Pre-Feasibility Study

SOCKS MANUFACTURING UNIT

Prepared By: WAQAR HUSSAIN

Student No: 08023008
Subject: MANAGEMENT
CHINA UNIVERSITY OF
PETROLEUM

Pre-Feasibility Study

Socks Manufacturing Unit

PURPOSE OF THE DOCUMENT ...............................................................................................

PROJECT PROFILE ....................................................................................................................

2.1
2.2
2.3
2.4
2.5
2.6
2.7
2.8
2.9
2.10

SECTOR & INDUSTRY ANALYSIS ...........................................................................................

3.1

SECTOR CHARACTERISTICS .....................................................................................................

MARKET INFORMATION .........................................................................................................

4.1
4.2

OPPORTUNITY RATIONALE ......................................................................................................

PROJECT BRIEF .......................................................................................................................
MARKET ENTRY TIMING .........................................................................................................
PROPOSED BUSINESS LEGAL STATUS .......................................................................................
PROJECT CAPACITY AND RATIONALE .......................................................................................
PROJECT INVESTMENT .............................................................................................................
PROPOSED PRODUCT MIX ........................................................................................................
RECOMMENDED PROJECT PARAMETERS ...................................................................................
PROPOSED LOCATION ..............................................................................................................
KEY SUCCESS FACTORS/PRACTICAL TIPS FOR SUCCESS ............................................................

LEADING EXPORTING COUNTRIES OF COTTON KNITTED SOCKS IN THE WORLD .........................

TARGET CUSTOMERS ..............................................................................................................

PRODUCTION PROCESS ...........................................................................................................

5.1
5.2
5.3
5.4
5.5
5.6

PRODUCTION PROCESS FLOW ..................................................................................................

PRODUCT MIX OFFERED ..........................................................................................................
RAW MATERIAL REQUIREMENT ...............................................................................................
MACHINERY REQUIREMENT ....................................................................................................
FURNITURE & FIXTURE ...........................................................................................................
MOTOR VEHICLES .................................................................................................................

HUMAN RESOURCE REQUIREMENT...................................................................................

LAND & BUILDING REQUIREMENT ....................................................................................

7.1
7.2
7.3

LAND REQUIREMENT ............................................................................................................

RECOMMENDED MODE ..........................................................................................................
UTILITIES REQUIREMENT ......................................................................................................

FINANCIAL ANALYSIS............................................................................................................
8.1
PROJECT COSTS ....................................................................................................................
8.2
PROJECTED INCOME STATEMENT ...........................................................................................
8.3
PROJECTED BALANCE SHEET .................................................................................................
8.4
PROJECTED CASH FLOW STATEMENT .....................................................................................

KEY ASSUMPTIONS .................................................................................................................

Pre-Feasibility Study

Socks Manufacturing Unit

DISCLAIMER
The purpose and scope of this information memorandum is to introduce the subject
matter and provide a general idea and information on the said area. All the material
included in this document is based on data/information gathered from various sources and
is based on certain assumptions. Although, due care and diligence has been taken to
compile this document, the contained information may vary due to any change in any of
the concerned factors, and the actual results may differ substantially from the presented
information. Organization does not assume any liability for any financial or other
loss resulting from this memorandum in consequence of undertaking this activity.
The prospective user of this memorandum is encouraged to carry out additional diligence
and gather any information he/she feels necessary for making an informed decision.

Pre-Feasibility Study

Socks Manufacturing Unit

1 PURP
URPOSE OF THE DOCUM
CUMENT
The objective of the pre-feasibility study is primarily to facilitate potential entrepreneurs
to facilitate investment and provide an overview about textile business. The project prefeasibility may form the basis of an important investment decision and in order to serve
this objective, the document covers various aspects of socks manufacturing business
concept development, start-up, production, marketing, finance and business management.
The document also provides sectoral information, brief on government policies and
international scenario, which have some bearing on the project itself.
This particular pre-feasibility is regarding Socks Manufacturing Unit which comes
under Textile sector.

