pencil and pen production · pen and pencil production being a monopoly business, ... 3 market...

PENCIL AND

PEN

PRODUCTION

PEN AND PENCIL PRODUCTION 2017

1 Compiled by IBEST consultancy service

1 Executive Summary

The proposed business is on production of pen and pencil in Bhutan and it has potential to

produce domestically as the major raw materials are available. According to the Annual

Education statistics 2016, there are 522 schools, which consist of 486 public schools including

51 central schools, and 36 private schools with the total number of1 72, 741 student. The demand

for the both pen and pencil is likely to grow at a very fast pace keeping in view the future

economic growth in Bhutan leading to higher purchase power.

The pen and pencil have become most important items required by the students and along with

exercise book, pen and pencil constitute the major segment of the school supplies which are

mostly purchased in the market by the student. At present, there are no manufacturing facilities

for the production of pen and pencil in Bhutan and the requirement is being met through imports

from India.

Pen and pencil production being a monopoly business, it can render its product to entire school

in Bhutan

The sources of finance for the proposed business are as follows:

REDCL (Rural Enterprise Development Corporation Limited)

Loden Foundation

Self funding

Financial institutions at average rate of 12%

The report presents in detail the justification of the project, market analysis, Resources required,

technology used, plant location, environmental aspects, implementation of project, cost

presentation and financial analysis:

i. Justification of the Project: Every year a large number of pen and pencil are imported

form Indian and other countries. The proposed business has a monopoly power and

available of raw material in the Bhutan.

ii. Market Analysis: Presently there is no business that produces pen and pencil in Bhutan.

Every year number of school and student increases and there is high demand for imported

pen and pencil.

iii. Resources required: The main raw material for the production of pen and pencil is

Pencil slat, black lead, and glue, packing material, pipe, ink, nozzle and plain rapper. Part

from all the raw materials machinery, water and electricity are required.

iv. Technology required: The production of pen and pencil will use automatic machinery

which will be imported from Zhengzhou Gashili Machinery co. ltd and

www.CHINA.HAIJIANG.COM from china.

http://www.china.haijiang.com/



v. Plant location: Location of the business will be at Thimphu, Phuentsholing and Paro

since this place have high number of schools and student whereby the proposed business

can distribute it product.

vi. Environmental Aspects: The production of pen and pencil causes’ air and water

pollution as well as degradation of the environment but this may reduce up to a great

extent by the recommended measures.

vii. Cost Presentation and Financial Analysis:

Table 1: Project summary

Total Project Startup Cost 1,778,810

Total Investment 1,879,110

Working Capital 100,300

BEP 62009

ROI 9%

ROI on Net profit 30.9%



TABLE OF CONTENTS

1 Executive Summary ...................................................................................................................................... 1

2 Justification of the project ........................................................................................................................... 5

2.1 The need of the project ........................................................................................................................ 5

2.2 Competition Analysis ........................................................................................................................... 5

2.3 SWOT analysis ...................................................................................................................................... 5

3 Market Analysis .............................................................................................................................................. 6

3.1 Structure of the industry ...................................................................................................................... 6

3.2 Demand vs. Supply ............................................................................................................................... 7

3.3 Pricing and Marketing Strategies .................................................................................................. 7

3.4 Technological changes that could impact costing ................................................................... 8

3.5 Competitiveness of the project ....................................................................................................... 8

3.6 Packaging & Transportation ........................................................................................................... 9

3.7 Assessment of Comparative Advantage ...................................................................................... 9

3.8 Determine potential for marketing collaboration ............................................................... 10

4 Resources ..................................................................................................................................................... 10

4.1 Sources of inputs............................................................................................................................... 10

4.2 Sources of raw material ................................................................................................................. 10

4.3 Assess the availability of manpower & skills ......................................................................... 11

4.4 Assess the need for skill development ..................................................................................... 12

5 The plant ....................................................................................................................................................... 12

5.1 Choice of the technology ................................................................................................................ 12

