Solar cooking system
Executive summary Solar cooking is the simplest, safest, most convenient way to cook food without consuming fuels or heating up the kitchen. Many people choose to solar cook for these reasons. But for hundreds of millions of people around the world who cook over fires fueled by wood or dung, and who walk for miles to collect wood or spend much of their meager incomes on fuel, solar cooking is more than a choice â€” it is a blessing. From the beginning, we wanted to develop a project which would be socially and economically viable for the people of Bangladesh and we came up with this idea of building a SUN OVEN where renewable energy will be the only source of fuel. We developed this project as a sister concerns of Grameen Shakti where we would be able to use the expertise and experience and most importantly the networking channel of Grameen Projects.
We want to establish the project in the Chittagong city coastal area. Our target customers are the rural people of Bangladesh who do not have access to gas and other fuel facilities. This project will be developed by using local materials and local manpower. This project is environment friendly and economically viable for the people. We will be able to save foreign currencies and a new era will be exposed to utilize the renewable energy facility for the betterment of the people.
Solar cooking is the simplest, safest, most convenient way to cook food without consuming fuels or heating up the kitchen. Many people choose to solar cook for these reasons. But for hundreds of millions of people around the world who cook over fires fueled by wood or dung, and who walk for miles to collect wood or spend much of their meager incomes on fuel, solar cooking is more than a choice — it is a blessing. For millions of people who lack access to safe drinking water and become sick or die each year from preventable waterborne illnesses, solar water pasteurization is a life-saving skill. There are numerous reasons to cook the natural way — with the sun. Objective of the report To develop a project this will be •
A source of employment
Local materials & Expertise based
An energy project
Helpful for saving foreign currency
Methodology To prepare this report, we made contacts with the people of Grameen Shakti to know the acceptance of renewable energy to the rural people. Then we formulated a project plan for making SUN OVEN. Here, we mentioned some hypothetical assumptions about the aimed project to justify the economic viability of the project. Rationality The people of our country is facing massive energy crisis. Deforestation also caused some major catastrophic distraction to the people. As the gas facility is scarce and rural people are not getting enough wooden fuel for cooking, we came up with this idea of using sunlight as a fuel to cook food without creating any pollution.
Production Plan (A) Products proposed to be manufactured: “GRAMEEN SUN OVEN” (B) Manufacturing process First of our project is “Low Cost Solar Cooker ". Grameen Solar Cooker is Modified Funnel Cooker. This is made out of three sections. The reflector part is made out of cardboard. Stainless steel sheet also can be used as it is more durable .The type we have constructed is called Circular type SUN OVEN. Design of Grameen Solar cooker Circular Grameen Solar cooker is made of three sections. Part C forms the upper section. Part B forms the lower section and part A forms the base of the cooker. How to cut these three parts from a single sheet of cardboard or aluminum or stainless steel sheet is shown in Fig 1 . Detailed dimensions for 24 inch diameter cooker are shown in Fig 2. This collector can collects heat energy equivalent to about 300 watts. For higher energy diameter of 30, 36, 48 or higher can be used. For these sized collectors multiply the given dimensions by 1.25, 1.5 or 2 respectively. Part C is semicircle shaped. Outer radius is 24 inches and inner radius is 16 inches. Join two end of this semicircle to form the upper section of cone.
Part B has outer radius of 12 inches, next circle is of radius 11.3 inches and third circle of radius 4.8 inches. Part B is 255 degrees section of circle. Join two end of this section to form the middle section of cone. Part B has collar space to join it to Part C. Part A is base of the structure. It is made of circle of radius 4..0 inches. There is another circle seen inside with same center. Its radius is 3.6 inches. This collar space is for joining the base to part B. The construction is shown Fig 3 Construction Tips: Small V-cuts are to be made in collar space of Part B and Part A. Then bend these V-cuts on inside. This will make it easy to join together the parts together this is
shown in Fig 3. To make the structure sturdy and durable we have pasted brown paper on external surface of the cooker. After pasting the paper we have found the structure became stiff and does not need any support.
