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It is widely recognized that successful development of the tourism industry plays a

key role in the economic and social progress of a nation.

It is a big step forward in the recent Ethiopian history to open investment

opportunities in hotel and tourism for private investors.

With all potential in Ethiopia, such as the historic centers, the resort area, the
curative nature of hot springs and game parks, it is possible to earn substantial
amount of profit, foreign currency and open job opportunity from hotel and tourism

It is this potential that motivates the investor , Ato Amaluz Berkyas to invest his
resources in hotel Business in the Oromia regional state, eastern shoa
administrative zone, in a place called Ziway to establish an international standard
hotel under the name of Super Hotel at a total asset of Birr 12,000,000 / Twelve
Million/ of which 45% will be equity financed. The planning horizon of the project
is ten years.

The proposed project promote countries tourism industry by way of rendering

efficient, competitive and reliable service and other activities affiliated with its

The initial promotional works of a project will focus on building good will, inform
and make aware of service receivers what differentiated the hotel from others
through advertisement on news paper, Radio, TV and websites.

In order to penetrate to the market the project will provide quality customer
oriented service. Quality and reliable of services shall be geared to the highest
standard in order to promote the proposed hotel image and win customers
confidence. Strong link need to be established with customers and regular feed
back and consultation be carried out to identify their desire and tailor the service in
their interest.

The major objective of the project is to mechanize returns on the invested capital of
the project. However, the project will also have the following benefits
Sustain profitable market share
Generate revenue in the form of tax
Create employment opportunity
Earn foreign Exchange

As the region, Eastern Shoa, is dominated by tourism centers like Sodere,
Langano and Awash National Park, there is high demand for good international
standard hotel. The existing hotels are some how inadequate to provide high
quality services especially for foreign visitors, tourists and Business people.

A survey conducted on the availability of internationally acceptable hotel

facilities in the area indicates the need to establish such hotel accommodation
and facilities. In the same study, it is revealed that many Visitors and tourists
drive back to Addis Ababa late in the evening due to unavailability of
reasonable standard accommodation in the region.

The number of tourists and guest in the region is estimated to be ranged from
120 160; the average is being 140per day. With the hotels expected 25%
market penetration ratio, the average number of resident guests (those requiring
room accommodations) is expected to be 35 guests (25% of 140).

The occupancy rate of room per day is forecasted as follows:-

Number of tourists and guests requiring room accommodation 140
Market penetration ratio 25%
Resident guest per day 35

Expected room profile

Double Bed 80% of guests
Single Bed 20% of guests

Room Occupancy
Double Bed 80% of 35 guests = 28 guests/2 Guests per room 14 rooms

Single Bed 20% of 35 guests = 7Guests/1guest per room 7 Rooms

Room occupied per day 21rooms

Total number of rooms to be constructed 30 rooms

Occupancy rate = 21rooms occupied per day
= 70%
In addition to the resident guest, walk-ins (travelers and resident of Ziway) are
expected to be served in the hotel. The number of guests expected to increase at
10% on year six due to advertisement and expansion of tourism industry in the

The hotel will get all essential inputs for food processing and various types
of beverage from the local market. Today, there are many trading companies
like National trading company that are involved in supplying the local
market with different types of imported goods. The hotel when it commence
operation will provide bar and restaurant service with different types of
beverage and food. More over it will have super suited bed rooms equipped
with showers, television, telephone and Satellite dish and other related
facilities. Besides swimming pool, laundry and conference room services
will also be provided by the hotel.

As a marketing strategy for the proposed project will include increase
customer awareness, apply moderate type of price for all menu items and
will do promotional activities by using radio, TV, and websites.


Location is a crucial consideration because it affects the project ability to draw

customers. The proposed project is located in Oromia regional state east Shoa
administrative zone , Ziway.

Ziway is one of the fast growing city, 165 kms south east Addis Ababa. It is
about 2.5 hours drive from Addis Ababa. In particular, during the cold rainy
season of June to August and part of September it enjoys warm temperature and
comfortable weather and generally has an agreeable weather condition through
out the year compared to that of Addis Ababa.

With its rift valley lake and good weather, Ziway provides a pleasant resort area
for the residents of Addis Ababa, International tourists and business community
who wish to come for vaccationining. Further more the city is suited one of the
busiest road of the country that takes to Awassa and arba minch etc, thus most
travelers to and from these cities stop and stay for a day and overnight in Ziway.