Pre-Feasibility Study

Socks Manufacturing Unit

2 PROJECT PROFILE
2.1

Oppo
Opportunit
unity Rat
Rationale

Knitted socks are an item of general use. These have a sizeable market at home and also
have an export potential. Cotton socks, as compared to nylon socks, are subject to rapid
replacements. Further, due to higher rate of urbanization, local demand has also increased
manifolds in recent years. So this validates the opportunity to set up a new sock
manufacturing unit to capture the need of expanding market.
2.2

Project
ect Brief

Socks are broadly classified into two main categories, cotton and nylon or blended socks.
Cotton socks are specially preferred by sportsmen, besides their normal use and also have
export potential as well.
Cotton sports socks are further classified into two types: Pouch socks and reel socks. The
proposed project will be manufacturing 60% pouch socks and 40% reel socks. It will be
started with 30 machines. All the equipment for the project is supposed to be new.
Second hand machinery can also be sued to reduce the cost of project, which is easily
available in the market. The project will be started with 70% initial year capacity.
2.3

Market Entry Timing

ing

Various products and services have high dependence on their commercialization timing
and delivery to the customers. But the socks manufacturing unit can be started at any time
during the year.
2.4

Proposed Busine
iness Legal Status

The said project can be a proprietorship or a partnership and even it can be registered
under company law with corporate law authority. Selection totally depends upon the
choice of the entrepreneur. This pre-feasibility assumes the legal status of a sole
proprietorship.
2.5

Project
ect Cap
Capacity and Rat
Rationale

Selection of project size is really critical. After doing thorough market research, it is
decided that the proposed pre-feasibility will be based on 30 machines. As it is assumed
that all the production of the unit will be exported, a sizeable production is required. 30
machines production can be exported in one container. Each machine will be having a
capacity of manufacturing 55 dozens pair of socks per 24 hours. The proposed project
can always be started with more machines. This feasibility study is based on 30 machines
which is the minimum viable size for a sock manufacturing unit.
The project will be working on three shift basis.
2.6

Project
ect Investment

Total cost of the project is worked out in the table below:

Pre-Feasibility Study

Socks Manufacturing Unit

Table 2-1
Project
ect Cos
Costs
Capital Investment
CNY64,987,928
Working Capital Requirement
CNY5,376,606
Total Investment
CNY70,364,533
The proposed pre-feasibility is based on the assumption of 50% debt and 50% equity.
However this composition of debt and equity can be changed as per the requirement of
the investor.
Table 2-2
Project
ect Fina
inancing
ing
Debt
Equity
Total project Investment

50%
50%

CNY35,182,26
7
CNY35,182,26
7
CNY70,364,53
3

Table 2-3
Viabil
bility
IRR
NPV @20%
Pay Back Period (years.)
2.7

24%
CNY15,610,583
5.29

Proposed Produc
duct Mix

The proposed project will be producing both pouch socks and reel socks. The
composition of production will be as follows:
Table 2-4
Product
Pouch Socks
Reel Socks

Produc
duct Mix
Production capacity per 24
hours
55 dozens pair of socks
45 dozen pair of socks

Percentage
Production
60%
40%

Annual Production
(Dozen pairs)
346,500
189,000
535,500

2.8
Reco
ecommende
nded Project
ect Parameters
Capacity
Human Resource
Technology/Machinery
128
Imported
535,500 dozens
pair per year
2.9

Location
Huangdao

Proposed Location

The said project can be started in any industrial area. It is recommended that an area
should be selected which is near to the port and export of the manufactured product may
become easy. Or otherwise it should be established in an area where raw material is
easily available. It may have industrial area of Huangdao\Qingdao.

Pre-Feasibility Study

2.10

Socks Manufacturing Unit

Key Succe
Successs Factors/Practical Tips
ips for Succe
Successs

There are many units existing which are indulged in socks manufacturing but still they
are not successful in catering the demand. So there is a potential for new entrepreneurs to
enter the market. Key success factors will be:
Wastage ratio of production should be kept at minimum.
Advance orders for sale can ensure the success of the business.
Strong controls on purchase price of raw material
Quality maintenance will play an important role as it is assumed that 100%
production will be exported.

