School Of Finance And Commerce

Course Code: BCOM1001 Course Name: Business Organization

Feasibility study

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Faculty Name: Vaishali Joshi Program Name:
 CONTENT
S
 WHAT IS FEASIBILITY STUDY?
 WHY DO FEASIBILITY STUDIES?
 DIMENSIONS OF FEASIBILITY STUDY
 MARKETING ANALYSIS
 TECHNICAL ANALYSIS
 FINANCIAL ANALYSIS
ECOLOGICAL ANALYSIS
 LEGAL AND ADMINISTRATIVE

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 FEASIBILITY
STUDY
Feasibility study-
• is an analysis of the viability of an idea.

• is an analysis of all possible solutions to a problem and a

recommendation on the best solution to use.

• is a formal study to decide what type of system can be developed,

which best the needs of the organization.
• A feasibility study is essentially a process for determining the viability of a
proposed initiative or service and providing a framework and direction
for its development and delivery.

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 WHY DO FEASIBILITY
STUDIES?
• To find a solution that is cost effective from a business perspective.
• To Find a solution that is well recognized
• To find out the probable market for the products
• To find out the opportunities and threats as presented by
environment
• To determine the probable income of operating the
project
• To show the contributions the project can offer to the society, among
others
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BENEFITSOF CONDUCTING A FEASIBILITY
STUDY
• Narrows the business alternatives.

• Gives project teams more focus and provides an alternative outline.

• Identifies a valid reason to undertake the project.

• Enhances the success rate by evaluating multiple parameters.

• Aids decision-making on the project

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 DIMENSIONS OF FEASIBILITY
STUDY
 MARKET ANALYSIS

 TECHNICAL ANALYSIS

 FINANCIAL ANALYSIS

 ECONOMIC ANALYSIS

 ECOLOGICAL ANALYSIS

 LEGAL AND ADMINISTRATIVE

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MARKET
ANALYSIS

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 MARKET
ANALYSIS
Market research is the systematic gathering, recording and
analysing of data about problems relating to the marketing of
goods and services.

Market research is the means by which those who provide goods

and services keep themselves in touch with the needs and wants of
those who buy these goods and services.

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 MARKETING
QUESTIONS
 What is the market?
 Who are the competitors?
 Who is the target audience?
 What do customers want?
 What do competitors offer?
 What is your USP?
 What do customers think you offer them?

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 METHODS OF MARKET
RESEARCH
 Field research
 Desk Research

FIELD RESEARCH
• Personal interview
• Telephone interview
• Postal surveys

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 DESK
• Internal Sources
O sales figures RESEARCH
O accounting records
o customer’s comments and
complaints
O sales representatives’ reports
• Online Research
o Search Engines
o Newspapers
o University has many useful databases online
• Printed Research
o Business Directories
o Business Statistics
o Industrial Market Research Reports

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FINANCIAL
ANALYSIS

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 FINANCIAL
ANALYSIS
Financial analysis seeks to ascertain whether the proposed project will be
financially viable in the sense of being able to meet the burden of servicing debt
and whether the proposed project will satisfy the return expectations of those who
provide the capital. The aspects which have to be looked into while conducting
financial appraisal are:

 Investment outlay & cost of project.

 Means of financing
 Project profitability
 Break-even-point
 Cash flows of the project
 Investment worthwhileness judged in terms of various criteria of merit
 Projected financial position
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 INVESTMENT OUTLAY & COST OF PROJECT

"Investment outlay" refers to the financial resources committed to an investment.

The “cost of project” represents the total of all items of outlay associated with a project which
are
supported by long-term funds. The major cost elements of a project are the following:
 Land and site development
 Buildings and civil works
 Plant and machinery
 Technical know-how and engineering fees
 Fixed assets
 Preliminary and capital issue expenses

 Margin money
Initial cash for working capital
losses
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 MEANS OF FINANCING

To meet the cost of project the following means of finance are available:
 Share capital
 Term loans
 Debenture capital

 Miscellaneous sources

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 PROJECT PROFITABILITY

The Project Profitability report is used to monitor the planned

and real cost related to a project.

• Project Profitability is the state or condition of a project to describe the

yielding of a financial profit or gain from that project. It is a measure of
project operational efficiency in terms of financial benefits. As a rule, it
is calculated by the cost-income ratio.
• Estimation is the major activity that ensures project profitability. Through
estimating project parameters (such as cost, performance and time) it
is possible to determine how the project is changed and to explore
current status of project benefits.
REJVI AHMED, Feasibility Study, Pentagon, Dept. of Mechanical
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Engineering. IUBAT
 BREAK EVEN POINT
• Definition At this point the income of the business exactly equals its expenditure.
If production is enhanced beyond this level, profit shall accrue to the business and if
it is decreased from this level, loss shall be suffered by the business.