3.2 SITE

The proposed hotel will be located in the city of ZIWAY 165 km from Addis

General Description Location
Project address Oromia region
Eastern Shoa Zone
Ziway city Woreda 1
Keble 02

The hotels project site will be on 10,000 m 2 flat area, adjacent to Lake Ziway
filled with several types of garden, trees and Varity of flowers and about 1km
from the main road.


The engineering aspect of the project deals with the land requirement, building
and site development. The land secured for the purpose of the project has an
area of 10000m2. It is secured through renting of Birr 2 per m2. from oromya
regional state Ziway.

The building cost includes, all cost of construction of bar, restaurant, 30super
suited bed rooms, standard swimming pool, kitchen, store, offices, and two deep
water well and cost to develop the area to international standard resort area.
The unit area plan and estimated cost are presented in detail in the bill of

Estimation of Construction Cost

The project Compound area = 10,000m2
Total Built up area = 1,000 m2

The Super Hotel is a ground plus two building, which consists of:-

On Ground floor
Conference Room
Reception, Office
Kitchen and Store

On first and Second Floor

Restaurant with 50seats
30Bed room with their Toilet

Total Construction Cost of the Project Birr 7,500,000.00

Building 70% Birr 5,250,000.00

Swimming pool (25 x 50m) 5% Birr 375,000.00

Resort site development Birr 1,875,000.00

Birr 7,500,000.00

Building Cost

Civil Work 40% Birr 5,250,000.00

Finishing Work 30% Birr 2,100,000.00

Electrical Installation 10% Birr 525,000.00

Sanitary Installation 20% Birr 1,050,000.00

Birr 5,250,.000.00

The organizational structure of the hotel is designed to ensure efficient operation,
cost effectiveness and flexibility. The relation ship between the different lines and
staff function would be clearly defined in the hotel procedure and operational
manual. Since every important function is supported by appropriate staff, activities
can be planned ahead in order to insure their execution. (SEE ANNEX 1)

In the process of manning vacant position the project will open job opportunity for
64 skilled and unskilled manpower. Due to the nature of the project the hotel will
be labor intensive

The proposed organizational structure of the envisaged project consists of one

General Manager. The Manager will be assisted by finance manager and personnel
and administrative manager. Two accountants will keep the accounts of the
business. Two head waiters will be employed to coordinate the operation of the bar
and the restaurant. In addition three receptionists, three cashiers, six bar men, ten
restaurant waiters, one chief cooker and seven cooks will be employed in order to
start operation.

More over, two store men, one purchaser, three drivers, two technicians, three
laundry men, seven cleaners and messengers, four gardeners, three guards and two
life savers will be employed to assist the operation and to perform the day to day
activities of the hotel.

The project analysis considers the availability of staffing in the market area tht has
been trained in food preparation, hotel and tourism.

The manpower requirement is expected to be fulfilled from Addis Ababa and

Ziway. The hotel will also provide training to employees periodically.


It is of utmost important to refer, at least in general terms, to the socio economic

contribution of the hotel in relation to the general development policy of the
country, and in particular to the benefits to be generated interims of employment,
transfer of technology, infrastructure development, economic growth etc. of Ziway
community in which the hotel operates.

As soon as the hotel becomes operational about 64 local people with different
educational, economic and social background will secure permanent employment
that alleviate, in a modest way, the acute unemployment problem of the city. It is to
be stressed that most of these employees will receive short term training in their
respective task/posts.

The economic benefits to be generated in the form of profit tax, sales tax,
employment tax etc; will have material contribution to the governments revenue
from the sector.

The construction work of the hotel in addition to providing immediate employment

for unskilled and skilled workers contributes immensely to the cities infrastructure
development and beauty.

The total planned investment in this project is Birr 12,000,000 / Twelve
This includes:-
Building, Swimming pool and resort site development. Birr 7,500,000
Equipment and furniture 2,100,000
Machinery. 900,000
Utensils (Glass ware, culturally and kitchen utensils). 600,000
Motor Vehicle 400,000
Working capital requirement
Cash 250,000
Inventory of Beverage 100,000
Inventory of Raw materials 100,000
Supplies 50,000 500,000
Total investment 12,000,000

Cost of machinery, equipment, furniture and utensil are rough estimation by

experts. The estimate is made by taking into consideration the current market
value and the requirement of these items for the proposed hotel. See annex two.

Cost of vehicle include two pick ups each costing 120,000/one hundred
thousand/ and a mini bus with cost of 160,000/One hundred sixty thousand/.

