1. Pre-Feasibility Study
SOCKS MANUFACTURING UNIT
Prepared By: WAQAR HUSSAIN
Student No: 08023008
Subject: MANAGEMENT
CHINA UNIVERSITY OF
PETROLEUM

2. Pre-Feasibility Study Socks Manufacturing Unit
1 PURPOSE OF THE DOCUMENT ...............................................................................................
2 PROJECT PROFILE ....................................................................................................................
2.1 OPPORTUNITY RATIONALE ......................................................................................................
2.2 PROJECT BRIEF .......................................................................................................................
2.3 MARKET ENTRY TIMING .........................................................................................................
2.4 PROPOSED BUSINESS LEGAL STATUS .......................................................................................
2.5 PROJECT CAPACITY AND RATIONALE .......................................................................................
2.6 PROJECT INVESTMENT .............................................................................................................
2.7 PROPOSED PRODUCT MIX ........................................................................................................
2.8 RECOMMENDED PROJECT PARAMETERS ...................................................................................
2.9 PROPOSED LOCATION ..............................................................................................................
2.10 KEY SUCCESS FACTORS/PRACTICAL TIPS FOR SUCCESS ............................................................
3 SECTOR & INDUSTRY ANALYSIS ...........................................................................................
3.1 SECTOR CHARACTERISTICS .....................................................................................................
4 MARKET INFORMATION .........................................................................................................
4.1 LEADING EXPORTING COUNTRIES OF COTTON KNITTED SOCKS IN THE WORLD .........................
4.2 TARGET CUSTOMERS ..............................................................................................................
5 PRODUCTION PROCESS ...........................................................................................................
5.1 PRODUCTION PROCESS FLOW ..................................................................................................
5.2 PRODUCT MIX OFFERED ..........................................................................................................
5.3 RAW MATERIAL REQUIREMENT ...............................................................................................
5.4 MACHINERY REQUIREMENT ....................................................................................................
5.5 FURNITURE & FIXTURE ...........................................................................................................
5.6 MOTOR VEHICLES .................................................................................................................
6 HUMAN RESOURCE REQUIREMENT...................................................................................
7 LAND & BUILDING REQUIREMENT ....................................................................................
7.1 LAND REQUIREMENT ............................................................................................................
7.2 RECOMMENDED MODE ..........................................................................................................
7.3 UTILITIES REQUIREMENT ......................................................................................................
8 FINANCIAL ANALYSIS............................................................................................................
8.1 PROJECT COSTS ....................................................................................................................
8.2 PROJECTED INCOME STATEMENT ...........................................................................................
8.3 PROJECTED BALANCE SHEET .................................................................................................
8.4 PROJECTED CASH FLOW STATEMENT .....................................................................................
9 KEY ASSUMPTIONS .................................................................................................................

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

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

5. Pre-Feasibility Study Socks Manufacturing Unit
2 PROJECT PROFILE
2.1 Opportunity Rationale
Oppo unit Rat
Knitted socks are an item of general use. These have a sizeable market at home and also
have an export potential. Cotton socks, as compared to nylon socks, are subject to
rapid replacements. Further, due to higher rate of urbanization, local demand has also
increased manifolds in recent years. So this validates the opportunity to set up a
new sock manufacturing unit to capture the need of expanding market.
2.2 Project Brief
ect
Socks are broadly classified into two main categories, cotton and nylon or blended
socks. Cotton socks are specially preferred by sportsmen, besides their normal use and
also have export potential as well.
Cotton sports socks are further classified into two types: Pouch socks and reel socks.
The
proposed project will be manufacturing 60% pouch socks and 40% reel socks. It will be
started with 30 machines. All the equipment for the project is supposed to be new.
Second hand machinery can also be sued to reduce the cost of project, which is easily
available in the market. The project will be started with 70% initial year capacity.
2.3 Market Entry Timing
ing
Various products and services have high dependence on their commercialization timing
and delivery to the customers. But the socks manufacturing unit can be started at any
time during the year.
2.4 Proposed Business Legal Status
ine
The said project can be a proprietorship or a partnership and even it can be registered
under company law with corporate law authority. Selection totally depends upon the
choice of the entrepreneur. This pre-feasibility assumes the legal status of a
sole proprietorship.
2.5 Project Capacity and Rationale
ect Cap Rat
Selection of project size is really critical. After doing thorough market research, it is
decided that the proposed pre-feasibility will be based on 30 machines. As it is
assumed that all the production of the unit will be exported, a sizeable production is
required. 30 machines production can be exported in one container. Each machine will
be having a capacity of manufacturing 55 dozens pair of socks per 24 hours. The
proposed project can always be started with more machines. This feasibility study is
based on 30 machines which is the minimum viable size for a sock manufacturing unit.
The project will be working on three shift
basis.
2.6 Project Investment
ect
Total cost of the project is worked out in the table
below:

7. Pre-Feasibility Study Socks Manufacturing Unit
Table 2-1 Project Costs
ect Cos
Capital Investment CNY64,987,928
Working Capital Requirement CNY5,376,606
Total Investment CNY70,364,533
The proposed pre-feasibility is based on the assumption of 50% debt and 50% equity.
However this composition of debt and equity can be changed as per the requirement
of the investor.
Table 2-2 Project Financing
ect ina ing
Debt 50% CNY35,182,26
Equity 50% 7
CNY35,182,26
Total project Investment 7
CNY70,364,53
Table 2-3 Viability
bil 3
IRR 24%
NPV @20% CNY15,610,58
Pay Back Period (years.) 3 5.29
2.7 Proposed Product Mix
duc
The proposed project will be producing both pouch socks and reel socks. The
composition of production will be as follows:
Table 2-4 Product Mix
duc
Product Production capacity per 24 Percentage Annual Production
hours Production (Dozen pairs)
Pouch Socks 55 dozens pair of socks 60% 346,500
Reel Socks 45 dozen pair of socks 40% 189,000
535,500
2.8 Recommended Project Parameters
eco nde ect
Capacity Human Resource Technology/Machinery Location
535,500 dozens 128 Imported Huangdao
pair per year
2.9 Proposed Location
The said project can be started in any industrial area. It is recommended that an area
should be selected which is near to the port and export of the manufactured product
may become easy. Or otherwise it should be established in an area where raw
material is easily available. It may have industrial area of HuangdaoQingdao.

8. Pre-Feasibility Study Socks Manufacturing Unit
2.10 Key Success Factors/Practical Tips for Success
Succes ips Succes
There are many units existing which are indulged in socks manufacturing but still they
are not successful in catering the demand. So there is a potential for new entrepreneurs
to enter the market. Key success factors will be:
• Wastage ratio of production should be kept at minimum.
• Advance orders for sale can ensure the success of the business.
• Strong controls on purchase price of raw material
• Quality maintenance will play an important role as it is assumed that 100%
production will be exported.
3 SECTOR & INDUSTRY
ANALYSIS
3.1 Sector Characteristics
ect
Cotton sports socks manufacturing, which is a comparatively new phenomenon, has
started since, last 40–50 years and its consumption has increased rapidly with the passage
of time as more and more people became health conscious and adapted athletic life.
The socks production in general has been tradition since inception of China. Jiangsu
and Zhejiang have been leading cities having family trade of socks manufacturing and
marketing within China. Mostly socks in China are produced on old double cylinder
dress socks machines and supplied to local distributors for local consumption as well
as exported.
4 MARKET INFORMATION
ARK ION
4.1 Leading Exporting Countries of Cotton Knitted Socks in the
ding ing Count Cotton tte
World
Wor
Italy is the leading exporter of cotton knitted socks in the world and exports majority
of the product to countries like USA, Japan and Germany. The details of the major
exporters in the world are given in the below table:

9. Pre-Feasibility Study Socks Manufacturing Unit
1
Table 4-1 Major Exporters of Cotton Knitted Socks in 20031
Cotton Knitte
Countries Value in $ (000)
Italy 930
China 890
USA 339
Turkey 527
Korea 343
Germany 264
Mexico 162
France 103
Taiwan 96
Belgium 138
4.2 Target Customers
Socks are being exported mainly to USA, UK, France, Germany, Japan, Netherlands, and
Canada. Export of socks is not subject to quota restrictions.
Due to increase in awareness of importance of adapting athletic life for a better health,
the demand for sports socks have been increasing with every passing year in countries
like USA, European countries and Middle East.
The leading importers of sports socks in the world are given in the below
table:
Table 4-2 Leading Importers of Sports Socks in the World in
ding Spo Wor
2
2003
2003
Countries Value in $ million
USA 1,148
Germany 723
Japan 501
United Kingdom 467
France 447
Netherlands 243
Belgium 173
Mexico 102
Italy 157

11. Pre-Feasibility Study Socks Manufacturing Unit
5 PRODUCTION PROCESS
DUCT ION
5.1 Production Process Flow
duc
The following figure shows the production process flow of socks manufacturing
unit:
Figure 5-1 Production Process Flow
duc
5.2 Product Mix Offered
duc ffe
The proposed project will manufacture knitted cotton sports socks especially to cater to
the international market. The business will produce high quality sports socks for men,
ladies and children.
The proposed project will produce the following types of cotton sports
socks:
1. Pouch Socks
2. Reel Socks
5.3 Raw Material Requirement
quir
China is a cotton growing country and has a major advantage of availability and lower
prices. Cotton fiber produced in China is of middle or short staple and of relatively
coarse grade. The cotton yarns produced by China cotton especially of counts 8s, 10s
and 12s are appropriate and ideal to produce soft sports socks. This is the major
reason that cotton sports socks quality produced by China’s cotton yarn is appreciated
in the international market.
The weight of an average pair of socks will be approximately, 65 grams. Raw material
used in cotton sports socks is about 70% cotton yarn and rest 30% is nylon, polyester,
acrylic or lycra etc, which is available in Pakistan.

12. Pre-Feasibility Study Socks Manufacturing Unit
5.4 Machinery Requirement
hine quir
A total number of 30 “Single Cylinder 4 Feed machines” will be installed, out of
which
18 machines will be used to manufacture pouch socks and 12 machines will be used for
manufacturing reel heel socks. Second hand machinery is also readily available in the
market and the price is approximately half the price of the new machines. Second
hand machinery can also be used to manufacture both type of socks.
Following table shows the machinery & equipment
requirement:
Table 6-1: Machinery & Equipment
quipm
Requirement
quir
Machine Description Make No of Total Amount
Unit in CNY
Lonati Single Cylinder 4
Feed (pouch heel) Imported 18 24,683,033
Lonati Single Cylinder 4
Feed (Reel heel) Imported 12 16,455,355
Rosso Automatic Linear
Linking Machine Imported 4 2,742,559
Bleaching machine Locally available 4 1,062,118
Hydro extractor Locally available 2 212,395
Dryer Locally available 4 637,329
Boarding/Setting Machine Locally available 6 318,810
Air Compressor Imported 1 1,223,867
Diesel Generator Locally available 1 1,520,733
Boiler 3 ton Locally available 1 1,593,322
Transformer Locally available 1 477,924
Socks Reversing Machine Imported 3 1,142,733
Quality Control Machine Imported 1 304,729
Electric wiring, Steam piping
Etc. per Machine Locally available 1 2,622,115
Water Pump including bore Locally available 1 282,800
Total 55,279,821
The freight & handling charges and installation cost of the machinery is estimated as
below:
Table 5-2 Other Equipment Charges Details
quipm
Freight & Handling Charges as % of CIF price 5%
Installation Charges as % of Price 1%
5.5 Furniture & Fixture
nit
Following furniture and fixtures will be required for factory and management offices.