3 SECTOR
ANALYSIS
3.1

&

INDUSTRY

Sect
ector Characteristics

Cotton sports socks manufacturing, which is a comparatively new phenomenon, has

started since, last 4050 years and its consumption has increased rapidly with the passage
of time as more and more people became health conscious and adapted athletic life.
The socks production in general has been tradition since inception of China. Jiangsu
and Zhejiang have been leading cities having family trade of socks manufacturing and
marketing within China. Mostly socks in China are produced on old double cylinder dress
socks machines and supplied to local distributors for local consumption as well as
exported.

4 MARK
ARKET INFORMATION
ION
4.1

Leading
on Knitte
ding Exporting
ing Coun
Counttries of Cott
Cotton
tted Socks in the Wor
World

Italy is the leading exporter of cotton knitted socks in the world and exports majority of
the product to countries like USA, Japan and Germany. The details of the major exporters
in the world are given in the below table:

Pre-Feasibility Study

Socks Manufacturing Unit

1
Table 4-1
Major Exporters of Cott
on Knitt
Cotton
Knitteed Socks in 2003
Countries
Value in $ (000)
Italy
China
USA
Turkey
Korea
Germany
Mexico
France
Taiwan
Belgium
4.2
Target Customers

930
890
339
527
343
264
162
103
96
138

Socks are being exported mainly to USA, UK, France, Germany, Japan, Netherlands, and
Canada. Export of socks is not subject to quota restrictions.
Due to increase in awareness of importance of adapting athletic life for a better health,
the demand for sports socks have been increasing with every passing year in countries
like USA, European countries and Middle East.
The leading importers of sports socks in the world are given in the below table:
2

2
Table 4-2
Leading
ding Importers of Spo
Sports Socks in the Wor
World in 2003
2003
Countries
Value in $ million
USA
Germany
Japan
United Kingdom
France
Netherlands
Belgium
Mexico
Italy

1,148
723
501
467
447
243
173
102
157

Pre-Feasibility Study

Socks Manufacturing Unit

5 PRODUCT
DUCTION
ION PROCESS
5.1

Produc
duction Process Flow

The following figure shows the production process flow of socks manufacturing unit:
Figure 5-1

5.2

Produc
duction Process Flow

Produc
duct Mix Offe
ffered

The proposed project will manufacture knitted cotton sports socks especially to cater to
the international market. The business will produce high quality sports socks for men,
ladies and children.
The proposed project will produce the following types of cotton sports socks:
1. Pouch Socks
2. Reel Socks
5.3

Raw Material Requir

quirement

China is a cotton growing country and has a major advantage of availability and lower
prices. Cotton fiber produced in China is of middle or short staple and of relatively
coarse grade. The cotton yarns produced by China cotton especially of counts 8s, 10s and
12s are appropriate and ideal to produce soft sports socks. This is the major reason that
cotton sports socks quality produced by Chinas cotton yarn is appreciated in the
international market.
The weight of an average pair of socks will be approximately, 65 grams. Raw material
used in cotton sports socks is about 70% cotton yarn and rest 30% is nylon, polyester,
acrylic or lycra etc, which is available in Pakistan.

Pre-Feasibility Study

5.4

Socks Manufacturing Unit

Machine
hinery Requir
quirement

A total number of 30 Single Cylinder 4 Feed machines will be installed, out of which
18 machines will be used to manufacture pouch socks and 12 machines will be used for
manufacturing reel heel socks. Second hand machinery is also readily available in the
market and the price is approximately half the price of the new machines. Second hand
machinery can also be used to manufacture both type of socks.
Following table shows the machinery & equipment requirement:
Table 6-1: Machinery & Equipm
quipment Requir
quirement
Machine Description
Lonati Single Cylinder 4
Feed (pouch heel)
Lonati Single Cylinder 4
Feed (Reel heel)
Rosso Automatic Linear
Linking Machine
Bleaching machine
Hydro extractor
Dryer
Boarding/Setting Machine
Air Compressor
Diesel Generator
Boiler 3 ton
Transformer
Socks Reversing Machine
Quality Control Machine
Electric wiring, Steam piping
Etc. per Machine
Water Pump including bore
Total

Make

No of
Unit

Total Amount
in CNY

Imported

18

24,683,033

Imported

12

16,455,355

Imported
Locally available
Locally available
Locally available
Locally available
Imported
Locally available
Locally available
Locally available
Imported
Imported

