Feasibility

Studies
Assoc. Prof. İrem UÇAL SARI
Istanbul Technical University

10/2/2023 10:15 AM 1
 Email:
ucal@itu.edu.tr
iremucalsari@gmail.com

Contact
Information Mobile:
0538 7919434
(Whatsapp is preffered)

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Syllabus
Date Week Topic
6.10.2023 1 General Introduction
13.10.2023 2 Recognizing Opportunities and Generating Ideas
20.10.2023 3 Pre-Feasibility and Feasibility Studies
27.10.2023 4 Market Feasibility
03.11.2023 5 Project presentations (Idea Generation and Prefeasibility)
10.11.2023 6 Project presentations (Idea Generation and Prefeasibility)
17.11.2023 7 Project presentations (Idea Generation and Prefeasibility)
24.11.2023 8 Technical Feasibility
Financial Feasibility Part 1 (Economic Feasibility: NPV, IRR, B/C,
uncertain and risk environments)
1.12.2023 9
Financial Feasibility Part 2 (Financial Statements: Income Statement,
Balance Sheet, Cash Flow Statement)
08.12.2023 10 Financial Models used in feasibility studies
15.12.2023 11 Project Presentations
22.12.2023 12 Project Presentations
29.12.2023 13 Project Presentations
05.01.2024 14 Project Presentations
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 1 project with 4 stages:
1st stage: Idea Generation: 10%
2nd stage: Market Feasibility: 10%
3rd stage: Technical Feasibility: 10%
4th submission: Financial Feasibility: 10%
Project Presentations:
Grading 1st stage presentation: %10 (15 min.
presentation+5 min discussion)
Final Presentation: %10 (25 minutes)
Final: %40

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 There will be 3 reports during the term.
The idea generation phase before the project and the final
project will be presented in the class.

Each group will consist of 3 people.

You will choose new innovative investment (for ex. A start

Project up company, new application or new product...) ideas and

apply the steps of a feasibility analysis.

Be careful: You have to submit reports (not the

presentation files. The reports should follow a suitable
format (headings, introduction, conclusion etc.)

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 You need to determine at least 3 new investment ideas
The following information should be included in your

First presentation:

Presentation Details of Idea Generation phase that you applied.

Pros and Cons of each idea
General outline of the investment projects for each idea
Idea such as; target market, competitors, the boundaries of the
Generation project, general details of the project (design
specifications...)
Your expections from this project?

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 Determination of
• requirements for the project

Project • The configurations that are expected by the customers

1nd Stage • What are the core elements of your design?

• At which points customer will not be willing to pay for
your idea?
Market • Which points should you focus on?
Feasibility • market share
• Competitors
• Scale of the market
• market strategy
• life cycle of your project
• Production scale
• Legal feasibility

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 Technical Feasibility
•Planning the production phase

Project •Technical Requirements

•Availability?
2nd Stage
•Cost?
•Applicability?
•Decision of producing or outsourcing for the
Technical components?

Feasibility •Labor requirements

•Design modifications through the knowledge gathered in
this stage

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 Financial Feasibility
•Detailed analysis of all costs and revenues of the project

Project • Determination of cash flows

• Capital budgeting analysis (Net present value or
3nd Stage
annual value or internal rate of return)
•Analysis and determination of source of capital.
•Risk analysis
Financial
Feasibility

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 Law of positive and negative
forces

• First law of project feasibility

• A project is not feasible if the positive forces

are smaller than the negative forces
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 Before commencing a
project..
1 Do we have the necessary technology?
2 Do we have the labor skills?
3 Are we underestimating the challenges? and
4 Are we overestimating our capabilities?

Any one of these questions point to vulnerabilities and we

make a continuous effort to root out these vulnerabilities
as far in advance as possible
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 Before commencing a
project..
Feasibility studies that can be accessed through various sources, such as
websites, and companies’ documentation show limited scope in analyzing
projects that are put forth with regard to vulnerability.

The notion of vulnerability” is at the center of any project.

Vulnerability: condition experienced by any of the four Ps (Processes, People,

Power) of a project that make it susceptible to failure

Points of Vulnerability: temporal and physical points along the various stages of
a project that impede on the calendar, costs, and/or quality of the project as it
faces adverse conditions (negative forces), whether these conditions are under
human control or not.
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Types of Feasibility Studies
MARKET FINANCIAL
FEASIBILITY FEASIBILITY
01 04
› Determination of
› The ability to raise
the market share of
money to implement
the investment
the project
project
TECHNICAL
ECONOMIC FEASIBILITY
02 05
FEASIBILITY
› The requisite number of
› Rate of return, Net technically capable
› present Value, Cost people as well as
of Capital technology required to
set up and run the plant
COMMERCIAL SOCIAL
03
FEASIBILITY 06 FEASIBILITY
› Availability of raw › Socially desirable or
material, skilled labor, undesirable?
infrastructure, and other
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factors of production
 Investment:
• Attachment of capital to a
movable or immovable asset or

INVESTMENT converting into foreign currency,

• A bank account is also
considered as an investment
Investor:
• People or organizations that
WHY AND WHAT
invest their capital in the said

?
TO INVEST investment issues are also called
investors.