14. Pre-Feasibility Study Socks Manufacturing Unit
Table 5-4 Details of Furniture and Fixtures
nit
Items No. of Items Total Cost (CNY)
Computers 10 90,000
Printers 1 25,000
Photocopy Machine 1 100,000
Fax Machine 1 10,000
Telephone Sets 5 2,500
Air Conditioners 2.00 40,000
Office Furniture 1.00 150,000
417,500
5.6 Motor Vehicles
hic
The proposed project will also be using a Loader truck for transportation purposes. The
truck will be costing Rs. 1,100,000 and the depreciation will be charged at the rate of
20% on written down value basis.
6 HUMAN RESOURCE
ESO URCE
REQUIREMENT
Both skilled and unskilled labour will be required for the paper cone business. Some
direct labor will be working on three shift basis and some will be working on one shift
basis. Direct labour for the factory includes following human resources:

15. Pre-Feasibility Study Socks Manufacturing Unit
Table 6-1 Human Resource
Hum rce
Description No. of No. of Salary per Annual
Shifts employees Month Salary
(CNY) (CNY)
Knitting Machine Operator 3 10 5,500 1,980,000
Knitting Supervisor 3 1 5,000 180,000
Bleaching Helper/ Bleaching 3 1 3,500 126,000
Machine
Quality/Linking/Pressing/Pac 3 20 3,500 2,520,000
king Staff
Boiler Assistant 3 1 10,000 360,000
Technician 3 2 3,500 252,000
Janitorial Staff 3 2 2,500 180,000
Total Direct Labor 5,598,000
Production Manager 1 1 25,000 300,000
Bleaching Master 1 1 25,000 300,000
Boiler Engineer 1 1 15,000 180,000
Knitting Master 1 1 25,000 300,000
Technical supervisor 1 1 4,500 54,000
Quality Incharge 1 1 25,000 300,000
Other Direct Labor 1,434,000
GM 1 1 50,000 600,000
Finance Manager 1 1 25,000 300,000
Accountant 1 1 10,000 120,000
Purchase Officer 1 1 10,000 120,000
Assistant Accountant 1 1 7,000 84,000
Store Supervisor 1 1 7,000 168,000
Office Boys 1 1 2,500 60,000
Security Guard, Gate Keepers 1 1 3,000 108,000
Total Indirect Labor 1,560,000
Total Cost of Human 8,592,000
Resource
Salaries and wages are assumed to grow at 10% per annum.
7 LAND
AND & BUILDING
REQUIREMENT
7.1 Land Requirement
quir
Total land required for the socks knitting unit is approximately 22,449 -Sq. ft or 5 Kanal.
Land price per kanal is taken to be CNY 500,000. The break up of the required area
is given below.

16. Pre-Feasibility Study Socks Manufacturing Unit
Table 7-1 Covered Area Details
Covered
Building & Civil works Space Required Construction Cost Total Cost
in Sq. ft (CNY /Sq. Ft.) (CNY)
Socks Knitting area 1,680 400 672,000
Bleaching & Dying area 1,064 400 425,600
Drying Area 480 400 192,000
Pressing Area 384 400 153,600
Socks Reversing Area 210 400 84,000
Linking Area 280 400 112,000
Boiler Area 600 400 240,000
Generator Area 600 400 240,000
Air Compressor Room 600 400 240,000
Packing area 1,200 400 480,000
Management Office 1,200 500 600,000
Accessories Store 600 400 240,000
Yarn Store 217 400 86,793
Dyes and Chemical 600 350 210,000
Store
Finished Goods Store 334 350 117,024
Toilets 600 350 210,000
Loading, unloading Bay 1,800 25 45,000
Grounds 10,000
Water Tank 350,000
Total Space 22,449 4,698,016
Requirement (sq.ft)
Boundary wall 1,520 100 152,000
Total Infrastructure 4,850,016
Cost
7.2 Recommended Mode
eco nde
Building for the proposed business can be acquired on rent but it is recommended that
it should be purchased or built as machinery will be installed. Construction cost of
building is estimated as above.
7.3 Utilities Requirement
quir
Utilities required for a socks manufacturing unit
are
 Electricity
 Water
 Telephone