5.2 Rate of consumption of power, fuel, utilities & consumables ......................................... 14

5.3 Man power requirement and organization chart ................................................................ 15

5.4 Extent of technical assistance needed including training ................................................. 15

6 Plant Location & Infrastructure with layout ................................................................................... 15

6.1 Raw material Availability .............................................................................................................. 15

6.2 Environmental aspects- Regulation & environment issues ............................................. 15

7 Project Implementation Schedule ....................................................................................................... 16

8 Financial Analysis ...................................................................................................................................... 16



8.1 Total Project capital Costs ............................................................................................................. 16

8.2 Working Capital Costs..................................................................................................................... 16

8.3 Cost of Production per unit ........................................................................................................... 16

8.4 Human Resource cost ..................................................................................................................... 17

8.5 Marketing Cost ................................................................................................................................... 17

8.6 Project profit and Loss Statement .............................................................................................. 17

8.7 Projected Cash flow statement .................................................................................................... 18

8.8 Projected Balance sheet statement............................................................................................ 19

9 Financial Ratio analysis .......................................................................................................................... 20

9.1 Interest on loan ................................................................................................................................. 20

9.2 Break Even Point .............................................................................................................................. 20

9.3 Return on Investment ..................................................................................................................... 20

9.4 Net Present Value and Internal Rate of Return..................................................................... 20

10 Conclusion ............................................................................................................................................... 21

11 References ............................................................................................................................................... 22



2 Justification of the project

2.1 The need of the project

With the growth in education sector, there is consequent rise in demand for the pen and pencil of

school supplies and every year more number of modern system of education both in government

sector as well as private sector are being set up. Consequently, there has been a change in the

demand for the proposed business.

The pen and pencil have become most important items required by the students and along with

exercise book, pen and pencil constitute the major segment of the school supplies which are

mostly purchased in the market by the student. At present, there are no manufacturing facilities

for the production of pen and pencil in Bhutan and the requirement is being met through imports

from India.

The proposed business has been drawn for the production of pen and pencil. The proposed has

two separate departments, the first for the production of pen and the second for the production of

pencil. As there is no such industrial unit’s production, there exist a good potential for

establishment of setting up of business in Bhutan. The proposed business unit would be equipped

with the machines for the production of pen and pencil. The ideal location for the proposed

business would be Thimphu, Phuntsholing, and Samdrupjongkhar as they constitute the major

market both school supplies as well as general market supplies.

2.2 Competition Analysis

The competitor includes mostly those of the producer from India. This imported Pen and Pencil

are of cheaper in price with high quality product. If the proposed business established in Bhutan,

the demand for the pen and Pencil will be high since the business have a monopoly power.

2.3 SWOT analysis

Strengths

Ideal location to run the business

Monopoly Business

Available of laborer

Weakness

Competitions from new entrance.

Poor access to distribution

Weak brands

Opportunities

Contribute o the nation’s economy

Growing number of schools and

students

Produce pen and pencil of better

quality

To reduce import of pen and pencil

and limit the outflow of foreign

exchange.

Threats

New entrance

Technological advance

Availability of similar product at

cheaper rate.

Threat of losing market.



The proposed business has a threat and weakness in terms of losing its market, advance

technology, and new entrance. However, the proposed business has a monopoly power to capture

all the market in the Bhutan as well as it will contribute to the nation economy.

2.1 Critical success factor

1) Monopoly Market

2) Location and it accessibility

3 Market Analysis

3.1 Structure of the industry

Manufacturer/Importers

Wholesalers

Retailers

Ultimate users



3.2 Demand vs. Supply

The country requirement for most type of pen and pencils are largely met through import.

According to the Annual Education statistics 2016, there are 522 schools, which consist of 486

public schools including 51 central schools, and 36 private schools with the total number of1 72,

741 students. The demand for the both pen and pencil is likely to grow at a very fast pace

keeping in view the future economic growth in Bhutan leading to higher purchase power.