4
4
2
4
6
1
1
1
1
3
1

2,742,559
1,062,118
212,395
637,329
318,810
1,223,867
1,520,733
1,593,322
477,924
1,142,733
304,729

Locally available
Locally available

1
1

2,622,115
282,800
55,279,821

The freight & handling charges and installation cost of the machinery is estimated as
below:
Table 5-2
Other Equipm
quipment Charges Details
Freight & Handling Charges as % of CIF price
Installation Charges as % of Price
5.5

Furnit
niture & Fixture

Following furniture and fixtures will be required for factory and management offices.

5%
1%

Pre-Feasibility Study

Socks Manufacturing Unit

Table 5-4
Details of Furnit
niture and Fixtures
Items
No. of Items
Computers
10
Printers
1
Photocopy Machine
1
Fax Machine
1
Telephone Sets
5
Air Conditioners
2.00
Office Furniture
1.00
5.6

Total Cost (CNY)

90,000
25,000
100,000
10,000
2,500
40,000
150,000
417,500

Motor Vehic
hicles

The proposed project will also be using a Loader truck for transportation purposes. The
truck will be costing Rs. 1,100,000 and the depreciation will be charged at the rate of
20% on written down value basis.

6 HUMAN
REQUIREMENT

RESO
ESOURCE
URCE

Both skilled and unskilled labour will be required for the paper cone business. Some
direct labor will be working on three shift basis and some will be working on one shift
basis. Direct labour for the factory includes following human resources:

Pre-Feasibility Study

Table 6-1

Socks Manufacturing Unit

Hum
Human Resource
rce

Description

No. of
Shifts

No. of
employees

Knitting Machine Operator

3
10
Knitting Supervisor
3
1
Bleaching Helper/ Bleaching
3
1
Machine
Quality/Linking/Pressing/Pac
3
20
king Staff
Boiler Assistant
3
1
Technician
3
2
Janitorial Staff
3
2
Total Direct Labor
Production Manager
1
1
Bleaching Master
1
1
Boiler Engineer
1
1
Knitting Master
1
1
Technical supervisor
1
1
Quality Incharge
1
1
Other Direct Labor
GM
1
1
Finance Manager
1
1
Accountant
1
1
Purchase Officer
1
1
Assistant Accountant
1
1
Store Supervisor
1
1
Office Boys
1
1
Security Guard, Gate Keepers
1
1
Total Indirect Labor
Total Cost of Human
Resource
Salaries and wages are assumed to grow at 10% per annum.

7 LAND
AND
REQUIREMENT
7.1

&

Salary per
Month
(CNY)
5,500
5,000
3,500

Annual
Salary
(CNY)
1,980,000
180,000
126,000

3,500

2,520,000

10,000
3,500
2,500

360,000
252,000
180,000
5,598,000
300,000
300,000
180,000
300,000
54,000
300,000
1,434,000
600,000
300,000
120,000
120,000
84,000
168,000
60,000
108,000
1,560,000
8,592,000

25,000
25,000
15,000
25,000
4,500
25,000
50,000
25,000
10,000
10,000
7,000
7,000
2,500
3,000

BUILDING

Land Requir
quirement

Total land required for the socks knitting unit is approximately 22,449 -Sq. ft or 5 Kanal.
Land price per kanal is taken to be CNY 500,000. The break up of the required area is
given below.

Pre-Feasibility Study

Table 7-1

Covere
d Area Details
Covered

Building & Civil works

Socks Knitting area
Bleaching & Dying area
Drying Area
Pressing Area
Socks Reversing Area
Linking Area
Boiler Area
Generator Area
Air Compressor Room
Packing area
Management Office
Accessories Store
Yarn Store
Dyes and Chemical
Store
Finished Goods Store
Toilets
Loading, unloading Bay
Grounds
Water Tank
Total Space
Requirement (sq.ft)
Boundary wall
Total Infrastructure
Cost
7.2