17. Pre-Feasibility Study Socks Manufacturing Unit
8 FINANCIAL ANALYSIS
NANCI NAL
8.1 Project Costs
ect Cos
Calculations
Project Costs
Year Year Year Year Year Year Year Year Year Year
Year
Land 0 1 2 3 4 5 6 7 8 9
2,494,371
Building
4,850,016
Total Capital Cost 64,987,928 - - - - - 2,202,372 - - -
-
Raw Material Inventory 2,619,772
Machine Spares 90,000
Utilities (Fuel) Inventory 95,760
Cash 2,571,074
Total Working Capital 5,376,606 - - - - - - - - -
-
70,364,533
Financing Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9
Project Financing Year 10
32,493,964 - - - - - - - - -
- Working Capital Financing 2,688,303 -
Total Debt 35,182,267 - - - - - - - - -
- Equity Financing 35,182,267 - - - - - - - -
- -
13

18. Pre-Feasibility Study Socks Manufacturing Unit
8.2 Projected Income Statement
ect
Calculations
Income Statement
Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10
Revenue 86,136,561 97,826,523 110,609,189 124,573,599 139,815,545 156,438,059 165,824,343 175,773,804 186,320,232 197,499,446
Cost of Sales
Raw Material Cost 61,128,007 66,804,180 72,682,947 78,770,144 85,071,756 91,593,924 93,425,802 95,294,318 97,200,205 99,144,209
Direct Labor 7,032,000 7,735,200 8,508,720 9,359,592 10,295,551 11,325,106 12,457,617 13,703,379 15,073,717 16,581,088
Direct Electricity 4,259,010 4,684,911 5,153,402 5,668,742 6,235,617 6,859,178 7,545,096 8,299,606 9,129,566 10,042,523
Machine maintenance 540,000 594,000 653,400 718,740 790,614 869,675 956,643 1,052,307 1,157,538 1,273,292
Oil and Diesel Consumption 2,234,400 2,457,840 2,703,624 2,973,986 3,271,385 3,598,524 3,958,376 4,354,213 4,789,635 5,268,598
Total Cost of Sales 75,193,417 82,276,131 89,702,093 97,491,205 105,664,923 114,246,407 118,343,534 122,703,823 127,350,660 132,309,710
Gross Profit 10,943,144 15,550,392 20,907,095 27,082,394 34,150,622 42,191,652 47,480,809 53,069,980 58,969,572 65,189,736
Administration expense 1,560,000 1,716,000 1,887,600 2,076,360 2,283,996 2,512,396 2,763,635 3,039,999 3,343,999 3,678,398
Electricity expense 221,408 243,549 267,903 294,694 324,163 356,580 392,237 431,461 474,607 522,068
Communications expense (phone, fax, mail, interne3t,1e2t,c0.0) 0 343,200 377,520 415,272 456,799 502,479 552,727 608,000 668,800
735,680
Office expenses (stationary, entertainment, ja 156,000 171,600 188,760 207,636 228,400 251,240 276,364 304,000 334,400 367,840
Professional fees (legal, audit, consultants, etc.) 129,205 146,740 165,914 186,860 209,723 234,657 248,737 263,661 279,480 296,249
Depreciation expense 6,206,484 6,206,484 6,206,484 6,206,484 6,206,484 6,122,984 6,209,146 6,209,146 6,209,146 6,209,146
Amortization of pre-operating costs 169,244 169,244 169,244 169,244 169,244 0 0 0 0 0
Marketing Expenses 215,341 244,566 276,523 311,434 349,539 391,095 414,561 439,435 465,801 493,749
Freight Out and Custom Clearance 1,722,731 1,956,530 2,212,184 2,491,472 2,796,311 3,128,761 3,316,487 3,515,476 3,726,405 3,949,989
Subtotal Vehicle Running Expense
Office 78,000 85,800
10,770,413 11,283,713 94,380
11,846,512 103,818
12,463,274 114,200
13,138,859 125,620
13,625,811 138,182
14,312,075 152,000
14,963,177 167,200
15,669,837 183,920
16,437,039
Earning before Interest and Tax 172,731 4,266,679 9,060,583 14,619,120 21,011,764 28,565,842 33,168,734 38,106,804 43,299,735 48,752,697
Interest on short term debt 437,563 485,068 253,703 - - - - - - -
Interest expense on long term debt (Project Loan) 3,249,396 2,717,153 6,440,140 1,487,672 779,257 - - - - -
Interest expense on long term debt (Working C 376,362 319,425 528,542 180,520 96,165 - - - - -
Subtotal 3,625,759 3,036,578 6,968,682 1,668,193 875,422 - - - - -
Earning before Tax (3,453,028) 1,230,101 2,091,902 12,950,927 20,136,342 28,565,842 33,168,734 38,106,804 43,299,735 48,752,697
Tax - 978,265 1,106,092 1,245,736 1,398,155 1,564,381 1,658,243 1,757,738 1,863,202 1,974,994
NET PROFIT/(LOSS) AFTER TAX (3,453,028) 251,836 985,810 11,705,191 18,738,186 27,001,461 31,510,490 36,349,066 41,436,532 46,777,703
Balance brought forward (3,453,028) (3,201,192) (2,215,383) 9,489,809 28,227,995 55,229,456 86,739,946 123,089,012 164,525,544
Total profit available for appropriation (3,453,028) (3,201,192) (2,215,383) 9,489,809 28,227,995 55,229,456 86,739,946 123,089,012 164,525,544 211,303,247
Balance carried forward (3,453,028) (3,201,192) (2,215,383) 9,489,809 28,227,995 55,229,456 86,739,946 123,089,012 164,525,544 211,303,247