Presently, there are no manufacturing units for Pen and pencil. The demand is being met through

imports. There being sufficient demand, both in school supplies sector as well as in open market

and the proposed unit is expected to have bright prospects for capturing a substantial share of

domestic market. As the unit is setup in the vicinity of Thimphu, Phuentsholing and Samdrup

Jongkhar, the distribution channels could be well utilized for marketing of the readymade pen

and pencil all over the Bhutan. Similarly, every student needs pen and pencil for noting down the

note in the school. The maximum life of pen is 7 days and pencil is 4 days, the student buys a

new pen and pencil and a demand becomes a recurring demand. A wide variety range of pen and

pencil in varying price range are available in the market and the proposed business needs to

product it at a reasonable price as per product being currently sold in the market

Government Private Total

Early Childhood Development

ECCD Centre 231 59 290

School Education

1) Primary school 307 14 321

2) Lower Secondary School 68 1 69

3) Middle Secondary School 71 2 73

4) Higher Secondary School 40 19 59

Sub-Total 486 36 522

Extended Classrooms 96 - 96

Central Schools 51 - 51

Schools with SEN programme & Special institutes 12 2 14

Source: Annual Education Statistics 2016.

3.3 Pricing and Marketing Strategies

3.3.1 Pricing Strategies

The proposed business will utilize media such as broadcast, newspapers, instagram and also

Facebook at certain interval of time to introduce the products in the market and also attract

more customers. The proposed business will distribute its product in 37 central schools in

Bhutan as well as shops around twenty Dzongkhag.



3.3.2 Marketing Strategies

Presently, most of the pen and pencil are being imported in Bhutan. As of now there are no

organized business units in Bhutan that produce pen and pencil and the requirement is being met

through imports. Accordingly, the following marketing strategies could be adopted by:

Marketing through trade channels by whole- sellers in major cities or direct sales to

stationery shops.

Distributing the pen and pencil around twenty dzongkhag schools and institutions.

The proposed business needs to mainly focus on school supply sector and market their products

through school students on major educational centers. The proposed business must identify shops

which could function as the retail outlets for selling its product. The business need to produce the

pen and pencil as per the demand of the customer with all the quality to that of imported one.

3.4 Technological changes that could impact costing

One of the biggest technological changes that can impact the way the unit would conduct

business in the future would be the progress of information technology in shaping e-commerce

and its adaption in the Bhutanese economy.

It may be used to find out the customers on line. Similarly, it may be possible to generate and

respond to customer enquiries on line and transact business with those who stay outside the

country. It has been also found out that most of the raw materials are imported. So, if these

things are produced within the country it would make the product more cost effective.

The basic impact of all this would help to reduce the cost and therefore the price of the product.

3.5 Competitiveness of the project The proposed business is on production of pen and pencil. This business has a monopoly power

in Bhutan and it could reduce the import rate of pen and pencil but it would compute against

India market.

The unit aspires to deliver quality product which would be beneficial for the student, institute

and market as a whole. It is expected that there would be a demand pull at the customer end

which can be further strengthened through innovative promotional strategies. The demand pull is

estimated to be significant thereby ensuring lowering of costs through economies of scale.



1.1 Special attributes desired by target customers

In general customers would prefer:

High quality lead pencil and pen

Water proof pen

However, the customer needs and wants may vary from one customer segment onto the other.

1.2 Terms &conditions and product specifications desired by target customers

The proposed business is for production of two distinct products, viz., Pen and pencil. The

proposed unit shall comprise of following two product departments.

1.2.1 Pencil Manufacturing Department: This department would be equipped with

the facilities for the production of pencil. The pencil will be of 3HB quality with

much softer, darker and quality writing.

1.2.2 Pen Manufacturing Department: This department would be equipped with the

facilities for the production of pen. The pen will be of high quality, long lasting

at the possible low cost.

3.6 Packaging & Transportation

The pen and pencil will be packed into “4 x 6” high quality paper and cardstock featuring

designs and each of the pack will include six cards, six envelopes and six sentiments for a final

touch. It needs to satisfy the objective to protects the quality of the product and provide

information to buyers, such as quality, producer and name of the producer, country, area, etc.