The working capital requirement includes investment in beverage, raw materials

for food, supplies and cash needed for daily transaction. The balance is expected
to increase starting from year 6 by 10% with increase in sales.

Cost of land isnt included as an investment item since the policy of the regional
Administration is renting land to investors on annual basis rather than selling or
leasing. The cost per square meter in ziway is birr 2 per year.

There is only a need to replace utensils at the end of the 5 th year when their
economic life ends and the vehicles and machinery are expected to serve up to
10years with out replacement.

About 9,000,000 /Nine million/ will be invested in the project at the

preproduction phase for the construction and acquisition of some assets. The
remaining 3,000,000/ Three million/ will be invested for furnition and finishing
in year one.


Out of the total financing to complete the project, furnitioning and make the
project operational, a sum of money amounting Birr 6,600,000.00/Six million
six hundred thousand/ which is 55% of the project cost is planned to be covered
by bank loan from construction and Business bank. The remaining 45% or Birr
5,400,000.00 /five million four hundred thousand/ will be contributed by the

The bank loan is of two types:-

1. Long term loan of 6,200,000.00 /Six million two hundred thousand/ to
finance the construction and will be payable within 10years at annual
interest rate of 10.5% per annum on remaining balance.

2. Short term loan in the amount of 400,000.00/ Four hundred thousand/ to

finance the working capital requirement at the rate of 10.5% interest per

The financing plan is summarized as follows:-

Source of fund
Source of fund Amount
Long Term Birr 6,200,000.00
Short Term Birr 400,000.00
Investment by owner Birr 5,400,000.00
Total fund required Birr 12,000,000.00

Note: - The current bank interest rate is 10.5% per annum for both short and
long term loan.

Long term loan Amortization Table

Year Repayment Interest (10.5%) Payment to Principal Balance

0 6,200,000.00
1 1,030,790.00 651,000.00 379,790.00 5,820,210.00
2 1,030,790.00 611,122.00 419,668.00 5,400,542.00
3 1,030,790.00 567,057.00 463,733.00 4,936,809.00
4 1,030,790.00 518,356.00 512,425.00 4,424,384.00
5 1,030,790.00 464,560.00 566,230.00 3,858,154.00
6 1,030,790.00 405,106.00 625,684.00 3,232,470.00
7 1,030,790.00 339,409.00 691,381.00 2,541,089.00
8 1,030,790.00 266,814.00 763,976.00 1,777,113.00
9 1,030,790.00 186,597.00 844,193.00 932,920.00
10 1,030,790.00 97,870.00 932,920.00 -

Interest on short term loan will be 400,000.00 x 10.5% = 42,000.00 per year.
Interest expense per year is summarized as follows:-

Year 1 2 3 4 5 6 7 8 9 10
Short term 42,000 42,000 42000 42,000 42,000 42,000 42,000 42,000 42,000 42,000
Long term 651,000 611,122 567,057 518,365 464,560 405,106 339,409 266,814 186,597 97,870
Total 693,000 653,122 609,057 560,365 506,560 447,106 381,409 308,814 228,597 139,870

The underlying assumptions used in preparing financial feasibility of the resort area
are briefly explained as follows.


All revenues and sales are made on cash
The revenue from rooms rent is forecasted based on the following assumptions

Total rooms available 30rooms (10single beds and 20 double beds)

Occupancy rate of rooms is expected to be an average of 70%
Room rent for Ethiopian is 40% discount on the rate of foreigners
At least 365 working days i.e. Bed nights are assumed in a year.
Guest profile is assumed to be 75% foreigners and 25% Ethiopians.
Of the room daily rented 2/3 is expected to be double bed and 1/3 single
The price per room type and guest profile is summarized as follows.

Price per Room

Type of room Foreigner Ethiopian
Double Bed USD 35 (Birr311) 187 Birr
Single Bed USD 20 (Birr178) 107 Birr
All prices include 10% sales Tax
1 USD = 8.89 Birr
See annex three
Based on 70% occupancy rate, rooms occupied per day will be:-
(70% X 30 rooms) = 21 rooms
2/3 X 21 rooms = 14 rooms of double bed
1/3 X 21 rooms = 7 rooms of single bed

i. Room income from double bed per year will be:
Foreigners = 75% X 14 X 365 X 311 = 1,191,908.00
Ethiopian = 25% X 14 X 365 X 187 = 238,563.00
Total income per year/ double bed 1,430,801.00
ii. Room income from double bed per year will be:
Foreigners = 75% X 7 X 365 X 178 = 341,093.00
Ethiopian = 25% X 7 X 365 X 90 = 68,346.00
Total income per year/ Single bed 409,439.00
iii. Total rooms revenue per year
Double Bed 1,430,801.00
Single Bed 409,439.00
Total 1,840,240.00
Less: sales Tax (10%) 184,024.00
Net room Revenue 1,656,216.00

