Wheat has been used as primary source for making flour There are basically six different classes

of wheat: Hard Red Winter, Hard Red Spring, Soft Red Winter, Hard White, Soft White and Durum The end products are determined by the wheats characteristics, especially protein and gluten content. The harder the wheat, the higher the protein content in the flour. Soft or low protein wheat having 8 11 percent protein are used in flour making ideal for cakes, pastries, cookies, crackers and Oriental noodles Hard flour containing 11 18 % proteins are made from high protein wheat, used in breads and quick breads. Durum is used in pasta and egg noodles. some producers add vitamins and minerals to replace those lost during milling

Flour is the product mainly obtained by grinding wheat kernels or berries. The kernel consists of three distinct parts: bran (14.5% of kernel weight), the outer covering of the grain; germ (2.5% of kernel weight), the embryo contained inside the kernel; and endosperm (83% of kernel weight), the part of the kernel that makes white flour. During milling, the three parts are separated and recombined accordingly to achieve different types of flours. The major types of flour include White flour, Bread Flour, All purpose flour, Cake flour and Semolina etc.

The production process of flour is mainly subjected to machine/method used particular to the desired output product. However a brief summary of the general operations in any particular production line can be illustrated under the following headings: Cleaning & Storing As wheat arrives in the mill it is passed through a cleaning process to remove coarse impurities and is then stored according to its quality. This is mainly determined by the hardness, protein content and gluten quality of the wheat. Washing & Sorting Washing begins with screening to remove coarse, fine materials and the grain is separated bysize, shape and weight. The finished product is then passed into conditioning bins.

Conditioning Conditioning takes place before milling to produce uniform moisture content throughout the grain. Moistening helps to prevent break-up of the bran (hard outer layer) during milling and improves separation from the floury endosperm (the mass that forms the white flour of the grain). Gristing After conditioning, different batches of wheat grain are blended together (gristed) to make a mixture capable of producing the desired flour. Milling In the Milling step, flour is produced by a sequence of breaking, grinding and separating operations until the desire flour type is produce. Milling is simply the separation of the bran and germ from the endosperm and the grinding for producing flour Packaging & Dispatching The final product is packaged in standards bags of 20 & 100 KGs.

Project Capacity The capacity of the proposed project would be 900 tons (0.9 millions kgs) on annual basis, assuming 300 working days a year, producing 3 tons of flour per day. Proposed Locations The proposed location for the establishment of the unit is Zarghoon Town North of Quetta District. Suitable Site The said project should be set up within the Industrial Area Sirki Road Quetta. Government wheat policy The main objective of the wheat distribution policy is to provide low priced wheat and flour to the general population. Wheat grain is provided to the flour millers at an issue price which is often lower than the private market price. Subsidies often come in the form of financial support for producers to produce higher volumes and support their incomes.

Utilities Requirement Electricity, Telephone, Gas Cost of Water Connection Water is required in ample quantity for the washing of raw wheat and for other associated requirements. For this purpose independent tube well will be required. The cost of tube well is Rs. 2.25 million. Vehicle requirement The proposed project will require mini truck i.e. Shehzor, costing around Rs. 1.25 Million and depreciation on the vehicle will be charged at the rate of 20% on written down value basis. Land & Building Requirement Total land required for the Flour Mill is approximately 2 Acres. Land price per Acre is taken at Rs. 3.125million (Industrial Estate Quetta) The total cost of purchasing the land is estimated at Rs. 6.25 million.

Total Plot Area( Acre) 2 Rate/Acre 3,125,000 TotalLandCost(Rs) 6,250,000

According to the census of 1998, the population of Pakistan was 132.35 million which rose to 174.54 million (estimated for 2009). This growth rate is a tremendous challenge to the existing infrastructure, and especially, it affects the food items supply in the country. This has given rise to demand of private sector to invest in establishment of flour mill. It contributes 14.4 percent to the value added in agriculture and 3.1 percent to GDP. Area and production target of wheat for the year 2009-10 had been set at 9045 thousand hectares and 25 million tons, respectively.

Further more the essence of flour has a vital role in our society as it provides upwards of 60 percent of the protein and carbohydrate in the average Pakistani diet. It has been observed that people belonging to any class of society (rich, middle class or poor) need and demand for flour process products, the poor may ignore other food related items but cannot ignore and avoid the bread, or other floor made products. Various surveys have measured food security according to three simple measures: Physical access to food (availability) Economic access to food Biological utilization of food (food absorption) Findings suggest that whereas physical availability of food (including wheat flour) is not an issue, consumers are constrained by poverty, low incomes and their inability to use the food adequately for proper nutrition. Using measurements for the (typical daily) requirements of protein and carbohydrate from cereals to calculate the wheat and flour supply/demand balance does indicate that there is a long standing deficit in supply, but this deficit could be met easily by improving the supply chain.