Three sections are Join two ends of part 'C' Join two ends of part 'B' Join all three parts to cut from the to make upper part of the to make lower part of the form the reflector cardboard cone cone
Paste aluminum foil or other Completed reflector reflective surface
Reflector, Cooking pots, Stands, Plastic cover
(C) Plant Capacity Plant Capacity 2012 800 pieces
2013 1200 pieces
2014 1400 pieces
2015 1800 pieces
2016 2000 pieces
Marketing and the 4 P’s Marketing is at the heart of every successful brand, business, organization, and cause. Marketing is not merely communications. It is the sum presentation to the customer of a value equation that results in a sale or action. Marketing is the process of identifying what the consumer needs, how the product or service can address that need, how to communicate that value in a compelling way, and how to deliver that message in the most efficient and effective manner. When state solar cooker incentive program managers think like marketers, they will sharpen the focus of outreach efforts and improve the effectiveness of their solar cooker program offerings. The classic elements of marketing – the 4 P’s: Product, Price, Place, Promotion – offer a useful matrix to assess state solar cooker programs. Solar cooker program initiatives should address each of the 4 P’s each plays an important part in marketing solar cooker. However, state incentive programs define the 4 P’s in a slightly different way than do solar cooker suppliers. For marketing purposes, state programs can evaluate the Product from the perspective of consumers’ rational and emotional attitudes towards solar cooker technology. These attitudes affect the desire to purchase. Consumer reaction to solar cooker technology (e.g., price, reliability, quality issues) informs marketing and communications approaches by identifying both the opportunities – the strengths and positive attributes that should be marshaled – and the barriers – the concerns and “issues” that prevent sales. The Place, or channels through which solar cooker is sold, also is an area where solar cooker programs have an important role through their work with installers, developers, and suppliers. Building a strong supplier network is critical in keeping up with rising demand; ensuring that customers can easily find an installer is part of this task. States also should look at how complex the solar cooker sales process can be for consumers and how solar cooker programs can minimize and ease the transaction process. Lastly, Promotion of solar cooker should be a primary focus as state programs seek to increase the visibility of solar cooker installations and broaden the appeal of their solar cooker incentive programs. Building a Marketing Plan The low market penetration of green energy pricing products and solar cooker technology suggests that customers, whether they are residential or commercial, have concerns about solar cooker power that are barriers to market growth. Understanding what consumers believe both rationally and emotionally about solar cooker technology will help shape the direction of a solar cooker marketing plan. While there is much to learn from these studies, the key findings point to several essential elements for an effective solar cooker marketing plan. Based on these studies, the remainder of this report will 1) identify major market barriers, 2) detail smart marketing strategies to address each barrier, and 3) recommend action steps to implement a successful marketing plan.
The Marketing plan process
Marketing Plan Action Step #1 IMPROVE THE VALUE EQUATION 1) Identify the range of financial options currently available to customers within your market. - Are lease arrangements, PPA’s and other monthly financing strategies available? - What new approaches, if any, should you offer? 2) Evaluate how you currently promote financial options to prospective customers. - Are you reaching a broad audience with these options and bringing new customer groups to solar cooker? 3) Develop an outreach plan. - Prominently promote the affordability message in collateral material, public relations and advertising that go beyond the website 4) Create a strong “affordability” message. - Use the website to show monthly payment options for solar cooker technology purchases or leases. 5) Work with installers. - Ensure that they are promoting the financing options that are available to their potential customers. 6) Focus on “how to pay for solar cooker.” - Ensure that workshops and other solar cooker seminars highlight financing as a key component, remembering that this is the biggest barrier to broader adoption. 7. Host special solar cooker financing events/workshops. - Identify target groups such as business associations, municipal and institutional customers, and developers. 8. Educate homeowners and commercial customers. - Work with local utilities to promote the value of combining solar cooker with energy efficiency for optimum financial effectiveness. Marketing Plan Action Step #2: REINFORCE THE RELIABILITY OF SOLAR COOKER