Socks Manufacturing Unit

Space Required
Construction Cost
Total Cost
in Sq. ft
(CNY /Sq. Ft.)
(CNY)
1,680
400
672,000
1,064
400
425,600
480
400
192,000
384
400
153,600
210
400
84,000
280
400
112,000
600
400
240,000
600
400
240,000
600
400
240,000
1,200
400
480,000
1,200
500
600,000
600
400
240,000
217
400
86,793
600
350
210,000
334
600
1,800
10,000

350
350
25

350,000
4,698,016

22,449
1,520

117,024
210,000
45,000

100

152,000
4,850,016

Reco
ecommende
nded Mode

Building for the proposed business can be acquired on rent but it is recommended that it
should be purchased or built as machinery will be installed. Construction cost of building
is estimated as above.
7.3

Utilities Requir
quirement

Utilities required for a socks manufacturing unit are

Electricity
Water
Telephone

Pre-Feasibility Study

Socks Manufacturing Unit

8 FINANCI
NANCIAL ANAL
NALYSIS
8.1

Project
ect Cos
Costs

Calculations
Project Costs

Land

Year

Year

Year

Year

Year

Year
Year
5

Year

Year

Year

Year

2,494,371
Building
4,850,016
Total Capital Cost
Raw Material Inventory
Machine Spares
Utilities (Fuel) Inventory
Cash
Total Working Capital
Financing
Project Financing
Total Debt

64,987,928
-

2,202,372

Year 5
-

Year 6
-

Year 7
-

Year 8
-

Year 9
-

2,619,772
90,000
95,760
2,571,074
5,376,606
70,364,533
Year 0
Year 1
Year 2
Year 10
32,493,964
- Working Capital Financing
35,182,267
- Equity Financing 35,182,267 -

Year 3
Year 4
2,688,303
-

13

Pre-Feasibility Study

8.2

Socks Manufacturing Unit

Project
ected Income Statement

Calculations
Income Statement
Year 1
Year 2
Revenue
86,136,561 97,826,523
Cost of Sales
Raw Material Cost
61,128,007 66,804,180
Direct Labor
7,032,000
7,735,200
Direct Electricity
4,259,010
4,684,911
Machine maintenance
540,000
594,000
Oil and Diesel Consumption
2,234,400
2,457,840
Total Cost of Sales
75,193,417 82,276,131
Gross Profit
10,943,144 15,550,392
Administration expense
1,560,000
1,716,000
Electricity expense
221,408
243,549
Communications expense (phone, fax, mail, interne3t,1e2t,c0.0) 0 343,200
Office expenses (stationary, entertainment, ja
156,000
171,600
Professional fees (legal, audit, consultants, etc.)
129,205
146,740
Depreciation expense
6,206,484
6,206,484
Amortization of pre-operating costs
169,244
169,244
Marketing Expenses
215,341
244,566
Freight Out and Custom Clearance
1,722,731
1,956,530
Office Vehicle Running Expense
78,000
85,800
Subtotal
10,770,413 11,283,713
Earning before Interest and Tax
172,731
4,266,679
Interest on short term debt
437,563
485,068
Interest expense on long term debt (Project Loan) 3,249,396
2,717,153
Interest expense on long term debt (Working C
376,362
319,425
Subtotal
3,625,759
3,036,578
Earning before Tax
(3,453,028) 1,230,101
Tax
978,265
NET PROFIT/(LOSS) AFTER TAX
(3,453,028)
251,836
Balance brought forward
(3,453,028)
Total profit available for appropriation
(3,453,028) (3,201,192)
Balance carried forward
(3,453,028) (3,201,192)

Year 3
110,609,189

Year 4
Year 5
124,573,599 139,815,545

72,682,947
8,508,720
5,153,402
653,400
2,703,624
89,702,093
20,907,095
1,887,600
267,903
377,520
188,760
165,914
6,206,484
169,244
276,523
2,212,184
94,380
11,846,512
9,060,583
253,703
6,440,140
528,542
6,968,682
2,091,902
1,106,092
985,810
(3,201,192)
(2,215,383)
(2,215,383)

