Economic Studies on the Production of Fruit Juice from a Locally Sourced Fruit ‘African Star Apple’

Abstract

The economic evaluation for the production of fruit juice from the Africa star apple otherwise known as ‘Agbalumo’ in the south western part of Nigeria was evaluated using the NPV (Net Present value) and IRR (Internal Rate of Return) methods assuming a uniform cash flow over a 10-year plant life. Sensitivity analysis was conducted by varying the number of production days (330, 300 and 250 days) at 100% plant capacity and varying the plant capacity (100, 85 and 70%) for a 330-day production schedule. Some components of the operating cost reduced with number of days and plant capacities. The production cost and product cost per unit increased with either plant capacity utilization or the number of days. It was observed that product cost/ 500ml Tetra Pak of Agbalumo juice at 85% and 70% stood at ₦37.48 while payback time/profitability percent had better index at 300 and 250 days compared to 330 days of plant operation. The results further indicated that the plant should not be operated for less than 250 days and plant capacity utilization of 70% in the year. Flexibility in the plant capacity utilization in the range of 70%-85% for 330 days shows a good economic performance as well as result of the NPV and IRR for this operating condition.

Keywords

• African star apple
• Agbalumo
• Net present value (NPV)
• internal rate of return (IRR)
• Plant capacity utilization