1. Evaluate customer concerns about solar cooker reliability in your market. 2. Find opportunities to increase visibility of solar cooker installations in high traffic locations. 3. Identify strategic partnerships with sports teams, local celebrities and media to create positive solar cooker images and increase presence of solar cooker installations in the public eye and in the marketplace. 4. Offer educational seminars for specific targeted segments (chambers of commerce, solar cooker seminars for homeowners, workshops for municipalities) to build confidence in solar cooker technologies. 5. Create campaigns built around positive testimonials from corporations, businesses, and institutions who have installed solar cooker power. 6. Participate in or increase awareness of annual solar cooker home tours to broaden attendance. Create special VIP tours for target groups. 7. Create a speakersâ€™ bureau of homeowners and business leaders who will speak about the effectiveness of solar cooker power to meet their energy and financial needs. Marketing Plan Action Step #3: REDUCE THE COMPLEXITY 1. Work with installers to reduce time delays in the process of providing estimates to solar cooker prospects. 2. Evaluate opportunities to create a solar cooker ambassador program that connects existing solar cooker customers with prospective customers to provide information during the complex decision-making process. 3. Consider offering free estimates and/or an energy advisor program to guide prospects through the solar cooker incentive application process. Marketing Plan Action Step #4 HELP CUSTOMERS OVERCOME INERTIA 1. Create a database of interested solar cooker prospects and develop a communications strategy that continues to engage these prospective customers during the long decisionmaking process. 2. Use promotional incentives and prospect mailings to encourage forward progress and sales. 3. Raise the level of visibility of solar cooker in the marketplace to keep solar cooker in mind. 4. Consider implementing a declining incentive program that encourages customers to act now. Marketing Plan Action Step #5 FIND THE RIGHT MESSAGE 1. Identify the â€œrightâ€? message for the marketplace and ensure that it is clear, consistent and addressing the value strategy. 2. Perform a communications audit on solar cooker marketing materials to assess the effectiveness and consistency of the message.
3. Identify what additional materials and outreach strategies are required to communicate the solar cooker value story. 4. Review the solar cooker programâ€™s website for its consumer-friendly focus and message. Marketing strategy #6 Reaching new customer markets It is critical to broaden the customer base and open new markets for solar cooker power. Each state and solar cooker program has a prospective customer base that has not yet reached its potential to become new solar cooker customers. Identifying creative ways to reach these new customers is not just the job of solar cooker installers and sup-pliers. State clean energy programs also are an important part of this outreach effort. Leveraging marketing resources at these target segments will yield results. Developing a Marketing Plan - How to Begin Marketing is a problem-solving activity. Identifying and understanding what problems require solving is the first and most important step in constructing an effective marketing plan. Thinking like a retailer is the key because it will ensure that programs and initiatives, as well as communications and promo-tons, are designed to create a call to action and move customers towards the sales process. A marketing plan is a living, breathing document that guides activities over a period of usually no more than one to two years and is focused on achieving quantifiable and measurable goals, such as megawatts of installed solar cooker. Activities within the plan must address core customer segments that are important to the solar cooker program, such as lowincome housing, schools and institutions, large commercial customers, and installers. The process of developing an effective plan includes the following steps. Step One: Market Analysis Begin by assessing past successes and failures. Identify what has worked and what has not. Which customer bases are responding and which are under-delivering? Are there geographic issues to be addressed within your plan? Step Two: Customer Research If there are questions about the motivations and attitudes that core customer groups have about solar cooker power, a customer research project and mar-ket analysis will identify the opportunities and barriers that must be addressed in the marketing plan. Solar cooker programs may want to rely on an outside resource such as an advertising agency or marketing consulting group to help with this aspect of the plan. Step Three: Establish Marketing Objectives What will the marketing plan accomplish? What are the goals? Marketing objective might include a percentage increase or megawatt goal for specific customer segments, such as commercial and industrial, residential, or institutional solar cooker installations. Step Four: Marketing Strategies How will the solar cooker program reach its objectives? This report suggests that Cost, Reliability, Complexity, Inertia and Message all must be addressed in an effective marketing plan. There may be other strategies relevant to your specific market that should be included or receive priority. Marketing strategy that addresses value, for example, might include offering financial tools that reduce the high out-of-
pocket costs for solar cooker installations. Marketi ng
strategy to address reliability may include raising visibility of solar cooker in the marketplace. Step Five: Tactics/Implementation Tactics are the specific programs and initiatives that address the marketing strategy. The examples cited in this report from solar cooker stakeholders across the country are examples of marketing tactics. The rest of the marketing plan includes a budget and timeline, as well as an approach to evaluate the success of specific tactics.