The break even point is :-

 The point where the gains equal the losses.
 The point defines when an investment will generate a positive return.
 The point where sales or revenues equal expenses.
 The point where total costs equal total revenues.
 There is no profit made or loss incurred at the break even point.
 It is the lower limit of profit when prices are set and margins are determined.

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 • Formula

Break even point

= (Fixed cost) / (Contribution per unit)

Where,
Contribution = Selling cost – Variable cost
Fixed Cost = Contribution - profit

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 CASH FLOWS OF THE PROJECT

When beginning capital-budgeting analysis, it is important to determine a

project's cash flows. These cash flows can be segmented as follows:

1. Initial Investment Outlay

These are the costs that are needed to start the project, such as new
equipment, installation, etc.

2. Operating Cash Flow over a Project's Life

This is the additional cash flow a new project generates.

3. Terminal-Year Cash Flow

This is the final cash flow, both the inflows and outflows, at the end of the
project's life; For example, potential salvage value at the end of a
machine's life.
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 PROJECTED FINANCIAL POSITION

• Projected Financial Statements is summary of various

component projections of revenues and expenses for the
budget period. They indicate the expected net income for
the period.

• Projected Financial Statements are an important tool in

determining the overall performance of a company. They
include the balance sheet, income statement and cash
flow statements to indicate the company performance.
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TECHNICAL
ANALYSIS

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 TECHNICAL
ANALYSIS
The technical analysis of a project idea can be scrutinized
in detail to evaluate its technical feasibility. Technical
analysis distinct from commercial, financial, economic and
managerial feasibility .Technical feasibility is one of the first
studies that must be conducted after a project has been
identified. In large engineering projects consulting agencies
that have large staffs of engineers and technicians conduct
technical studies dealing with the projects.

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 PURPOSE

• To ensure that the project is technically feasible in the sense that all the

inputs required to set up the project are available.

• To facilitate the most optimal formulation of the project in terms of

technology, size, location and so on.

• Choose best alternative

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 TECHNICAL ANALYSIS FACTORS
Location and site
Plant size
Layout
Machinery & Equipment
Environment impact
assessment
Inputs
Infrastructural facilities
Manpower
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 LOCATION AND SITE
A thorough & comparative analysis for each potential
location should be made to determine the most ideal side.
It has to consider to following factors:
The accessibility to, & availability of, raw material sources.
The availability of cheap or moderately priced utilities such
as power, water or fuel.
The combine cost of transporting raw materials & fuel to the
site.
The proximity to distributing outlets.
The availability of skilled & unskilled labor.
Maps & charts of the proposed site must be included. 25
 PLANT SIZE
Determination of an optimum plant size is critical to the
success of a project.
A plant represents sunk costs and any under utilisation of its
capacity means either reduced profits or, for levels below
the Break-Even Point, losses.
It is therefore normally better to build a plant having a capacity
that is likely to be fully utilized quickly, rather than to go in for a
large capacity in the fond hope of a growing share of the
market.
The best possible size of plant is recommended after analysing
options
the availability, economics, and practicability of different size 30
 TECHNOLOGY
Technology is a critical aspect of technical analysis of
any project. So it must be analyze effectively.
For example, a technology which has proven itself
in cold climates may fail in tropical climate.
Technology’s Cost of acquisition, installation, repairs
and maintenance should be analysed properly.
A technology is considered appropriate only if it
is assessed to be satisfactory and relevant

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 LAYOUT
The layout should be clearly depicted through diagrams
& descriptions.
 A good layout is characterized by:
 Minimum material handling.
 Effective space utilization.
 Smooth work flow.
 Safe & conductive working area for the workers.
 Safety and sanitation facilities &
 Flexibility of arrangements.