3.7 Assessment of Comparative Advantage

a) Abundance of Hydroelectric Power

Bhutan is an energy surplus state. 97% of its energy is obtained from hydro power. According

to Bhutan Trade Statistic 01st January- 31st March, 2017, total exports to India were Nu. 549.23

million. The cost of electricity is lower than many power deficient economies.

b) Availability of Water

Bhutan is endowed with rich perennial water resources fed with permanent glaciers, glacier

lakes and recurrent monsoons. The per capita mean flow availability is as high as 109,000 m3.

This compares very favorably with a developing economy like India which has per capita mean

flow availability as low as 1,588 m3.



3.8 Determine potential for marketing collaboration

There is potential for marketing collaboration at the customer end of the supply chain. The

proposed business can distribute its product to wholesaler and the schools in twenty

dzongkhag.

4 Resources

4.1 Sources of inputs Utilities required by the plant consist of electrify and water.

Electricity is required to run the production machinery and to provide lighting for the plant. So

except for very remote areas availability of electricity is not a handicap.

Water is required for general purposes and for supplying to the boiler, where steam is

produced to be supplied to the molasses tank. Bhutan is drained by many rivers flowing south

between these ranges and for the most part ultimately emptying into the Brahmaputra River in

India. The river basins are oriented north-south and are, from west to east, the Jadalkha, Torsa,

Raidak, Sankosh, Mao Khola/Aie, Manas and eastern river basins, this last basin being

composed of the Bada and Dhansiri rivers. Two wastewater treatment projects are being

implemented in the cities of Thimphu and Phuntsoling.

4.2 Sources of raw material For the proposed business major raw materials required for the production of pen and pencil are

pipe, Ink, Nozzle, Plain Rapper, Pencil salt, Black lead, Glue, Lacquer enamel and packing

material.

Ink: Ink is a liquid that contain pigments used to produce an image, text, or design.

Nozzle: Nozzle is a tube use to fill the ink. Nozzle can be of brass and other metal.

Pencil slat: Pencil slats are the wooden component used for pencil manufacturing to produce

wood-cased pencil.

Black Lead: The lead of the pencil is a mix of final ground graphite and clay powers.

Glue: Glue is used to inject in a groove. Glue helps to stick the groove slat in to sandwich to

prevent the breakage.

Lacquer enamel: Lacquer is used for the shiny finished applied to material.



4.3 Assess the availability of manpower & skills

According to the Labour Force Survey Report 2015 finds that the working age population which

is 15 years and above is estimated at 558, 959 people of which 352,953 people are in the labour

force and 206,006 people are not in labour force. The diagram below shows the percentage share

of employed person in 2015 by the type of enterprise highlights that 58% of the employed person

are in agriculture farming followed by 19.1% in private businesses and 7% in civil service

Figure 1. Percentage share of employed person by the type of enterprise, 2015

According to the Trading Economic report 2016 state that the unemployment rate in Bhutan have

decreased to 2.50 percent in 2016 from 2.60 percent in 2015.

Figure 2. Unemployment Rate in Bhutan (2006-2016)

However, higher technical courses for engineering and technology, international law and finance

are required to meet the requirement of the imminent future.



4.4 Assess the need for skill development

As the workforce is mostly unskilled, there is a need to develop their skills according to the need

of the industry. Workshops or on-site short term trainings may be organized by the suppliers of

machineries on how to control the temperature, operate machineries etc. The training should be a

combination of theory sessions, on the job coaching sessions and on the job supervision. For

people joining with no relevant experience training in their respective functional area would be

mandatory. There should be a periodic skill assessment done by the management on the basis of

observation of on the job performance. Based on the findings, a training calendar needs to be

drawn up

5 The plant

5.1 Choice of the technology An automatic mechanized plant has been used for the production of pen and pencil. The plant

has the capacity of producing 10000 set of pencil per month and 500 sets of pen per month.