78,770,144
85,071,756
9,359,592
10,295,551
5,668,742
6,235,617
718,740
790,614
2,973,986
3,271,385
97,491,205 105,664,923
27,082,394
34,150,622
2,076,360
2,283,996
294,694
324,163
415,272
456,799
207,636
228,400
186,860
209,723
6,206,484
6,206,484
169,244
169,244
311,434
349,539
2,491,472
2,796,311
103,818
114,200
12,463,274
13,138,859
14,619,120
21,011,764
1,487,672
779,257
180,520
96,165
1,668,193
875,422
12,950,927
20,136,342
1,245,736
1,398,155
11,705,191
18,738,186
(2,215,383)
9,489,809
9,489,809
28,227,995
9,489,809
28,227,995

Year 6
156,438,059

Year 7
Year 8
165,824,343 175,773,804

Year 9
186,320,232

Year 10
197,499,446

91,593,924
11,325,106
6,859,178
869,675
3,598,524
114,246,407
42,191,652
2,512,396
356,580
502,479
251,240
234,657
6,122,984
0
391,095
3,128,761
125,620
13,625,811
28,565,842
28,565,842
1,564,381
27,001,461
28,227,995
55,229,456
55,229,456

93,425,802
95,294,318
12,457,617
13,703,379
7,545,096
8,299,606
956,643
1,052,307
3,958,376
4,354,213
118,343,534 122,703,823
47,480,809
53,069,980
2,763,635
3,039,999
392,237
431,461
552,727
608,000
276,364
304,000
248,737
263,661
6,209,146
6,209,146
0
0
414,561
439,435
3,316,487
3,515,476
138,182
152,000
14,312,075
14,963,177
33,168,734
38,106,804
33,168,734
38,106,804
1,658,243
1,757,738
31,510,490
36,349,066
55,229,456
86,739,946
86,739,946 123,089,012
86,739,946 123,089,012

97,200,205
15,073,717
9,129,566
1,157,538
4,789,635
127,350,660
58,969,572
3,343,999
474,607
668,800
334,400
279,480
6,209,146
0
465,801
3,726,405
167,200
15,669,837
43,299,735
43,299,735
1,863,202
41,436,532
123,089,012
164,525,544
164,525,544

99,144,209
16,581,088
10,042,523
1,273,292
5,268,598
132,309,710
65,189,736
3,678,398
522,068
735,680
367,840
296,249
6,209,146
0
493,749
3,949,989
183,920
16,437,039
48,752,697
48,752,697
1,974,994
46,777,703
164,525,544
211,303,247
211,303,247

Pre-Feasibility Study

8.3

Socks Manufacturing Unit

Project
ected Balance Shee
Sheett

Calculations
Balance Sheet
Assets
Current Assets
Cash & Bank
Raw Material Inventory
Machine Spares Inventory
Utilities (Fuel) Inventory
Accounts Receivable
Total Current Assets
Fixed Assets
Land
Building
Machinery & Equipment
Office Equipment, Furniture
Office Vehicle
Total Fixed Assets
Intangible Assets
Pre-operating Costs
Total Assets
Liabilities & Shareholders' Equity
Current Liabilities
Accounts payable
Short term Debt
Total Current Liabilities
Other liabilities
Long term debt Project
Long term debt (Working Capital)

Year 0

Year 1

Year 2

Year 3

Year 4

Year 5

Year 6

Year 7

Year 8

Year 9

Year 10

2,571,074
2,619,772
90,000
95,760

2,619,772
45,000
95,760
3,691,567
6,452,099

2,863,036
49,500
105,336
4,192,565
7,210,438

3,114,983
54,450
115,870
4,740,394
8,025,697

6,255,813
3,375,863
59,895
127,457
5,338,869
15,157,897

22,097,372
3,645,932
65,885
140,202
5,992,095
31,941,486

52,170,972
3,925,454
72,473
154,222
6,704,488
63,027,609

89,567,617
4,003,963
79,720
169,645
7,106,758
100,927,702

131,792,910
4,084,042
87,692
186,609
7,533,163
143,684,416

179,095,840
4,165,723
96,461
205,270
7,985,153
191,548,447

231,730,280
4,249,038
106,108
225,797
8,464,262
244,775,484

2,494,371
2,494,371
4,850,016
4,365,015
55,279,821 49,751,839
417,500
334,000
1,100,000
990,000
64,141,708
57,935,225