19. Pre-Feasibility Study Socks Manufacturing Unit
8.3 Projected Balance Sheet
ect Sheet
Calculations
Balance Sheet
Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10
Assets
Current Assets
Cash & Bank 2,571,074 - - - 6,255,813 22,097,372 52,170,972 89,567,617 131,792,910 179,095,840 231,730,280
Raw Material Inventory 2,619,772 2,619,772 2,863,036 3,114,983 3,375,863 3,645,932 3,925,454 4,003,963 4,084,042 4,165,723 4,249,038
Machine Spares Inventory 90,000 45,000 49,500 54,450 59,895 65,885 72,473 79,720 87,692 96,461 106,108
Utilities (Fuel) Inventory 95,760 95,760 105,336 115,870 127,457 140,202 154,222 169,645 186,609 205,270 225,797
Accounts Receivable 3,691,567 4,192,565 4,740,394 5,338,869 5,992,095 6,704,488 7,106,758 7,533,163 7,985,153 8,464,262
Total Current Assets 5,376,606 6,452,099 7,210,438 8,025,697 15,157,897 31,941,486 63,027,609 100,927,702 143,684,416 191,548,447 244,775,484
Fixed Assets
Land 2,494,371 2,494,371 2,494,371 2,494,371 2,494,371 2,494,371 2,494,371 2,494,371 2,494,371 2,494,371 2,494,371
Building 4,850,016 4,365,015 3,880,013 3,395,011 2,910,010 2,425,008 1,940,007 1,455,005 970,003 485,002 -
Machinery & Equipment 55,279,821 49,751,839 44,223,857 38,695,875 33,167,893 27,639,911 22,111,929 16,583,946 11,055,964 5,527,982 -
Office Equipment, Furniture 417,500 334,000 250,500 167,000 83,500 - 430,811 344,649 258,487 172,325 86,162
Office Vehicle 1,100,000 990,000 880,000 770,000 660,000 550,000 2,211,561 2,101,561 1,991,561 1,881,561 1,771,561
Total Fixed Assets 64,141,708 57,935,225 51,728,741 45,522,257 39,315,773 33,109,289 29,188,678 22,979,532 16,770,386 10,561,240 4,352,094
Intangible Assets
Pre-operating Costs 846,219 676,976 507,732 338,488 169,244 - - - - - -
Total Assets 70,364,533 65,064,299 59,446,910 53,886,442 54,642,914 65,050,775 92,216,288 123,907,234 160,454,802 202,109,687 249,127,578
Liabilities & Shareholders' Equity
Current Liabilities
Accounts payable 1,120,493 1,232,542 1,355,796 1,491,376 1,640,514 1,804,565 1,985,022 2,183,524 2,401,876 2,642,064
Short term Debt 2,761,426 3,098,458 3,397,607 - - - - - - -
Total Current Liabilities - 3,881,919 4,331,000 4,753,404 1,491,376 1,640,514 1,804,565 1,985,022 2,183,524 2,401,876 2,642,064
Other liabilities
Long term debt Project 32,493,964 27,171,534 21,316,862 14,876,722 7,792,569 0 0 0 0 0 0
Long term debt (Working Capital) 2,688,303 2,281,607 1,817,973 1,289,431 686,893 0 0 0 0 0 0
35,182,267 29,453,141 23,134,836 16,166,154 8,479,462 0 0 0 0 0 0
Shareholders' equity
Paid-up capital 35,182,267 35,182,267 35,182,267 35,182,267 35,182,267 35,182,267 35,182,267 35,182,267 35,182,267 35,182,267 35,182,267
Retained earnings (3,453,028) (3,201,192) (2,215,383) 9,489,809 28,227,995 55,229,456 86,739,946 123,089,012 164,525,544 211,303,247
Total Equity 35,182,267 31,729,239 31,981,074 32,966,884 44,672,075 63,410,261 90,411,722 121,922,213 158,271,278 199,707,811 246,485,514
TOTAL CAPITAL AND LIABILITIES 70,364,533 65,064,299 59,446,910 53,886,442 54,642,914 65,050,775 92,216,288 123,907,234 160,454,802 202,109,687 249,127,578