For the production of pencil, automatic pencil production machinery is used and the machinery

will be imported from Zhengzhou Gashili Machinery co.ltd from China. The process starts with

the grooved slat which will be imported from India at the initial stage. The grooved slat is a half

pencil, is coated with the glue and the lead are placed in the groove and then covered with the

second slat. The block is dried in the drying machine and it’s passed through shaping machine

that shapes the raw pencil. The raw pencils are then lacquered in a painting machine, which is

made to apply three to ten times of lacquer coating depending on the quality of finish required.

After the final coat of lacquer, the pencil is placed in heading and sizing machine which sands

off excess wood and paint from the ends of the pencil and trims the pencil in good finished

length.

For the production of Pen, automatic pen producing machinery is used and the machinery will be

brought from China Haijiang.com ltd. For the pen production process the pipe and ink will be

imported from India. Raw plastic materials are injected into injection molds and the readymade

ink is filled into the pipe.

Pencil manufacturing process

Step

1: the wooden slats are formed/ shaped on the slat machine

Step

2: Pencil slat are treated with wax

Step

3: groovier machine cuts grooves in to slat to accept the writing core

Step Writing core is placed in to the grooves



4:

Step

5:

A second grooves is glued on to the first grooves by a lead layering and its dried in

drying machine

Step

6: The grooved slat is cut into individual pencils.

Figure 3: Pencil manufacturing process

Pen manufacturing process

Step 1: Making the Ink

Step 2: Stamping and forming

Step 3: Molding the housing

Step 4: Ink filling and assembling

Step 5: Final assembling, packaging and shipping

Figure 4: Pen manufacturing process

Step 1• Eight shallow groves are sawed lengthwise into each slat

Step 2

• Grooved slat are glued on top, sandwiching the leads

• The slats are fed through a cutting machine

Step 3

• Cut pencil are put into the drying machine

• The pencil are ready , packed, and used

Start: Raw pen

materials

Fill Ink pen cartridge with Ink

Press Plug into pen Barrel

Press Ink Pen

Cartridge into Pen Barrel

Place Pen cap on Pen

Finish : assembled

Pen



Details of supplier (pen and pencil production plant)

1. SHENZHEN GEREKE MACHINERY CO.,LTD

Address:No.19,Unit2,JiaDe Maluan Industry Park,Pingshan New District,

ShenZhen,GuangDong

Tel:0755-8990 6421

Fax:0755-8990 6385

Web:www.geruike.com

www.szgeruike.cn

E-mail:[email protected]

2. www.gsl-machine.com

Contact: Nancyle:

Mobile: 0086-13643842763

TEL\FAX:0086-371-60317344

Email: [email protected]

Yahoo: [email protected]

MSN: [email protected]

Skype: gashilinancy

3. Daphne Zhou

Tel:86-451-86646708

Fax: 86-451-86811059

Skype: meixue.zhou

We chat: 1322468646

What’s up: +8618345168420

Add: No.388 Songhua Road, Haping Centralized Zone, Economic Developing

Area.Harbin china 150090

5.2 Rate of consumption of power\, fuel, utilities & consumables The table below shows the annual requirement of utilities:

Sl. nos Description Annual consumption Unit

1 Electricity 175 Kwh

2 Water 3200 M^3

http://www.gsl-machine.com/

mailto:[email protected]



tel:86-451-86646708



5.3 Man power requirement and organization chart

SL.NOS Particulars Required no.

1 Manager 1

2 ADM cum Accountant 1

3 Technician 2

4 Salesperson 1

5 Skilled Workers 3

6 Wage Worker

8

5.4 Extent of technical assistance needed including training As the workforce is not so much skilled there is a need to develop their skills according to the

need of the industry. Workshops or on-site short term trainings may be organized by the

suppliers of machineries on how to control the temperature, operate machineries etc. The

training should be a combination of theory sessions, on the job coaching sessions and after that

on the job supervision. The duration of training will be of 2 weeks, 1 week for the theory and

on the job training and 1 week for the supervision at a pre-fixed rate. The duration of training

may be extended later on if required.