Smart Solar cooker Marketing Strategies Effective marketing guides how, when, and where product information is presented to consumers, with the ultimate goal of persuading consumers to purchase solar cooker energy systems. Therefore, state solar cooker program managers must view themselves as a critical part of the solar cooker sales process. Understanding what problems need solving and how best to address them is at the heart of the Solar cooker Marketing Plan. Messages that connect on a financial or value level are most likely to succeed. There are examples of effective solar cooker marketing activities all over the country to draw upon. Through grants from the these cities are engaged in active partnerships with solar cooker companies; municipal, county and state agencies; utilities; NGO’s and universities to identify and remove market barriers and encourage solar cooker sales to residential and commercial customers. Their approaches may be a useful source of problem-solving initiatives for cities and states looking at their own solar cooker marketing challenges As solar cooker programs begin to think like marketers, they can assess “how they’re doing” by asking a series of questions to determine whether solar cooker marketing efforts are on the right track, including How are new customers learning about solar? Should we do more to help? Where are our best opportunities?
About the promoters of the project Name of Promoters Shuaibul Islam Ashrafun Naher Kazi Nigar Sultana Md. Zobayer Hasan Nayem Ahmmed Mst. Farida Yeasmin Mst. Taslima Naimeen Afsana Yeasmin Sharmin Akter Marzia Nur
Age 23 23 23 23 23 23 23 23 23 23
Net Worth 200000 200000 200000 200000 200000 200000 200000 200000 200000 200000
Schedule of implementation Tasks Acquisition of land Land Development Construction of Buildings Procurement of plant and Machinery Erection of plant and machinery
Starting Time 01/01/2012 01/02/2012 16/02/2012 01/02/2012 17/03/2012
End Time 31/01/2012 15/02/2012 16/03/2012 29/02/2012 01/04/2012
Time Duration 31 days 15 days 30 days 29 days 15 days
Trial production Commercial production
15 days …………….
Raw Materials Required: To build a sun oven we will need these raw materials – 1. Cardboard box 2. Scissors 3. Aluminum foil 4. Tape
5. Plastic wrap 6. Black paper 7. A rule
A. Sources of Supply: Here, Cardboard box will be collected from the local companies as it is massively produced in our country. And another important material Aluminum foil will be collected from MOZIR & CO. which is a reputed company in Bangladesh. Other items are available in the local markets.
B. Minimum Purchase quantity: As the raw materials are readily available in the market purchases will be made based on the purchase orders from the customers.
C. Arrangement made for regular supply of the required quantity of raw material: We will make regular contacts with the materials providers to ensure the supply of the raw materials. Man power Requirement Human resource management in today’s organization is instrumental in driving an organization toward its objectives. Successful human resource or man power management hinges on a company’s ability to attract and hire the best employees, equip them with the skills they need to excel, compensate them fairly, and motivate them to reach their full potential. Firms need to have the right number of people, with the right training, in the right jobs, to do the organization’s work when it needs to be done. Human resource specialists are the ones who must determine future human resource needs. Then they assess the skills of the firm’s existing employees to see if new people must be hired or existing ones retained. The solar cooker project needs at least 25 persons including some executives, stuffs and workers. The requirements are as follows:
No. of persons required
availability Executives: Production
Experienced, well educated
Far- sighted, Experienced
Finance & Accounting :
Member of board of directors
General Management :
Broad managerial skill
Supervisory staff optimist
Skilled workers perseverant
Semi skilled workers
Keen, Loves work
Locational Advantages of the Proposed Location Chittagong is the sea port of Bangladesh. Huge quantities of export-import are being done from the port all through the year. The communication facilities with the other districts are also satisfactory. So it will be fruitful to construct the factory and go-down in the Chittagong. The raw materials can be easily imported (if needed, though the local market has the availability of all the raw materials) through the port and then can be kept reserve in the godown. The finished goods can be transferred from factory to other district according to the demand. Also a proper type of marketing program in Chittagong can attract the importers and tourists of other countries. Thus a good opportunity to export can be created easily. Infrastructural Facilities (A) Transport facilities :
Transportation is a great factor for inventory based business. A large amount of taka is spent for transportation. But as the production department such as factory and godown is constructed in the Chittagong area, transport of raw materials and finished goods can be done without any hassles. The raw materials can be brought from other
districts on water. And also the transfer of the ordered finished goods will be done on water. This way of transportation is cheap and less time consuming and as being a river based country, there is a linkage between Chittagong and other districts through water way.