The growing population and strong local traditions of bread consumption suggest that the demand for wheat and wheat flour will continue to increase in the foreseeable future. Wheat based products are a major part of the diet in Quetta including Pakistan. Flour and bread (roti) plays a critical role in peoples lives. As the population has increased and the number of Flour mills available do not completely fulfill the requirements of people, therefore people of this region show keen interest in getting and having new Flour mills that would definitely lead to competition and this will lead to cheaper prices

1. Pay Back Period Cash provided by operations Year 0 1 2 (a)3 4 Cash flows (152,195)(b) 32,849 52,479 95,373 153,093(d) 32,849 52,479 95,373 153,093

Commutative Cash Flow 32,849 85,328 147,852(c) 248,466

PBP = a+(b-c)/d Year PBP = 3.029 3 years and 10 days

2. Internal Rate Of Return ICO = CFt/(1+IRR)^t Year Cash Flows 1 32849 2 52479 3 95373 4 153093

@ 10% (1+IRR)^t 1.10 1.21 1.33 1.46 Pv = @ 50% (1+IRR)^t 1.50 2.25 3.38 5.06 Pv =

CFt/(1+IRR)^t 29,863 43,371 71,655 104,565 249,454

ICO = CFt/(1+IRR)^t Year 1 2 3 4

Cash Flows 32849 52479 95373 153093

CFt/(1+IRR)^t 21,899 23,324 28,259 30,241 103,723

IRR = Low %age + x x= IRR = 0.26695487 36.70%

3. Net Present Value NPV = CFt/(1+IRR)^t -ICO Year Cash Flows 1 32,849 2 52,479 3 95,373 4 153,093

(1+IRR)^t 1.10 1.21 1.33 1.46 Pv = NPV =

CFt/(1+IRR)^t 29,863 43,371 71,655 104,565 249,454 97,259

4. Profitability Index PI= CFt/(1+IRR)^t /ICO Year Cash Flows 1 32,849 2 52,479 3 95,373 4 153,093

(1+IRR)^t 1.10 1.21 1.33 1.46 Pv = PI =

CFt/(1+IRR)^t 29,863 43,371 71,655 104,565 249,454 1.64

The liquidity of firm is measured by its ability to satisfy its short-term obligations. Liquidity refers to solvency of firms overall financial position-the ease with which it can pay its bills. They may include ratios that measure the efficiency of the use of current assets. We measure liquidity of Flour Mill by calculating following ratios:

a) Current ratio:
Current ratio is the measure of short term debt paying ability of the firm, calculated as: Rule of thumb is 2:1 Current ratio = Current assets Current liabilities Years Year 0 Year 1 Year 2 Year 3 Year 4 Total Current Assets Total Current Liabilities Current ratio 42,310 82,741 41,270 106,131 46,765 142,268 52,728 190,413 59,194

2.005
Current Ratio

2.269

2.698

3.217

3.5 3 2.5 2.005 Ratio 2 1.5 1 0.5 0 2.269 2.698

3.217

Year 0

Year 1

Year 2

Year 3

Year 4

Years

b) Quick ratio / acid test ratio: At a time it is desirable to access a more immediate position than that indicated by the current ratio. The acid test or quick ratio relates to most liquid assets to current liabilities. Measures assets that are quickly converted into cash and they are compared with current liabilities. Calculated as: Quick ratio = current asset inventory Current liabilities Rule of thumb is 1:1

Years Total Current Assets Inventory Total Current Liabilities Acid test ratio
2.5 2 Ratio 1.5 1 0.5 0

Year 0 42,310 39,813 -

Year 1 82,741 47,269 41,270 0.860

Acid Test Ratio

Year 2 106,131 55,838 46,765 1.075

Year 3 142,268 65,665 52,728 1.453

1.917

Year 4 190,413 76,920 59,194 1.917

1.453 0.86 1.075

Year 0

Year 1

Year 2
Year

Year 3

Year 4

c) Cash ratio: Sometimes the analysts need to view the ability of a firm from an extremely conservative point of view. For example the company may have pledged and its inventory or the analyst suspects severe liquidity problem with inventory & receivables. The best indicator to the companys short-run liquidity may be the cash ratio. Calculated as: Cash ratio = Cash + marketable securities Current liabilities Years Cash & Bank Balances Investments Total Current Liabilities Cash ratio Year 0 625 Year 1 4,330 41,270 0.105
Cash Ratio

Year 2 16,613 46,765 0.355

Year 3 37,265 52,728 0.707

Year 4 67,651 59,194 1.143

1.143 Ratios 0.707 0.355 0.105 Year 0 Year 1 Year 2 Year Year 3 Year 4

It is the ability to pay the debts mostly long term as indicated by the income statement and the others considered the firms ability to carry debts as indicated by the balance sheet. Creditors and mostly banks and lending institutions are interested because they have to ascertain about to recoup their finance.