The revenue is expected to increase by 10% starting from year 6 with increase
in occupancy rate.


i.. Forecasted number of guests
-Resident guest per day
14 double beds occupied per day = 28 persons
7 single beds occupied per day = 7 persons
Total 35 persons
- Walk-ins, in average per day
7 Guests on Break
13 Guests on Lunch
13 Guests on Dinner
Total guests per day

Break fast 35 + 7 = 42
Lunch 35 + 13 = 48
Dinner 35 + 13 = 48
All resident guests are assumed to take breakfast, lunch and dinner from hotel.
All prices include 10% service and 5% sales tax.

ii. Forecasted food sales

Based on average price of breakfast, lunch and dinner in limited
international standard hotel.

Number of guests Average price of Total sales per day

Meal Type
per day meal (Birr)
Breakfast 42 15.00 630.00
Lunch 48 30.00 1,440.00
Dinner 48 30.00 1,440.00
Total 3,510.00

Resident guest per day

Annual food sales 365 X 3510.00 = 1,281,150.00
Less 10% service charge 128,115.00
5% Sales tax 64,057.00 192,172.00
Net sales (Food) 1,088,978.00
See annex four
Food sales are expected to increase by 10% starting from 6 th year with increase
in the guest numbers.


The beverage sales per day with its type is forecasted as follows
All prices include 10% service charges and 5% sales tax.

i. Hot drinks
Includes Coffee, tea with milk, hot chocolate, cappuccino etc
It is estimated that resident guests will take 2cups per day
Walk-ins are expected to average 30 guests per day,
Thus the average number of cups sold per day will be
35 resident guests X 2cups/day = 70Cups
30 Walk-ins guests X 1cup = 30Cups
Total 100Cups
The average price of hot drink is = 5 birr per cup
Daily sales of hot drinks will be = 500 Birr
Annual sales 500 X 365 = 182,500Birr

ii. Soft Drinks

Includes Pepsi, Coca Cola , Fanta etc.
60% of the resident guests are expected to consume 2 bottles of soft drinks
with lunch and dinner.
Walk-ins are expected to average 60 guests
Average price per bottle is 5birr
The bottles sold per day will be:-
Resident guests 60% x 35 x 2 = 42
Walk-ins 60 x 1 = 60
102 x 5Birr/bottle = 510Birr/day
Annual sales 510 x 365 = 186,150.00

iii. Alcoholic Drinks

It is very difficult to associate number of guests per day and volume of
alcoholic drinks sold because the volume of drinks taken by individuals

depends upon their behavior. What is usually used in forecasting alcoholic
beverage sales is to estimate the average bottles sold per day from each type
of drink.
a) Beer
Projected Bottles/Tins Price per Total
sold per day Bottle/ Tin
Local Beer 120 Bottles 6 Birr 720.00
Imported Beer 40 Tins 15Birr 600.00
Daily Beer Sales 1,320.00Birr

1. Others
Types of Projected No No of Total Shots Price per Total sales
drink of Bottle/Tins shots per sold shot daily
sold per day bottle
Whisky 2 33 66 10 660.00
Imported 2 33 66 8 528.00
Cursive 1 24 24 15 360.00
Local hard 3 29 87 5 435.00
Total Sales 1,983.00

The annual sales from Alcoholic drinks will be

(1320 + 1983) x 365 = 1,205,595.00

Summary of Beverage Sales/Annual

i. Hot Drinks 182,500.00
ii. Soft Drinks 18615.00
iii. Alcoholic Drinks 1,205,595.00

Total 1,574,245.00
Less Service Charge 10% 157,425.00
Sales tax 5% 78,712.00 236,137.00
Projected Net Beverage Sales 1,338,108.00
See Annex five
i. Swimming pool
20 guests are expected to use the swimming pool daily
The charge per guest is estimated to be 5 Birr
The daily income from swimming pool service will be 20x30 = 600Birr
Total annual income will be 600 x 365 = 219,000
ii. Laundry
The laundry in addition to serving to the hotel, it is expected to generate income
from serving the guests. It is estimated that 40% of daily resident guests in average
will be charged 20 Birr.
Total annual income from laundry service will be
40 x 35 x 20 x 365 = 102,200.00
iii. Renting Conference Hall
The standard conference hall, which accommodates about 200 people is expected
to be rented 4 times in a given month at 2,000Birr per day.
Total annual income from laundry service will be
4 x 2000 x 365 = 96,000.00