(B) Electric Power
At least a generator for backup.
Details of Fixed asset required for the project of â€œSolar cookerâ€? The project of Solar cooker is a new project in Bangladesh. The main goal of this project is to give the opportunity to cook at less cost and energy. There are many poor and middle class families in our country. The purpose of our project is to give the facility to cook which expand less energy and to save our scarce resources. It also reduces the complexity in cooking. The Details of Fixed asset required for the project are given below: a. Land: As the project is very new for us so that we selected our project that is very adjacent from the port area of Chittagong. We spend a large amount of money behind it. Land is used for making the cooker. On the basis of year 2011, we projected the future cost of land, which increases year by year. b. Land Development: For the proper use of this project land development is also very important and costlier. If we make the land unused then it accelerates huge cost for us because we spend large amount of money for land. For the development of our project it is one of the main criteria to develop land. We make the projected cost for land based on 2011. The cost of 2011 is divided into: Boundary set up: 8 feet throughout the whole project and cost are 5 lacs. Electricity, Water, gas and all other utilities: Total utilities cost 2 lacs Road and transportation: 2 lacs. Others: 1 lacs. c. Building: The building is a two storied building, where the 1 st and half of the 2nd floor is used as an administrative building and factory and the rest of the part of 2 nd floor is used as training centre.
The total cost of this building is 5 lacs taka.
d. Laboratory & Research center: Our laboratory and research center is also located at with the place of half acres of land. Here this place is used for the innovation of solar
cooker and all types of research related to it. Famous experts throughout the world are invited here for their valuable ideas about it.
For the installment of laboratory items and various tools, the total expenditure will be 200000 Tk.
e. Plant & Equipment: It is also required for our project. Several machines are used for manufacturing this product. Before choosing machinery we focus on the adaptability of environment and acceptability of it in our country. We imported some machinery from outside which is not being available in our country. This also accelerates costs.
Project cost Tools, spares, Accessories, Testing equipment: For low-cost panel type solar cooker we conduct a research project. The overall purpose of the research project is to attempt to improve the performance, reliability and cost-effectiveness of low-cost solar cookers for use in Bangladesh. We have conducted tests to determine the performance and feasibility of using cooking pots that incorporate a selective solar coating material. For this purpose we use different types of tools, spares, accessories and testing equipment. Miscellaneous fixed assets: These are the assets that are allied to solar cooker project but that do not form part of plant and machinery. These assets though do not form part of industrial equipments, are to be included in the project and adequately provided the project. Preliminary and preoperative Expenses: preliminary expenses essentially associate with activities involved in the formation of the project of solar cooker; pre-operative expenses are those which are connected with actions that are required for start up of solar cooker operations. The following expenses come under this head: •
Investigation fee, service charge etc to banks.
Commitment charge payable on loans offered by financial institution
Expenses on capital issues.
Other miscellaneous expenses during the project implementation stage.
Provision for Contingencies: The cost estimates of land, land development, building, plant and machinery, electrical, transport and erection etc that are made on certain assumptions. While actually implementing the project, it is more likely that there may be deviations between the estimated cost and actual cost. They are: •
The price of plant and machinery of solar cooker may rise; the sales tax, excise duty etc, may get revised on the higher side.
In the case of imported plant and machinery, the cost in terms of taka may increase due to adverse fluctuations in foreign exchange rates.
During implementation of the project there may be minor deviations required to suit the field conditions – some equipments which were not originally envisaged may be required to be included etc.