Debt to equity ratio: Debt to equity is a computation that determines the entitys long run debt paying ability this computation compares the total debts with the total share holders equity. The debt to equity ratio also helps to determine how well creditors are protected In case of insolvency. Debt to equity ratio = Total debts (Short Term + Long Term Debt) X 100 Total stock holders equity Years Total Current Debts Total Non Current Debts Total Equities Debt to equity ratio Year 0 76,098 76,098 100.000 Year 1 41,270 55,328 88,148 109.586
Debt To Equity Ratio

Year 2 46,765 46,460 107,028 87.104

Year 3 52,728 35,709 140,068 63.138

Year 4 59,194 23,239 186,334 44.239

120 % 100 % 80 % 60 %

100

109.586 87.104 63.138 44.239

%age

40 %
20 % 0% Year 0 Year 1 Year 2 Year 3 Year 4

Year

Profitability ratio is a barometer of organizations profit & loss. Using this ratio they quantify which would be the best mode of financing that would yield the higher profitability. Profitability is the ability of a business to earn profit over a period of time. There are various measure of profitability which indicates the efficiency of operations and generating of revenues and profits. They include following

a) Gross Margin: It determines the managements expertise in managing the cost of goods sold. If cost of goods sold is higher the gross margin would be lower or vice versa. Gross margin = Gross profit x 100 Net sales Years Gross Profit Sales Net Gross margin Year 1 90,599 1,074,938 8.428% Year 2 159,621 1,273,388 12.535%
Gross Margine Ratio

Year 3 246,880 1,500,779 16.450%

Year 4 355,403 1,760,913 20.183%

25.00% 20.18% 20.00% 15.00% 10.00% 5.00% 0.00% Year 1 Year 2

Year

16.45% 12.54% 8.43%

Year 3

Year 4

b) Operating Margin: Measure of firms income they are generating from operations. Recognize the effect and the magnitude of operating expanses. Operating income margin = Operating income x 100 Net sales

Years
Operative Income Sales Net Operating Margin

Year 1
30,869 1,074,938 2.872

Year 2
90,993 1,273,388 7.146

Year 3
168,034 1,500,779 11.196

Year 4
264,845 1,760,913 15.040

Operating Income Margine

16 % 14 % 12 % 10 % 8% 6% 4% 2% -%

15.04 2.872 7.146 11.196

Year 1

Year 2
Year

Year 3

Year 4

c) Net Profit Margin ratio: Commonly used profit measure is return on sales, often termed net profit margin. This ratio gives measure of net income dollars generated by each dollar of sales.
Net Profit Margin, Return on sale ratio = Net income x 100 Net sales

Years Net income Sales Net Net profit margin

Year 1 12,049 1,074,938 1.121

Year 2 49,810 1,273,388 3.912

Year 3 97,014 1,500,779 6.464

Year 4 156,500 1,760,913 8.887

Net Profit Margine

10 % 9% 8% 7% 6% 5% 4% 3% 2% 1% -%

8.887
6.464 3.912 1.121

%ages

Year 1

Year 2

Year

Year 3

Year 4

d) Return on Asset: The rate of return on total assets indicates the degree of efficiency with which management has used the assets of the enterprise during an accounting period. Calculated as: Return on assets = EBIT x 100 Total assets

Years EBIT
Total assets Return on assets

Year 1 31,091
152,195 20.428

Year 2 91,935
184,744 49.763

Year 3 170,459
200,253 85.122

Year 4 269,566
228,504 117.970

Return on Assets

140 % 120 % 100 %

%ages

117.97
85.122

80 % 60 % 40 % 20 % -% Year 1 Year 2
Year

49.763 20.428

Year 3

Year 4

e) Return on Fixed asset: Income is earned by using the fixed assets of a business productively. The more efficient the production, the more profitable the business. This is an important ratio for all users of financial statements. Calculated as: Return on total asset = EBT X100 Avg. total assets Years EBT Total Fixed Assets Year 1 20,423 107,731 Year 2 84,423 100,279 Year 3 164,429 92,829 Year 4 265,256 85,375

Return On Fixed assets

18.957

84.188

177.131

310.695

Return on Fixed Assets

350 %
300 % 250 %
%ages

310.695 177.131

200 % 150 % 100 % 50 % -% Year 1 Year 2

Year

84.188 18.957 Year 3 Year 4

f) Return on equity: The return on total equity measures the return to both common and proffered shareholders. Compute as follows: Return on equity = EBT x 100 Stock holders equity Year 1 Year 2 20,423 76,098 26.837 84,423 88,148 95.774
Return on Equity

Years
EBT Stock-holders equity Return on equity

Year 3
164,429 107,028 153.631

Year 4
265,256 140,068 189.376

200 % 180 % 160 % 140 % 120 % 100 % 80 % 60 % 40 % 20 % -%

189.377 153.632

%ages

95.774

26.838

Year 1

Year 2

Year

Year 3

Year 4