6 Plant Location & Infrastructure with layout

6.1 Raw material Availability Raw material for the production of the pen and pencil will be imported from india which would

be easy as Phuentsholing has close proximity to the Indian towns of Jaigaon and other.

6.2 Environmental aspects- Regulation & environment issues

The production process involved in the production of pen and pencil is basically a conversion

process from wood into pencil and plastic into a pen. There is no as such gaseous and liquid

affluent are generated in the process. Dying is the only process in the manufacturer of pen and

pencil which has pollution both noise and air. Some solid waste would be generated in the form

of plastic and other dust which can be easily disposed off. But the waste generation could be

minimized by using the method of economic cutting.



7 Project Implementation Schedule

PROJECT TIMELINE

Activities 2017

1st Month 2nd Month 3rd Month 4th Month

Feasibility study and

development of the project

proposal

Start of the Construction of

Semi-permanent Building

Purchase of Inventories

and Start of Production

8 Financial Analysis

8.1 Total Project capital Costs

Total Project Startup Cost 1,778,810

Total Investment 1,879,110

Working Capital 100,300

8.2 Working Capital Costs

Particulars Monthly Yearly

Advertising 500 6,000

Inventory Purchases 30,000 360,000

Miscellaneous 1,500 18,000

Payroll 33,000 396,000

Rent or Lease 10,000 120,000

Others: 25,300 303,600

Total 100,300 1,203,600

8.3 Cost of Production per unit

Year 1 Year 2 Year 3 Year 4 Year 5

Total Units 30,000 31,500 33,075 34,729 36,465

Cost of Production 1,210,922 1,258,502 1,308,461 1,360,917 1,415,997

Unit Cost of Production 40.36 39.95 39.56 39.19 38.83



8.4 Human Resource cost

MANPOWER COST

Particulars Monthly Year 1 Year 2 Year 3 Year 4 Year 5

Direct Labor

21,000

252,000

264,600

277,830

291,722

306,308

Salary &

Allowances

12,000

144,000

151,200

158,760

166,698

175,033

Wages

3,500

42,000

44,100

46,305

48,620

51,051

Total

36,500

438,000

459,900

482,895

507,040

532,392

8.5 Marketing Cost Following table shows the marketing cost for annually:

Particulars Monthly Yearly

Advertising 500 6,000

8.6 Project profit and Loss Statement

INCOME STATETMENT PROJECTION FOR 5 YEARS

YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5

Revenue

2,040,000

2,142,000

2,249,100

2,361,555

2,479,633

Cost of Goods Sold

621,600

652,680

685,314

719,580

755,559

Gross Profit / (Loss)

1,418,400

1,489,320

1,563,786

1,641,975

1,724,074

Expenses

589,322

605,822

623,147

641,338

660,439

Net Operating Income

/ (Loss)

829,079

883,499

940,640

1,000,638

1,063,636

Less: BIT (30%)

248,724

265,050

282,192

300,191

319,091

Net Income / (Loss)

580,355

618,449

658,448

700,446

744,545



8.7 Projected Cash flow statement

Projected Cash Flow Statement


Beginning Cash

Balance

936,700

1,814,920

2,737,051

3,705,289

Accts. Rec.

Collections

204,000

214,200

224,910

236,156

247,963

Loan Proceeds

1,879,110

Sales &

Receipts

1,836,000

1,927,800

2,024,190

2,125,400

2,231,669

Other:

Total Cash

Inflows

3,919,110

2,142,000

2,249,100

2,361,555

2,479,633

Available Cash

Balance

3,919,110

3,078,700

4,064,020

5,098,606

6,184,921

Advertising

6,000

6,300

6,615

6,946

7,293

Inventory

Purchases

360,000

378,000

396,900

416,745

437,582

Miscellaneous

18,000

18,900

19,845

20,837

21,879

Payroll

396,000

415,800

436,590

458,420

481,340

Rent or Lease

120,000

126,000

132,300

138,915

145,861

Other:

303,600

318,780

334,719

351,455

369,028

Subtotal

1,203,600

1,263,780

1,326,969

1,393,317

1,462,983

Other Cash Out

Flows:

Capital

Purchases

1,778,810

Subtotal

1,778,810

-

-

-

-

Total Cash

Outflows

2,982,410

1,263,780

1,326,969

1,393,317

1,462,983

Ending Cash

Balance

936,700

1,814,920

2,737,051

3,705,289

4,721,938



8.8 Projected Balance sheet statement

Projected Balance Sheet For 5 Years


Assets

Cash & Bank

936,700

1,814,920

2,737,051

3,705,289

4,721,938

Accounts Receivable

204,000

214,200

224,910

236,156

247,963

Prepaid Expenses

50,000

Other Current Assets

Total Current

Assets

1,190,700

2,029,120

2,961,961

3,941,444

4,969,901

Net Fixed Assets

1,469,489

1,210,167

950,846

691,524

432,203

Other Assets

Total Assets

2,660,189

3,239,287

3,912,807

4,632,968

5,402,104

Liabilities & Capital

Accounts Payable

486,113

1,351,900

2,355,034

3,453,829

4,657,559

Total Current

Liabilities

486,113

1,351,900

2,355,034

3,453,829

4,657,559

Long-Term Notes

Payable

1,593,720

1,268,938

899,325

478,693

(0)

Total Long-Term

Liabilities

1,593,720

1,268,938

899,325

478,693

(0)

Total Liabilities

2,079,833

2,620,838

3,254,359

3,932,522

4,657,559

Net Profit

580,355

618,449

658,448

700,446

744,545

Total Capital

580,355

618,449

658,448

700,446

744,545

Total Liabilities &

Capital

2,660,188

3,239,287

3,912,806

4,632,968

5,402,104



9 Financial Ratio analysis

9.1 Interest on loan


Interest 209,790 172,781 131,079 84,088 31,138

Loan Principle 291,807 328,816 370,518 417,509 470,460

Loan Balance 1,587,303 1,258,487 887,969 470,460 0

EMI 501,597 501,597 501,597 501,597 501,597

9.2 Break Even Point

BREAK EVEN X BREAK EVEN Y LABEL

62,009 4,216,612 break even unit =62009

9.3 Return on Investment

RETURN ON INVESTMENT

Product Year 1 Year 2 Year 3 Year 4 Year 5

Pencil(pkt) 5% 9% 12% 16% 20%

Pen(pkt) 3% 5% 8% 10% 12%

Total ROI 9% 14% 20% 26% 32%

9.4 Net Present Value and Internal Rate of Return

Net Present Value (NPV) 1,592,445

Internal Rate of Return (IRR) 38%



10 Conclusion

The proposed business is based on production of pen and pencil and until now there is no such

business established in Bhutan which acts as one of the advantage of the business since the

market can be captured with monopoly power. Even though the business has capability of

capturing with monopoly business in Bhutan. But the business not financially feasible since the

total start up cost leads to BNT 1,778,810, total investment BTN 1,879,110 and working capital

BTN 100,300.

Secondly, according to the Constitution of the Kingdom of Bhutan act, under Article 5

Environment, Bhutan should conserve the country’s natural resources and to prevent degradation

of the ecosystem, a minimum of sixty percent of Bhutan’s total land shall be maintained under

forest cover for all time. So, in order to produce pen and pencil the basic requirement is wood

and every year to produce pencil for 175,393 students will leads to destruction of environment.

Thirdly, the proposed business cannot compute with the India market price and quality since

they have a capability of producing high quality product at reasonable price which customer

prefer for



11 References Labour Force Survey Report 2015, Department of Employment, Ministry of Labour and

Human Resources, Royal Government of Bhutan (2015).

Statistical Yearbook of Bhutan 2016, National Statistics Bureau, Royal Government of

Bhutan (2016)

www.alibaba.com

Annual Education Statistics 2016

http://www.alibaba.com/

pencil and pen production · pen and pencil production being a monopoly business, ... 3 market...

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