Working Capital Margin: Working capital margin is the difference between working capital requirement and working capital finance. In other words, it is the promoter’s contribution towards working capital requirements. In respect of the solar cooker project the component working capital margin can be replaced by working capital requirement. Since the components of project cost have been arrived at, it can be summarized as under:
a) b) c) d) e) f)
Particulars Land Land development Building Plant and Machine: 1) Indigenous 2) Imported Tools, spares, Accessories,Testing equipment Miscellaneous fixed assets : Transportation and erection charges for plant and machinery Office furniture Office equipments Preliminary and preoperativeExpenses Provision for contingencies : on buildings on plant and machinery 3) on other fixed assets Working capital requirement Total Project Cost
Sources of financing:
Amount 800000 200000 500000 100000 650000 250000
100000 50000 50000 1000000 200000 600000 500000 1000000 6000000
Often the hardest part of starting a project is raising the money to get going. The entrepreneur might have a great idea and clear idea of how to turn it into a successful business. However, if sufficient finance can’t be raised, it is unlikely that the project will get off the ground. Raising finance for start-up requires careful planning. The entrepreneur needs to decide: • •
How much finance is required? When and how long the finance is needed for?
What security (if any) can be provided?
Whether the entrepreneur is prepared to give up some control (ownership) of the startup in return for investment?
The following are the main sources of project finance: 1. Ordinary shares 2. Preference shares 3. Debentures 4. Bonds 5. Term Loans 6. Deferred credits
7. Capital investment subsidy 8. Lease financing 9. Unsecured loans 10. Internal accruals 11. Bridge loans 12. Public deposits
Ordinary (equity) shares Ordinary shares are the source of permanent capital. Ordinary shares are issued to the owners of a company. They have a nominal or 'face' value, typically of tk.10 . The market value of a quoted company's shares bears no relationship to their nominal value, except that when ordinary shares are issued for cash, the issue price must be equal to or be more than the nominal value of the shares. Preference shares Preference shares have a fixed percentage dividend before any dividend is paid to the ordinary shareholders. As with ordinary shares a preference dividend can only be paid if sufficient distributable profits are available, although with 'cumulative' preference shares the right to an unpaid dividend is carried forward to later years. The arrears of dividend on cumulative preference shares must be paid before any dividend is paid to the ordinary shareholders. Term loans A bank loan provides a longer-term kind of finance for a start-up, with the bank stating the fixed period over which the loan is provided (e.g. 5 years), the rate of interest and the timing and amount of repayments. The bank will usually require that the start-up provide some security for the loan, although this security normally comes in the form of personal guarantees provided by the entrepreneur. Bank loans are good for financing investment in
fixed assets and are generally at a lower rate of interest that a bank overdraft. However, they don’t provide much flexibility. Capital invest subsidy: Government provides subsidy for the setting up of industries. The subsidy offered is two types. Area subsidy and product subsidy. Deferred credits: Some machinery suppliers provide the facility of deferred credit, provided the credit-taker offers a bank guarantee. A project promoter who wants to avail the deferred credit facilities offered by a machinery supplier should approach a bank for offering guarantee for the repayment of deferred installments to the machinery supplier. Unsecured loans and bank’s short term borrowing: A bank overdraft is a more short-term kind of finance which is also widely used by start-ups and small businesses. An overdraft is really a loan facility – the bank lets the business “owe it money” when the bank balance goes below zero, in return for charging a high rate of interest. As a result, an overdraft is a flexible source of finance, in the sense that it is only used when needed. Bank overdrafts are excellent for helping a business handle seasonal fluctuations in cash flow or when the business runs into short-term cash flow problems (e.g. a major customer fails to pay on time). Credit card is a surprisingly popular way of financing a start-up project. In fact, the use of credit cards is the most common source of finance amongst small businesses. It works like this. Each month, the entrepreneur pays for various business-related expenses on a credit card. 15 days later the credit card statement is sent in the post and the balance is paid by the business within the credit-free period. The effect is that the business gets access to a free credit period of aroudn30-45 days. Short term loan from Grameen Shakti: For completing this project company can borrow money from Grameen Shakti NGO. They give loan to our project as it works for the rural development by providing solar facility. Table of sources of project financing Sources of project financing Shareholder’s equity Term loans Deferred credits Capital investment subsidy Unsecured Loans and bank’s short-term borrowing Internal accruals Short-term loan from Grameen Shakti Public deposit or Bank borrowing TOTAL financing of project
Economic Viability of Project:
Amount ( tk) 20,00,000 10,00,000 1,50,000 3,00,000 5,00,000 50,000 5,00,000 5,00,000 50,00,000
When a project is profitable or does not generate loss is economically viable. So before taking decision which project is accepted or not, economic viability acts as one variable behind it.