Total other income

Swimming pool 219,000.00
Laundry service 102,200.00
Rent from conference hall 96,000.00

Total annual income 417,200.00


A/ Food and Beverage cost

Based on the information from some hotels in Addis Ababa (their name is omitted
based on their request), the cost interms of sales percentage has the following
Food costs 40% of food sale
Beverage costs 50% of Beverage sales
By using this rate to our hotel
Food costs will be 40% x 1,281,150.00 = 512,460.00
Beverage costs will be 50% x 1,574,245.00 = 787,123.00
Total Food and Beverage Cost 1,299,583.00

B/ Employee meal
The hotel will provide its employees meal service as follows.
No of employees Cost per meal Total Cost
Breakfast 64 1.50 96.00
Lunch 64 2.50 160.00
Dinner 64 2.50 160.00
Employee meal per day 416.00
Annual cost will be 416.00 x 365 = 151840.00

C/ Salaries and Wages

The Hotel will start with the following 64 employees which is the combination
of skilled and unskilled labor.
Position Quantity Monthly Salary Total Salary Yearly Salary

1. General Manager 1 3,000.00 3,000.00 36,000.00

2. Finance Manager 1 2,000.00 2,000.00 24,000.00

3. Personnel & Adm. Manager 1 1,500.00 1,500.00 18,000.00
4. Head Waiter 2 700.00 1,400.00 16,800.00
5. Receptionist 3 500.00 1,500.00 18,000.00
6. Accountant 2 600.00 1,200.00 14,400.00
7. Purchaser 1 600.00 600.00 7,200.00
8. Cashier 3 300.00 900.00 10,800.00
9. Bar men 6 300.00 1,800.00 21,600.00
10. Restaurant Waiter 10 300.00 3,000.00 36,000.00
11. Cleaners and Messengers 7 200.00 1,400.00 16,800.00
12. Store men 2 400.00 800.00 9,600.00
13. Drivers 3 300.00 900.00 10,800.00
14. Gardeners 4 150.00 600.00 7,200.00
15. Guards 3 200.00 600.00 7,200.00
16. Chief Cook 1 800.00 800.00 9,600.00
17. Cooks 7 400.00 2,800.00 33,600.00
18. Technician 2 500.00 1,000.00 12,000.00
19. Laundry men 3 300.00 900.00 10,800.00
20. Divers (Life Savers) 2 250.00 500.00 6,000.00
TOTAL 64 25,000.00 326,400.00
Salaries are expected to increase 10% every two years

D/ Insurance expense
The insurance premium requirement for the fixed assets of the Hotel is estimated
by Global insurance Co. as follows.

Motor Birr 6,305.00/year

Fire and Lightning Building Birr 5,518.00/year
Fire and Lightening Equipment and Furniture Birr Birr2,210.00/year
Fire and Lightning Machinery Birr 950.00/year
Bulglary and House breaking Equp. And Furn. Birr 5,959.00/year
Workmen Compensation Birr 23,278.00/year
Insurance expense will be increased at the end of five year

E/ Deprecation schedule
Item Investment Depreciation Rate Year I Year 2-5 Year 6-8 Year 9-10
Cost Dep./Year Dep./year Dep./year Dep./Year
Building 7,500,000.00 5% 375,000.00 375,000.00 375,000.00 375,000.00
Equipment and 2,100,000.00 10% 210,000.00 210,000.00 210,000.00 210,000.00
Machinery 900,000.00 16%- First year 144,000.00 108,000.00 108,000.00 -
12% thereafter
Utensils 600,000.00 20% 120,000.00 120,000.00 120,000.00 120,000.00
Vehicles 400,000.00 20% 80,000.00 80,000.00 - -
Depreciation/Year 929,000.00 893,000.00 813,000.00 705,000.00

Utensils costing Birr 600,000.00 will be replaced at the end of year 5.

Vehicles will be deprecated only for 5 years, since they can serve for ten
years with out replacement; deprecation from year 6-10 is zero.