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 • Expansion (Capacity Increase)

• Completion

• Bottleneck Removal

INVESTMENT • Modernization

TYPES • Renovation

• Diversification of products

• Quality correction

• Integration

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 INVESTMENT TYPES
Expansion (Capacity Increase)
It is an investment to increase the
production capacity of the same
goods and services in the same
enterprise.
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Completion
for the production of goods and services
•In the existing line of the facilities
•Without changing the product type
- without creating a new product
- without increasing capacity.
•They are investments for the completion
of items such as missing machinery and
equipment, building, construction and
furnishings.
16
 INVESTMENT TYPES

• In the facilities for the production of goods and

services
• Made in cases where a part of the main or auxiliary
machinery and equipment in the existing production
BOTTLENECK line is not in harmony with other machinery and
REMOVAL equipment in the production flow in terms of
capacity and functionality
• Replacement of machinery and equipment
• For the addition of new machinery and equipment
• Investments made to take full advantage of the
installed capacity

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 INVESTMENT TYPES

• In facilities for the production of goods and services

that have completed their financial life in terms of
efficiency as a result of technology or in terms of
MODERNIZATION production costs

• Addition of technologically appropriate parts to main

or auxiliary machinery and equipment

• Investments involving the replacement of an existing

component on the machine with an improved model.

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 INVESTMENT TYPES
RENOVATION
• These are investments that
involve replacing the main
machinery and equipment
and/or auxiliary machinery
• equipment with new ones due
to
• the completion of their
technical and/or economic
life in the facilities.
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DIVERSIFICATION OF
PRODUCTS
• Investments for obtaining a
different end product,
• with an additional investment
to be made in the existing
machinery and equipment in
the same enterprise, which
does not have a new
investment feature.
19
 INVESTMENT TYPES

• Investments in directly improving the quality or

QUALITY changing the model of the final product,
CORRECTION • obtained in the existing production lines of the
facilities for the production of goods and services,
• Obtained in the final production lines.

• In the existing production lines of the facilities producing

goods and services,
• To supply intermediate goods with complementary qualities
to the final product,
• To be able to use the final product being produced as
INTEGRATION intermediate goods,
• To integrate forward and/or backwards into the existing
facility,
• Considering the subject of the investment and the
characteristics of the project,
• The borders of the same province investment made within
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 FEASIBILITY REPORT
EXECUTIVE SUMMARY
A. Summary of project information
and feasibility study findings

MAIN REPORT
B. CONTENTS (table of contents, table and figure list
and abbreviations)

INTRODUCTION (purpose, scope and organization

of the report, method of study, summary of findings,
conclusions and recommendations)

DEFINITION AND SCOPE OF THE PROJECT

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(name of the project, purpose, type, technical content,
components, size, duration of implementation, place
or area of application, project outputs, main inputs,
target audience and/or region, project owner
organization and legal status) 21
 FEASIBILITY REPORT
MAIN REPORT
B.
BACKGROUND INFORMATION
• Socio-economic Status (general, sectoral and/or regional
• Sectoral and/or Regional Policies and Programs
• Institutional Structures and Legal Legislation (such as
incentive and BOT legislation
• Source and Relevance of the Project Idea
• Compliance of the Project with Sectoral and/or Regional
Development Goals (policies, plans and programs)
• Relationship of the Project with Other Past, Ongoing and
Planned Projects
• Emergence of the Project Idea
• Past Studies, Research and Other Studies Related to the Project
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 FEASIBILITY REPORT
MAIN REPORT
B. JUSTIFICATION OF THE PROJECT [1]
• Demand Analysis at National and Regional Level
• The main reasons and indicators that determine the demand
• Past growth trend of demand
• Information about the current level of demand
• Current capacity and previous years capacity utilization
rates
• Forecast of Future Demand at National and Regional Level
• The region's economic growth scenario (targets and
strategies) and its relationship with demand forecasts
• Future development potential of demand and forecast of
demand
• Assumptions, studies and methods used (simple extrapolation,
model, etc.)
[1] According to the nature of the project, instead of demand analysis,
market research and analysis, needs analysis, problem analysis, traffic study,
etc. techniques can be used.. 23
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 FEASIBILITY REPORT
MAIN REPORT
B. SALES/PRODUCTION PROGRAM OF GOODS /
SERVICES
• Sales Program
• Production Program
• Marketing Strategy (pricing, promotion and distribution)
PROJECT LOCATION/FIELD OF APPLICATION_1
• Physical and geographic features
• Geographic location
• Climate (precipitation, humidity, temperature, wind, etc
• Information on soil and land structure
• Flora
• Water resources
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 FEASIBILITY REPORT
MAIN REPORT
B.
PROJECT LOCATION/FIELD OF APPLICATION_2