We determine project viability based on NPV, IRR or other factors. The possible sources of cash inflow and outflow for year 2011 are given below:
Sources of cash inflow and outflow: Cash Inflow Profit from selling Equity financing Debt financing Allowance from govt. Currency from other countries
Amount 400000 500000 1000000 500000 800000
Cash savings & fund from others
Cash Outflow Land purchase Raw material Land development Manufacturing cost Selling & administrative expense Building & research centre
Amount 500000 400000 600000 500000 300000 200000
The cash inflow is 3500000 and outflow is 2500000.
As we shown the details of cash inflow and outflow for 2011, now we project the succeeding yearâ€™s cash inflow and outflow based on 2011: Projected cash inflow and outflow: Cash inflow Cash outflow
2011 3500000 2500000
2012 3675000 2625000
2013 3858000 2756250
2014 4000000 2894063
2015 4200000 3038766
Now we calculate several variables based on the following information:
As the outflow of the project is 2500000 and inflow is 3500000 in 2011 so the project is profitable from this perspective. In the first year the project generates enough inflow to cover its outflow. We are hopeful that out project also becomes successful in the succeeding years which we shown through cash flow.
If the cost of capital is 10% then NPV of the project for several years are given below:
Year 2011 2012 2013 2014 2015
Cash inflow 3500000 3675000 3858000 4000000 4200000
PV of inflow 3181818 3037190 2898573 2732054 2607870
Outflow 2500000 2625000 2756250 2894063 3038766
PV of outflow 2272727 2169421 2070811 1976684 1886835
NPV 909091 867769 827762 755370 721035
NPV = PV of cash Inflow- PV of cash Outflow
Here we see the NPV for several years are positive so the project must be taken. As our project is new in our country, so we focus less on profit at first year. We focus more on the acceptability of the project to people. If people get the facility of solar cooker then it increases their standard of living by reducing cost and complexity. When this product spread all over the country, it accelerates exporting in other country. Year 2011 2012 2013 2014 2015
Cash inflow 3500000 3675000 3858000 4000000 4200000 â€˘
Outflow 2500000 2625000 2756250 2894063 3038766
Profitability Index 1.4 1.41 1.42 1.43 1.44
Profitability Index = PV of cash Inflow / PV of cash outflow
As the Profitability Index is greater than o and remain constant, so the project can be accepted. The prospect of this project is bright and we refer this based on net profit, total asset and return on asset. Year
Return on Assets
2011 2012 2013 2014 2015
460300 483315 507481 532855 559498
5000000 5250000 5512500 5788125 6077531
9.1% 9% 9.2% 9.3% 9%
The project return on asset is approximately same all over the years. So the prospect of the project is higher. Net Profit
From the graph we see that the net income of the project increase year after year.
ROA It shows the return by using assets.