2,494,371
3,880,013
44,223,857
250,500
880,000
51,728,741

2,494,371
3,395,011
38,695,875
167,000
770,000
45,522,257

2,494,371
2,910,010
33,167,893
83,500
660,000
39,315,773

2,494,371
2,425,008
27,639,911
550,000
33,109,289

2,494,371
1,940,007
22,111,929
430,811
2,211,561
29,188,678

2,494,371
1,455,005
16,583,946
344,649
2,101,561
22,979,532

2,494,371
970,003
11,055,964
258,487
1,991,561
16,770,386

2,494,371
485,002
5,527,982
172,325
1,881,561
10,561,240

2,494,371
86,162
1,771,561
4,352,094

846,219
70,364,533

676,976
65,064,299

507,732
59,446,910

338,488
53,886,442

169,244
54,642,914

65,050,775

92,216,288

123,907,234

160,454,802

202,109,687

249,127,578

1,120,493
2,761,426
3,881,919

1,232,542
3,098,458
4,331,000

1,355,796
3,397,607
4,753,404

1,491,376
1,491,376

1,640,514
1,640,514

1,804,565
1,804,565

1,985,022
1,985,022

2,183,524
2,183,524

2,401,876
2,401,876

2,642,064
2,642,064

27,171,534
2,281,607
29,453,141

21,316,862
1,817,973
23,134,836

14,876,722
1,289,431
16,166,154

7,792,569
686,893
8,479,462

0
0
0

0
0
0

0
0
0

0
0
0

0
0
0

0
0
0

35,182,267
(3,453,028)
31,729,239
65,064,299

35,182,267
(3,201,192)
31,981,074
59,446,910

35,182,267
(2,215,383)
32,966,884
53,886,442

35,182,267
9,489,809
44,672,075
54,642,914

5,376,606

32,493,964
2,688,303
35,182,267

Shareholders' equity
Paid-up capital
35,182,267
Retained earnings
Total Equity
35,182,267
TOTAL CAPITAL AND LIABILITIES 70,364,533

35,182,267
28,227,995
63,410,261
65,050,775

35,182,267
55,229,456
90,411,722
92,216,288

35,182,267
86,739,946
121,922,213
123,907,234

35,182,267
123,089,012
158,271,278
160,454,802

35,182,267
164,525,544
199,707,811
202,109,687

35,182,267
211,303,247
246,485,514
249,127,578

Pre-Feasibility Study

8.4

Socks Manufacturing Unit

Project
ected Cas
Cash Flow Statement

Calculations
Cash Flow Statement
Year 0
Operating activities
Net Profits
Depreciation
Raw Material Inventory
(2,619,772)
Machine Spares
(90,000)
Utilities (Fuel) Inventory
(95,760)
Accounts Receivable
Accounts Payable
Amortization
Cash Provided by Operations
(2,805,532)
Financing Activities
Project Loan-Principal Repayment
Working Capital Loan-Principal Repayment
Short term Debt Principal Repayment
Addition to Project Loan
32,493,964
Addition to Working Capital Loan
2,688,303
Issuance of Shares
35,182,267
Cash Used for Financing Activities
70,364,533
Investing activities
Capital expenditure
(64,987,928)

Year 1

Cash balance brought forward

Cash available for appropriation
Dividend
Cash balance
Cash carried forward

Year 3

Year 4

Year 5

(3,453,028)
6,206,484
45,000
(3,691,567)
1,120,493
169,244
396,626

251,836
6,206,484
(243,265)
(4,500)
(9,576)
(500,998)
112,049
169,244
5,981,274

985,810
6,206,484
(251,947)
(4,950)
(10,534)
(547,829)
123,254
169,244
6,669,532

11,705,191
6,206,484
(260,880)
(5,445)
(11,587)
(598,475)
135,580
169,244
17,340,112

18,738,186
6,206,484
(270,069)
(5,989)
(12,746)
(653,226)
149,138
169,244
24,321,021

(5,322,429)
(406,696)

(5,854,672)
(463,633)
(2,761,426)
(9,079,732)

(6,440,140)
(528,542)
(3,098,458)
(10,067,140)

(7,084,154)
(602,538)
(3,397,607)
(11,084,299)

