FM-AA-CIA-15 Rev.

0 10-July-2020

Study Guide in (Course Code and Course Title) Module No.__

STUDY GUIDE FOR MODULE NO. ___

2

FEASIBILITY STUDY

MODULE OVERVIEW

Businesses, ranging from small and medium enterprises to those with billion-dollar or peso capital base,
are sporadically sprouting around the world. But few stay for more than a decade or two, and still some are
grasping their last financial breath. Those that exist longer and have gained competitive advantage over
competitors started right by carefully evaluating new business opportunities and challenges brought about by
the ever changing business world.
The preparation of a project feasibility study before opening a business endeavor has proven to provide
more benefits and serve as catalyst for business success.
This chapter and the succeeding chapters may serve as a simple guide in conducting a feasibility study.
Chapter 2 will discuss about the definition of feasibility study, nature of feasibility study, purposes of a
feasibility study, qualities of a good feasibility study, usefulness of a feasibility study, limitations of a feasibility
study, factors affecting preparation of a feasibility study, classification of feasibility studies and parties
requiring feasibility study.
At the end of this chapter, it will play a significant contribution to the learning process in the preparation
of a project feasibility study.

MODULE LEARNING OBJECTIVES

At the end of this topic, the students must be able to

a. Determine the definition of feasibility study
b. Comprehend the nature of a feasibility study
c. Identify the importance for preparing a feasibility study
d. Demonstrate the qualities of a good feasibility study
e. Determine the usefulness and limitations of the feasibility study
f. Identify the factors affecting the preparation of the feasibility study
g. Understand the classification of the feasibility study
h. Identify the groups or sectors that require feasibility study

LEARNING CONTENTS (title of the subsection)

Definition of Feasibility Study

Feasibility study is an analysis of the practicability of proposed plan or method that covers all the
essential parts of the project, the market, management, technical, legal, financial and even socio-economic
aspect to ascertain the possibility of completing the project successfully.

Natures of feasibility study :

1. Systematic inquiry
2. Proposed business activity
3. Viability in all areas
4. Measurement of profitability level

Purposes of a Feasibility Study

The general purpose of conducting feasibility study is to test the viability of the certain project in all areas.

Corollary to this underlying premise, a feasibility study is conducted to:

1. Enhance the sustainability of a particular business currently undertaken;
2. Facilitate easily the evaluation of a project’s success in all areas covered by the study
3. Seek the infusion of additional fresh working capital from a financial institution
4. Determine the recovery period of a capital investment or expected return on investment
5. Serve as measuring instrument in evaluating actual project against what the study reveals

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6. Reduce, if it cannot be totally avoided, the expected business difficulty that maybe experienced during
actual implementation; and
7. Meet and satisfy the requirements set by the investors of the proposed business project

Qualities of a Good Feasibility Study

1. Objective
2. Simple
3. Reliable

Usefulness of a Feasibility Study

1. For the benefit of project proponents, it is still the most scientific instrument, with different
interdependent aspects, that can be used in project design or redesign.
2. It can minimized if not totally eradicate the business difficulty that maybe experienced in the actual
implementation of the project.
3. It is the reliable instrument in making future economic decision whether to implement the project or
not.
4. It is the most comprehensive medium in determining the financial requirement and profitability of a
certain project.

Limitations of a Feasibility Study

1. Valuable information needed in the study is not readily available.
2. The cost of gathering data, formulation of conclusions, and drafting of recommendations is very high.
3. The competitor may have available data related to their operations but they may hesitate to share
such information because of confidentiality in the area of taxation, production process, marketing, and
other aspects of the business.
4. The proponent conducting the study is not well experienced in the field of specialization and may lack
skills and expertise in all or some areas of the study.
5. A feasibility study though conducted by a competent individual and with reliable data available, still
remains forecast and nobody can prove the availability of the forecast.

LEARNING ACTIVITY 1

LEARNING ACTIVITY 1

Discuss the following:

1. The production manager strongly comments that....”the study reveals that the project is profitable. The
proposed project, therefore, should be implemented, and no time should be wasted since the competitor may
start ahead.”