20. Pre-Feasibility Study Socks Manufacturing Unit
8.4 Projected Cash Flow Statement
ect Cas
Calculations
Cash Flow Statement
Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10
Operating activities
Net Profits - (3,453,028) 251,836 985,810 11,705,191 18,738,186 27,001,461 31,510,490 36,349,066 41,436,532 46,777,703
Depreciation 6,206,484 6,206,484 6,206,484 6,206,484 6,206,484 6,122,984 6,209,146 6,209,146 6,209,146 6,209,146
Raw Material Inventory (2,619,772) - (243,265) (251,947) (260,880) (270,069) (279,521) (78,509) (80,079) (81,681) (83,314)
Machine Spares (90,000) 45,000 (4,500) (4,950) (5,445) (5,989) (6,588) (7,247) (7,972) (8,769) (9,646)
Utilities (Fuel) Inventory (95,760) - (9,576) (10,534) (11,587) (12,746) (14,020) (15,422) (16,964) (18,661) (20,527)
Accounts Receivable (3,691,567) (500,998) (547,829) (598,475) (653,226) (712,393) (402,269) (426,405) (451,990) (479,109)
Accounts Payable 1,120,493 112,049 123,254 135,580 149,138 164,051 180,457 198,502 218,352 240,188
Amortization 169,244 169,244 169,244 169,244 169,244 - - - - -
Cash Provided by Operations (2,805,532) 396,626 5,981,274 6,669,532 17,340,112 24,321,021 32,275,972 37,396,645 42,225,293 47,302,930 52,634,440
Financing Activities
Project Loan-Principal Repayment (5,322,429) (5,854,672) (6,440,140) (7,084,154) (7,792,569) 0 0 (0) 0 0
Working Capital Loan-Principal Repayment (406,696) (463,633) (528,542) (602,538) (686,893) 0 0 0 0 0
Short term Debt Principal Repayment (2,761,426) (3,098,458) (3,397,607) - - - - - -
Addition to Project Loan 32,493,964 - - - - - - - - - -
Addition to Working Capital Loan 2,688,303 - - - - - - - - - -
Issuance of Shares 35,182,267 - - - - - - - - - -
Cash Used for Financing Activities 70,364,533 (5,729,125) (9,079,732) (10,067,140) (11,084,299) (8,479,462) 0 0 (0) 0 0
Investing activities
Capital expenditure (64,987,928) - 0 0 0 0 (2,202,372) 0 0 0 0
Cash used for/provided by Investing Activi(t6ie4s,987,928) - 0 0 0 0 (2,202,372) 0 0 0 0
NET CASH 2,571,074 (5,332,500) (3,098,458) (3,397,607) 6,255,813 15,841,559 30,073,600 37,396,645 42,225,293 47,302,930 52,634,440
Cash balance brought forward 2,571,074 - 0 0 6,255,813 22,097,372 52,170,972 89,567,617 131,792,910 179,095,840
Cash available for appropriation 2,571,074 (2,761,426) (3,098,458) (3,397,607) 6,255,813 22,097,372 52,170,972 89,567,617 131,792,910 179,095,840 231,730,280
Dividend - - - - - - - - - - -
Cash balance 2,571,074 (2,761,426) (3,098,458) (3,397,607) 6,255,813 22,097,372 52,170,972 89,567,617 131,792,910 179,095,840 231,730,280
Cash carried forward 2,571,074 - 0 0 6,255,813 22,097,372 52,170,972 89,567,617 131,792,910 179,095,840 231,730,280

