,000 3,703,920 4,592,861 5,787,005 7,407,366 9,629,576
CGS 1,430,000 1,923,000 2,115,300 2,326,830 2,559,513 2,815,464 3,097,011 3,406,711
Gross Profit 770,000 607,000 920,700 1,377,090 2,033,348 2,971,540 4,310,355 6,222,864
Operating
Exp
Labour 75,000 75,000 75,000 82,500 82,500 82,500 90,750 90,750
Building Rent 15,000 15,000 15,000 16,500 16,500 16,500 18,150 18,150
Utilities Bills 18,000 18,000 18,000 19,800 19,800 19,800 21,780 21,780
Salaries 83,000 83,000 83,000 91,300 91,300 91,300 100,430 100,430
Depriciation
(Equipment) 25,000 25,000 25,000 27,500 27,500 27,500 30,250 30,250
Selling and
Adv.
Expenses 35,000 38,500 42,350 46,585 46,585 46,585 51,244 51,244
Misc Exp 15,000 16,500 18,150 19,965 19,965 19,965 21,962 21,962
Total
Operative
Expenses 266,000 271,000 276,500 304,150 304,150 304,150 334,565 334,565
Profit Before
Tax 504,000 336,000 644,200 1,072,940 1,729,198 2,667,390 3,975,790 5,888,299
Taxation 85,680 57,120 109,514 182,400 293,964 453,456 675,884 1,001,011
Profit after
Taxation 418,320 278,880 534,686 890,540 1,435,234 2,213,934 3,299,905 4,887,288

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 Budgeted Balance Sheet (for 08 years)

Assets Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8

Office Equipment 50,000 47,500 45,125 50000 47,500 45,125 50000 47,500
Ending Inventory 350,000 385,000 423,500 465,850 512,435 563,679 620,046 682,051
Workshop/office
furniture 50,000 47,500 45,125 50000 47,500 45,125 50000 47,500
Motorcycle 50,000 47,500 45,125 50000 47,500 45,125 50000 47,500
Preliminary
Expenses 40,000 0 0 0 0 0 0 0
Accounts
Receivables 660,000 759,000 910,800 1,111,176 1,377,858 1,736,101 2,222,210 2,888,873
Cash in hand 800,000 840,000 882,000 926,100 972,405 1,021,025 1,072,077 1,125,680
Cash at Bank 1,000,000 1,050,000 1,102,500 1,157,625 1,215,506 1,276,282 1,340,096 1,407,100
Total Assets 3,000,000 3,176,500 3,454,175 3,810,751 4,220,704 4,732,462 5,404,428 6,246,204

Liabilities
Accounts payables 100,000 85,000 65,000 60,000 50,000 35,000 10,000 -
Cost received in
advance 300,000 400,000 500,000 600,000 700,000 750,000 750,000 750,000
Loan payable 2,000,000 1,850,000 1,665,000 1,498,500 1,310,000 1,050,000 750,000 450,000
Capital 181,680 562,620 689,489 761,711 725,470 683,528 594,523 158,916
Net Profit 418,320 278,880 534,686 890,540 1,435,234 2,213,934 3,299,905 4,887,288
Total Liabilities 3,000,000 3,176,500 3,454,175 3,810,751 4,220,704 4,732,462 5,404,428 6,246,204

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Notes to the budgeted CGS, Income Statement and Balance Sheet

Note-1:- Budget estimates have been worked out for 8 future years

Note-2:- A ten percent p.a increase has been estimated in purchase price of raw materials in
Cost of Goods Sold Statement

Note-3:- Different percentages increases in revenue (first year 15%) figures of income
statement have been assumed in income statement

Note-4:- Gradual increases after every 03 years have been assumed in operative expenses
(Labor, Rent Utilities, depreciation, salaries etc) in the income statement

Note-5:- Accounts receivables are 30% of total revenue shown in balance sheet

Note-6:- There is a 5% annual increase in cash at bank in the balance sheet

Note-7:- A gradual decrease in loan payable is assumed due to payment of loan installments

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