(7,792,569)
(686,893)
(8,479,462)

(5,729,125)

Cash used for/provided by Investing Activi(t6ie4s,987,928)

NET CASH

Year 2

Year 6
27,001,461
6,122,984
(279,521)
(6,588)
(14,020)
(712,393)
164,051
32,275,972

Year 7
31,510,490
6,209,146
(78,509)
(7,247)
(15,422)
(402,269)
180,457
37,396,645

0
0
-

Year 8
36,349,066
6,209,146
(80,079)
(7,972)
(16,964)
(426,405)
198,502
42,225,293

0
0
-

Year 9
41,436,532
6,209,146
(81,681)
(8,769)
(18,661)
(451,990)
218,352
47,302,930

(0)
0
-

Year 10
46,777,703
6,209,146
(83,314)
(9,646)
(20,527)
(479,109)
240,188
52,634,440

0
0
-

0
0
-

(0)

(2,202,372)

(2,202,372)

2,571,074

(5,332,500)

(3,098,458)

(3,397,607)

6,255,813

15,841,559

30,073,600

37,396,645

42,225,293

47,302,930

52,634,440

2,571,074
2,571,074
2,571,074

2,571,074
(2,761,426)
(2,761,426)
-

(3,098,458)
(3,098,458)
0

0
(3,397,607)
(3,397,607)
0

0
6,255,813
6,255,813
6,255,813

6,255,813
22,097,372
22,097,372
22,097,372

22,097,372
52,170,972
52,170,972
52,170,972

52,170,972
89,567,617
89,567,617
89,567,617

89,567,617
131,792,910
131,792,910
131,792,910

131,792,910
179,095,840
179,095,840
179,095,840

179,095,840
231,730,280
231,730,280
231,730,280

Pre-Feasibility Study

Socks Manufacturing Unit

9 KEY ASSU
SSUMPTION
IONS
Table 9-1
Project
ect Assu
ssumptions
Projected Life of The Project in Years
Debt
Equity
Annual Mark Up Rate (Short Term & Long Term)
Debt Tenure

10
50%
50%
14%
5

Table 9-2
Ope
Operating
ing Assu
ssumptions
No of Working Days in One Year
No. of Shifts
No. of hours in one shift
Annual installed production capacity (dozen pairs)
Initial year capacity utilization
Capacity growth rate
Maximum capacity utilization

350
3
8
535,500
70%
5%
95%

Table 9-3
Revenue
nue Assu
ssumptions
Sales price per dozen Pouch Heel
Sales price per dozen Reel Heel
Sales growth rate
Table 9-4

US $ 3.50
US $ 4.50
6%

Raw Material Cos

Costs
Cost (CNY/Gram)

Weight (grams per pair)

Wastage Ratio (%age of raw material
input)
Cotton %age
Nylon
Polyester
Acrylic
Lycra
Table 9-5

65.00
12%
70%
8%
12%
4%
6%

0.09
0.40
0.17
0.13
0.58

Expense Assu
ssumptions

Salaries, wages growth rates (as %age of annual

Salaries and Wages)
Communication expense

10%

Office expenses (stationary, entertainment, janitorial

10%

20%

% of administration
expense
% of administration

Pre-Feasibility Study

Socks Manufacturing Unit

services, etc.)
Promotional expense
Machinery & equipment insurance rate
Office vehicles insurance rate
Professional fees (legal, audit, consultants, etc.)
Marketing Expenses
Freight And Custom Clearance Charges

expense
% of revenue

Office Vehicle Running Expense

Depreciation rate on Machinery
Depreciation rate on furniture and office equipment
Table 9-6
Turnove
over Assu
ssumptions
Raw Material Inventory
Stores and Spares Inventory
Fuel inventory
Accounts Payable
Accounts Receivable
Table 9-7
General Assumptions
Exchange Rate (CNY/Euro)
Freight & Handling Charges as % of CIF price
Installation Charges as % of Price

1%
5%
5%
0.2% % of revenue
0.3% % of revenue
2% %age of Cost of
Sales
5% %age of Admin
Expense
10% Written down value
20% Written down value
15 days
2 months
15 days
30 days
15 days
9.3
5%
1%