The projects return on asset is approximately constant year by year. Total Assets
The assets of the project also increase year by year. So on the basis of the following variables we can say that the future of the project is prosperous. So it is a wise decision to take the project. What is a Cost Benefit Analysis? A cost benefit analysis is used to evaluate the total anticipated cost of a project compared to the total expected benefits in order to determine whether the proposed implementation is worthwhile for a company or project team. If the results of this comparative evaluation method suggest that the overall benefits associated with a proposed action outweigh the incurred costs, then a business or project manager will most likely choose to follow through with the implementation. A cost-benefit analysis has three parts. First, all potential costs that will be incurred by implementing a proposed action must be identified. Second, one must record all anticipated benefits associated with the potential action. And finally, subtract all identified costs from the expected benefits to determine whether the positive benefits outweigh the negative costs. Cost Benefit Analysis: Description Benefit (-) Cost: Power Fuel Wages & salaries Selling expense Interest on working capital Total cost Net benefit
Amount(tk) 1298300 324000 150000 100000 70100 100000 744100 554200
The positive net benefit and cost-benefit ratio 1.74 indicate that proposed action is potentially a worthwhile investment and should be further evaluated as a realistic opportunity
Sensitivity Analysis: A technique used to determine how different values of an independent variable will impact a particular dependent variable under a given set of assumptions. This technique is used within specific boundaries that will depend on one or more input variables, such as the effect that changes in selling price, fixed cost, or variable cost will have on a changes in the breakeven point (BEP). Sensitivity analysis is a way to predict the outcome of a decision if a situation turns out to be different compared to the key prediction(s). ……. Company ltd proposes to start a new venture for the manufacture of …... The estimates of the new venture are as under. Output per annum Expected sales revenue per two months Fixed cost Variable cost
: 10000 units : 2488400 tk. : 446000 tk. : 744100 tk.
A) If the selling prices rise to Tk. 261.28 per unit, find out its effect on BEP. B) If the fixed cost increases to Tk. 500000, find out its effect on BEP. C) If the variable cost increases by 10%, find out its effect on BEP. Analysis: Fixed cost Sales revenue Selling price per unit Variable cost Variable cost per unit
: 446000 tk. : 2488400 tk. : 248.84 tk. : 744100 tk. : 74.41 tk.
Break Even Point (BEP) =
= = 2556 unit A) When selling price rise to Tk. 261.28 per unit. BEP=
= 2387 unit. B) When fixed cost increases to Tk. 500000. BEP = = 2866 units C) When variable cost increases by 10%. BEP = =2671 units. Results: (A) Selling price per unit ( tk ) 248.84
BEP 2556 units
Increase in selling price ( % )
Increase in BEP (%)
Interpretation: From the above analysis we can state that 4.76% reduction in selling price results 7.08% increase in BEP. (B) Fixed cost
Increase in fixed cost
Increase in BEP
= 12.11 %
= 11.74 %
Interpretation: From the above analysis we can state that 12.11% increase in fixed cost results 11.74 % increase in BEP.
(C) Variable cost ( per unit)
Increase in variable cost
Increase in BEP
= 10 % = 4.5 % Interpretation: From the above analysis we can state that 10.0% increase in variable cost results 4.5 % increase in BEP. Finally, after the overall analysis we can easily conclude that out of the three factors ( selling price, fixed cost, variable cost ), BEP is more sensitive to the selling price. It is the study of how the variation (uncertainty) in the output of a statistical model can be attributed to different variations in the inputs of the model. Such type of variation in the output due to variation in the input is shown through this analysis. For these projects BEP is more sensitive to the selling price. Findings While working with the project, some opportunities and threats are founded. The opportunities seem very profitable. On the other hand, the threats can make the project an unsuccessful one. In case of the project, the findings are as follows: 1. We hope that the project will be welcomed by all classes of people as it is cheap and useful. People of all stages can afford it and if the appropriate marketing can be done, it would gain acceptance in the whole country. 2. The SUN OVEN is totally depends on nature. So it can discourage the public whether the proper utility of the oven will achieve or not. It is a great threat. 3. The major strength of the project is it is environment friendly. Now a day’s most of the fuels cause a huge pollution where the oven will make no smoke. 4. There is an opportunity of self employment. 5. A systematic marketing plan can initiate foreign export thus earning foreign currency. Conclusion The project “Grameen SUN Oven” has a great purpose. The purpose is to serve the society and save the energy by using the natural sun rays while a huge quantity of gas, Furness oil, and wood are burnt for cooking food. So this project needs govt. co-operation. If the govt. comes forward, the project can earn international recognition. Bibliography Related Websites: www.Wikipedia.com www.Google.com
Reference Books: Project Management K. Nagarajan 4th Edition