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 MACHINERY & EQUIPMENT
What type of equipment and technology will the business need to
produce its product/service?
What costs are involved to purchase and set up the equipment?
What are the costs involved in the ongoing running of the
equipment?
EQUIPMENT SUPPLIERS:
 Who are the potential suppliers of the equipment?
 Where are they located?
 What sort of service and warranties do they provide?
How long will it take to acquire the equipment and begin
operations?
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 ENVIRONMENTAL IMPACT ASSESSMENT
This study - identifies the environment in which a project is to be
implemented, assesses the short and long-term impacts.
surface water quality
air quality
seismology/geology
erosion
land quality
fisheries
forests
terrestrial wildlife
noise
archaeological/historical significance
public health 30
 INPUTS
These relate to the operation phase of the project, but need to
be identified at this stage of the technical study to examine
the technical feasibility of the proposed system.
Classification of the inputs :
Raw materials
Processed materials
Water & steam
 Gas, fuels and electricity.

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 INFRASTRUCTURAL FACILITIES
Availability and characteristics of roads, bridges, railway facilities
(like station, yards), air transportation, waterways, ports, etc
depending upon their relevance to the assessed requirements of the
project at both implementation and operation stages need to be
studied
A large part of the land area is normally required to be reserved for
service roads, storm water mains, railways, over-ground or
overhead gas, steam, and air pipelines, water reservoirs, and even
harbours for certain large-scale industrial projects.
A detailed study of all such requirements, and of their implications
in terms of time, resources, and approximate costs is necessary to
avoid surprises later on.

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 MANPOWER
The availability in needed numbers, of manpower of
requisite skills where and when required, has to be
studied.
manpower covers both the project implementation and
the operation (& maintenance) phases.
In case imparting of training is also involved, timely
availability, and costs, of the training facilities have also to
be assessed.

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OPERATIONAL
FEASIBILITY

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 OPERATIONAL
FEASIBILITY
• Operational feasibility determines if the human resources are available to
operate the system once it has been installed
• Users that do not want a new system may prevent it from becoming operationally
feasible
• Is a measure of how well a proposed system solves the problems, and takes
advantages of the opportunities identified during scope definition and how it
satisfies the requirements identified in the requirements analysis phase of system
development.

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 THE ESSENTIAL QUESTIONS TO HELP IN
TESTING THE OPERATIONAL FEASIBILITY OF A
•SYSTEM
Does management support the project?
• Are the users not happy with current business practices?
• Will it reduce the time (operation) considerably
• Have the users been involved in the planning and development of the
project?
• Will the proposed system really benefit the organization?
• Does the overall response increase?
• Will accessibility of information be lost?
• Will the system effect the customers in considerable way?

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ECOLOGICAL
ANALYSIS

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 ECOLOGICAL
ANALYSIS
• ecological - characterized by the interdependence of living organisms
in an environment; "an ecological Anything ecological relates to the
science of ecology, which is the study of how living things and the
environment do their thing.
• issues like preserving rain forests, saving endangered species, and
keeping drinking water safe, you're interested in ecological issues.
Ecological things have to do with how plants and animals relate to
each other, in good and bad ways, in specific environments — from
the impact of floods on river insects to how smog harms humans. Just
about anything people do has an ecological impact — for better or
worse.
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 THE CONCERNS THAT ARE USUALLY
ADDRESSED INCLUDE THE
FOLLOWING:
• What is the likely damage caused by the project to the environment?
• What is the cost of restoration measures required to ensure that the
damage to the environment is contained within acceptable limits?
• What are the likely environmental impacts from undertaking
project ?
• What is the cost of reducing the negative impact
• Evaluation of the environmental impacts and risks with and without
technical measures are taken to reduce these impacts?
• Are there alternative ways of supplying the good or service of project
without incurring these environmental costs? What are the costs of these
alternatives?
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LEGAL
FEASIBILITY

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 LEGAL
FEASIBILITY
• a measure of how well a solution can be implemented within existing
legal/contractual obligations.

• It includes study concerning contracts, liability, violations, and legal other traps
frequently unknown to the technical staff

• Determines whether the proposed system conflicts with legal requirements,

• e.g. a data processing system must comply with the local Data Protection Acts.

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STUDY OF LEGAL ISSUES RELATED TO THE
PROJECT
• Copyrights or patent laws

• Legal requirements for financial reporting

• Antitrust laws

• Labor relations and regulations

• Safety regulation

• Union contracts

• National data and work laws

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 ADMINISTRATIVE
ANALYSIS
Administrative relating to the management of a company, school, or other
organization. or has held a position with significant secretarial or clerical
duties. Ad Someone who has administrative experience either holds
administrative experience comes in a variety of forms but broadly relates
to skills in communication, organization, research, scheduling and office
support

• What are managerial needs of the project?

• Does organization have the ability to get the managerial skills needed?
• Is timing of project consistent with quantity and quality of management?

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THANK
YOU

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