Cost-Benefit Analysis of Powdered Camel Milk Production in the Somali Region of Ethiopia

The Somali region of Ethiopia has a high potential for milk production. The perishable nature of raw camel milk imposes a significant loss to the pastoralists and the economy. The milk production plant will process raw camel milk to powdered form to benefit from the seasonal fluctuation of camel milk supply because of the higher shelf life of powder camel milk. This study employs a Cost-Benefit Analysis to appraise the financial benefits of the project and identify the potential risks facing the production of powdered camel milk in the Somali region, Ethiopia. The powdered camel milk production project will generate a NPV of 38.47 million ETB and a MIRR of 26.6%, which means the project will be profitable from the owner’s perspective. The study also shows that the powdered camel milk production project will generate substantial net cash flow to pay its debt obligation to the bank. The minimum ADSCR is 1.93, the average ADSCR is 5.95, the minimum LLCR is 4.34, the average LLCR is 7.47. The sensitive variables in the sensitivity analysis results are exchange rate, export price of powdered camel milk, raw camel milk price, and the milk processing capacity. Keywords: Cost-Benefit Analysis, Financial Analysis, Risk Analysis, Powdered Camel Milk, Ethiopia.