F/ Other operating expenses

i. Utilities
Forecast for utility is as follows
Projected cost per Month
Electricity Birr 9,000.00
Telephone Birr 4,000.00
Water Birr 7000.00
Birr 20,000.00
Annual utility expense 20000 x 12 = 240,000.00

ii. Advertising and Selling

The Hotel is expected to incur advertising costs in order
To attract guests. It is estimated that birr 25,000.00
Can be average cost spent for this purpose.

iii. Rent Expense
The hotel is expected to pay to the regional administration
Birr 2 per square meter for 10,000 square meter of land
Occupied as site. The annual rent expense will be
2 x 10,000 = Birr 20,000

iv. Miscellaneous
Includes various costs that will be incurred by the hotel.
i.e Maintenance, training, license fee, water filtering
Chemical cost, fuel cost and other general expenses
are estimated to be Birr 60,700.00.


A. Projected balance Sheet
Super Hotel
Projected Balance Sheet
July 1, Year 1

Assets Liabilities & Capital
Current Assets
Cash 250,000.00 Liabilities
Inventories 200,000.00 Short Term Loan 400,000.00
Supplies 50,000.00 Total Current Liab. 400,000.00
Total Current Assets 500,000.00 Long term debt 6,200,000.00
Fixed Assets Total Liabilities 6,600,000.00
Buildings 7,500,000.00
Equipment & Furn. 2,100,000.00
Machinery 900,000.00 Owners Equity
Utensils 600,000.00 Amazel Berkyas Capital 5,400,000.00
Vehicles 400,000.00
Total Fixed Assets 11,500,000.00
Total Assets 12,000,000.00 Total Lab. & Cap. 12,000,000.00

B. Projected Income Statement

Income tax is 35% of income

It is estimated that at the end of 10 th year 75% of the book value of fixed
assets will be recovered as salvage value i.e

Book value of fixed assets at the end of year 10 Birr3,750,000.00

Salvage value to be recovered 75% x 3,750,000 = Birr2,812,500.00
Net Loss from disposal at the end of year ten Birr 937,500.00

Recovery of Net working Capital

Current assets Birr 500,000.00
Current Liabilities Birr 400,000.00
Birr 100,000.00

C. Cost of Capital
Taking 14% which is average currently required rate of return by hotel
owners and cost of debt is 10.5%, the weight average cost of capital of the
hotel is determined as follows.
Source of Finance Weighted %age of Total Cost WACC
Debt 0.55 10.5% 0.057
Equity 0.45 14% 0.063
Cost of Capital 0.120

8.4 Decision Model

The project is appraised using Net present value, Internal rate of return and
profitability index.
i. Net present value
At 12% rate of cost of capital
Time Cash Flow Discount factor 12% Present Value
0 -9,000,000.00 1.00000 -9,000,000.00
1 -898,894.35 .89285 -802,577.82
2 2,074,548.35 .79720 1,653,829.94
3 2,038,259.60 .71180 1,450,833.18
4 2,021,217.40 .63550 1,284,483.66
5 1,379,433.05 .56740 782,690.31
6 2,143,532.65 .50660 1,085,913.64
7 2,095,291.10 .45250 948,119.22
8 2,069,882.85 .40390 836,025.68
9 1,976,234.15 .36060 712,630.03
10 5,185,804.70 .32200 1,669,829.11
NPV 621,776.97

Since the net present value is positive the project should be accepted

ii. IRR / internal rate of return/

Using excel formula the IRR of the projects cash flow is 13.24%

Since IRR > cost of capital, the project should be accepted and

iii. Profitability Index

It is the ratio of PV of expected cash flow over the life of a project to net
PI= PV of cash flows
Initial out lay

= 9,570,636.97 = 1.07
The profitability index is > 1. Therefore, the project is feasible.


As the feasibility study of the project clearly indicated implementing and

proceeding with the project idea is advisable. This is because the financial
feasibility analysis indicates that the net present value of the projects net
cash flow is positive. Besides, the internal rate of return of the project is
greater than the required rate of return for the project. The profitability index
is also more than one.

In addition to its financial viability, the establishment of the hotel has a

positive impact in the development of hotel and tourism industry in the

country. The contribution of project idea towards the alleviation of the acute
unemployment problem of the country is also worth mentioning. Moreover
revenue for the government in the form of income tax and sales tax is
another form of social benefit that can be derived by establishing the hotel.

In general, considering the projects financial feasibility and social benefit, it

is advisable to implement the project.