21. Pre-Feasibility Study Socks Manufacturing Unit
9 KEY ASSUMPTIONS
SSU ION
Table 9-1 Project Assumptions
ect ssu
Projected Life of The Project in Years 10
Debt 50%
Equity 50%
Annual Mark Up Rate (Short Term & Long Term) 14%
Debt Tenure 5
Table 9-2 Operating Assumptions
Ope ing ssu
No of Working Days in One Year 350
No. of Shifts 3
No. of hours in one shift 8
Annual installed production capacity (dozen pairs) 535,500
Initial year capacity utilization 70%
Capacity growth rate 5%
Maximum capacity utilization 95%
Table 9-3 Revenue Assumptions
nue ssu
Sales price per dozen Pouch Heel US $ 3.50
Sales price per dozen Reel Heel US $ 4.50
Sales growth rate 6%
Table 9-4 Raw Material Costs
Cos
Cost (CNY/Gram)
Weight (grams per pair) 65.00
Wastage Ratio (%age of raw material
input) 12%
Cotton %age 70% 0.09
Nylon 8% 0.40
Polyester 12% 0.17
Acrylic 4% 0.13
Lycra 6% 0.58
Table 9-5 Expense Assumptions
ssu
Salaries, wages growth rates (as %age of annual 10%
Salaries and Wages)
Communication expense 20% % of administration
expense
Office expenses (stationary, entertainment, janitorial 10% % of administration

22. Pre-Feasibility Study Socks Manufacturing Unit
services, etc.) expense
Promotional expense 1% % of revenue
Machinery & equipment insurance rate 5%
Office vehicles insurance rate 5%
Professional fees (legal, audit, consultants, etc.) 0.2% % of revenue
Marketing Expenses 0.3% % of revenue
Freight And Custom Clearance Charges 2% %age of Cost of
Sales
Office Vehicle Running Expense 5% %age of Admin
Expense
Depreciation rate on Machinery 10% Written down value
Depreciation rate on furniture and office equipment 20% Written down value
Table 9-6 Turnover Assumptions
ove ssu
Raw Material Inventory 15 days
Stores and Spares Inventory 2 months
Fuel inventory 15 days
Accounts Payable 30 days
Accounts Receivable 15 days
Table 9-7 General Assumptions
Exchange Rate (CNY/Euro) 9.3
Freight & Handling Charges as % of CIF price 5%
Installation Charges as % of Price 1%