Write your reaction to the statement. As a student of feasibility study writing, do you agree or disagree
with the statement? Support your answer.

LEARNING CONTENTS (title of the subsection)

Factors Affecting Preparation of a Feasibility Study:

1. Type of industry
2. Size of the project
3. Purpose of the study
4. Party preparing the study
5. Requirements of prospective investors

Classification of Feasibility Studies

1. Amount of investment. – micro, small or medium, large enterprises
2. Status of the project – new business or expansion
3. Industry classification – clothing, real estate, transportation

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4. Nature of management- newly management, old management

5. Liability of investors – sole proprietorship, partnership, corporation

Parties Requiring Feasibility Study

1. Prospective investors
2. Management of the business
3. Proponents
4. Financial institutions
5. Shareholders
6. Government agencies

LEARNING ACTIVITY 2

The team members preparing the feasibility study are graduates from prominent universities.
One team member is a graduate of industrial engineering from Ateneo de Manila University. He
finished his post-graduate studies in the same school, and has gained substantive experiences in his field of
specialization here and abroad.
Another member is a graduate with honors from the University of Sto. Tomas, with a baccalaureate
degree in economics. He finished his masters degree and doctoral studies in the university of the Philippines.
“The members of the team conducting the study have master’s degrees and are experts in their fields
of specialization”, one member of the Board of Directors comments, “ thus, they have all the reasons to vouch
for the attainment of their forecast.”
Discuss your view on the statement of one of the members of the Board.

SUMMARY

To summarize, a project feasibility study

 Feasibility study is a formal project document that shows results of the analysis, research and
evaluation of a proposed project and determines if this project is technically feasible, cost-effective
and profitable.
 Is not the product of a simple and superficial investigation on the viability of a business endeavor. It
serves as the conceptual framework on how a business project can easily be performed. All the
survey data gathered in the study was supported by thorough analysis and evaluated both the
qualitative and quantitative aspects of the information.
 Does not give so much emphasis on the bureaucratic processes in accomplishing the objectives. It
highlights the significance of the thinking process.
 Is not rigorously undertaken for new business projects only. It may also serve the requirements of
existing businesses, especially on the aspect of plant expansion, additional product lines, or new
business opportunities. A feasibility study is also used in continuing business operation and in the
business expansion.
 Can be credited for the favorable success experienced by a business. Hence, a business without the
benefits of a good feasibility study is more likely to fail than succeed. A business having a good
feasibility study will have a greater possibility of producing higher income and achieving goals and
vision.
 Embraces key areas of other disciplines like economics, marketing, management, accounting ,
taxation, engineering, quantitative analysis, mathematics, logic and reasoning, and even business
report writing. In this study, we need to apply principles of all preceding disciplines.
 Is undertaken primarily for profit-oriented organizations. Hence, non-government organizations and
the government, including any of its political subdivisions or instrumentalities, do not undertake
feasibility studies. The feasibility study is conducted by the business organization concerned in
income generation.
 Involves cost-benefit analysis where the benefits derived from the study should exceed total
estimated costs. Hence, studies having more costs than benefits are not usually favored by
prospective investors. The income or output of the project should be higher than the costs.

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For additional information, just click https://www.slideshare.net/mobile/najibsayegh1/importance-of-feasibility-

study

REFERENCES

Books:
Aduana, Nick L. (2015). Writing Project Feasibility Study
Ditablan, Eustaquio (2007). Feasibility Study Handbook
Howard Business Essentials. Managing Projects Large &Small; Howard Business School Press, 2004

Electronic sources:
https://www.google.com/search?q=project+summary +of+ feasibility+study&oq
https://dictionary.refrence.com/browse/feasibility
https://www.investopedia.com/terms/f/feasibilitystudy.asp
http://www.wikipedia.org/wiki/Feasibility_Study
https://www.slideshare.net/mobile/najibsayegh1/importance-of-feasibility-study

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