• Economic and Physical Infrastructure (accessibility to raw

material resources, transportation and communication system,
water electricity natural gas networks, land use, sub industry,
distribution and marketing opportunities, etc
• Social Infrastructure (population, employment, income
distribution, social services, cultural structure
• Institutional Structures
• Pre assessment of Environmental Impacts
• Alternatives , Site Selection and Land Cost (expropriation
cost)
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 FEASIBILITY REPORT
TECHNICAL ANALYSIS
C.
TECHNICAL ANALYSIS AND
DESIGN
• Capacity Analysis and Selection
• Analysis of Alternative Technologies and Technology
Selection
• Environmental Impacts, Protection Measures and Cost of
Selected Technology
• Technical Design (process design, machinery equipment,
civil works, land arrangement, layout etc.)
• Investment Costs (construction, machinery hardware, etc.)

PROJECT INPUTS
• Input Requirement (raw and auxiliary materials)
• Input Prices and CostForecast
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 FEASIBILITY REPORT
TECHNICAL ANALYSIS
C.
ORGANIZATIONAL STRUCTURE,
MANAGEMENT AND HUMAN
RESOURCES
• Organizational Structure and Management of the Organization
• Organization and Management Expenses (overheads etc.)
• Manpower Requirement and Estimated Expenses
PROJECT MANAGEMENT AND
IMPLEMENTATION PROGRAM
• Project Executive Organizations and Their Technical Capacities
• Project Organization and Management (decision making process,
construction method etc.)
• Project Implementation Program (DurationPlan)

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 FEASIBILITY REPORT
FINANCIAL ANALYSIS
D.
OPERATING PERIOD INCOME AND EXPENSES
•Pricing of Production and/or Service
•Estimating Business Income and Expenses

TOTAL INVESTMENT AMOUNT AND

DISTRIBUTION OVER YEARS
•Total Investment Amount (in domestic and foreign currency)
•Land Value (expropriation expenses)

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 FEASIBILITY REPORT
FINANCIAL ANALYSIS
D.
Fixed Capital Investment
• Pilot-Project, Engineering and Supervision Expenses
• License, Patent, Know-How etc. Expenses
• Land Arrangement and Development Expenses (landscape etc.)
• Preparation Structures (construction site etc.)
• Construction Expenses (earth works, infrastructure,
superstructure, engineering structures, etc.)
• Environmental Protection Expenses
• Expenses Related to Transportation Facilities

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 FEASIBILITY REPORT
FINANCIAL ANALYSIS
D.
Fixed Capital Investment (Cont.)
• Machinery-hardware expenses
• Transportation, Insurance, Import and Customs Expenses
• Assembly Expenses
• Vehicles
• Overheads
• Commissioning Expenses
• Unexpected Expenses
Investment Period Interests
Working Capital
• Distribution of Investment over Years
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 FEASIBILITY REPORT
FINANCIAL ANALYSIS
D.
FINANCE OF THE PROJECT
Financial Structure of Executive and Operating Organizations
Financing Method (equity, external loan, grantetc.)
Funding Sources and Conditions
Financing Cost
Financing Plan
PROJECT ANALYSIS-FINANCIAL ANALYSIS
Financial Statements and Liquidity Analysis
Discounted Cash Flow Statement
Financial Benefit-Cost Analysis (NBD, IRR, etc.)
Impact on the State Budget
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 FEASIBILITY REPORT
ECONOMIC ANALYSIS
E.
Economic Costs
Economic Benefits
Economic Benefit-Cost Analysis
Cost Effectiveness Analysis (comparative unit production and
investment cost)
Other Economic Impacts of the Project (value added impact etc.)

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 FEASIBILITY REPORT
SOCIAL ANALYSIS
E.
Social Benefit-Cost Analysis
Socio-cultural Analysis (participation, gender effect, etc.)
Other Social Impacts of the Project

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 FEASIBILITY REPORT
RISK ANALYSIS
F.
Sensitivity Analysis

ATTACHMENTS
G.
Environmental Impact Assessment (EIA) Report
Other Support Studies (reserve survey, ground survey etc.)

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