Project Feasibility Study

Feasibility analysis (FA, also called feasibility study) is used to assess

the strengths and weaknesses of a proposed project and present directions
of activities which will improve a project and achieve desired results. The
nature and components of feasibility studies depend primarily on the
areas in which analyzed projects are implemented.
 Feasibility literally means whether some idea will work or not. It
knows before hand whether there exists a sizeable market for the
proposed product/service, what would be the investment
requirements and where to get the funding from. In other words,
feasibility study involves an examination of the operations,
financial, HR and marketing aspects of a business on ex ante
(Before the venture comes into existence) basis.
 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. It is a
process for making sound decisions and setting direction. It is
also a process which:
1. Is driven by research and analysis.
2. Usually involves some form of consultation with stakeholders,
community, users, etc.
3. Focuses on analyzing, clarifying and resolving key issues and
areas of concern or uncertainty.
4. Very often involves basic modeling and testing of alternative
concepts and approaches.
A feasibility study looks at three major areas:

a) Market issues.

b) Organizational/technical issues.

c) Financial issues.
Why Do Feasibility Studies?
Developing any new business venture is difficult. Taking a project
from the initial idea through the operational stage is a complex and
time-consuming effort. Most ideas, whether from a cooperative or an
investor owned business, do not develop into business operations
 Feasibility studies are useful and valid for many kinds of projects.
Evaluation of a new business ventures, both from new groups and
established businesses, is the most common, but not the only usage.
Studies can help groups decide to expand existing services, build or
remodel facilities, change methods of operation, add new products,
or even merge with another business. A feasibility study assists
decision makers whenever they need to consider alternative
development opportunities.
General requirements and potential benefits of conducting feasibility study
include:
1. Developing any new business venture is difficult.
2. Taking a project from initiation of idea to operational stage is a complex
and time consuming effort.
3. It minimizes project failure -Most ideas, whether from cooperative or
investor-owned businesses, do not develop into business operations.
4. Projects involve business operations that differ from Individual business.
5. Feasibility study allows groups developing a business idea to preview
potential project outcomes and decide if they want to continue developing
the project.
The feasibility study involves;
1. Appraisal of existing systems and manual processes.
2. Troubleshooting.
3. Process re-engineering.
4. Risk analysis and assessment.
5. Risk management.
6. Cost-benefit analysis.
7. Impact analysis.
8. Integration of existing and new systems.
9. Resource requirements planning and timings.
10. Implementation strategy.
11. Infrastructure assessment and requirements.
12. Dependencies and requirements.
13. Support requirements and logistical analysis
The elements of feasibility analysis for a project should be covering the
below:

1) Need Analysis
2) Process Work
3) Engineering & Design
4) Cost Estimate
5) Financial Analysis
6) Project Impacts
7) Conclusions and Recommendations
A feasibility report should have the following structure:
1.Executive Summary:
It provides a quick overview of the main points of the assessment, helping
to form a picture of the proposal along with the recommendations. It should
be concise and include the major findings covered in the main body of the
report.
2. Need Analysis
Need Analysis information provide a context to the business proposition. It
analyzes the justification of the idea, with a study of possible alternatives. It
links the business idea to the current circumstances and helps to inform
evaluation of the business idea.
3. Engineering:
Description of the technical aspects of the business idea, including any
changes needed to be made to existing processes or the need to add items to
existing range of products and services.
4 Cost Estimate:
This involves estimating project cost to a suitable level of accuracy.
Levels of around -5% to +15% are common at this level of a project plan.
Estimates of capital investment, recurring and nonrecurring costs must be
there. Sensitivity analysis can be carried out on the estimated cost values to
see how sensitive the project plan is to the estimated cost values
5 Financial Analysis:
This involves an analysis of the cash flow profile of the project
This is a critical analysis since it determines whether or not and when
funds will be available to the project
6 Project Impacts:
This portion of the feasibility study provides an assessment of the
impact of the proposed project
Environmental, social, cultural, political, and economic impacts may be
some of the factors that will determine how a project is perceived by the
public
7 Conclusions and Recommendations:
The feasibility study should end with the overall outcome of the project
Types of feasibility
Feasibility is of the following types:

Technical Feasibility:
This area reviews the engineering feasibility of the project, including
structural, civil and other relevant engineering aspects necessitated by the
project design. The technical capabilities of the personnel as well as the
capability of the projected technologies to be used in the project are
considered.
Economic Feasibility:
Economic feasibility is the process of identifying the financial benefits
and costs associated with a development project. It involves the
feasibility of the proposed project to generate economic benefits. A
benefit-cost analysis (addressing a problem or need in the manner
proposed by the project compared to other, the cost of other approaches
to the same or similar problem) is required.
Managerial Feasibility:
Demonstrated management capability and availability, employee
involvement, and commitment are key elements required to ascertain
managerial feasibility. This addresses the management and
organizational structure of the project, ensuring that the proponent's
structure is as described in the submittal and is well suited to the type
of operation undertaken.

Safety Feasibility:
Safety feasibility is another important aspect that should be
considered in project planning. Safety feasibility refers to an analysis
of whether the project is capable of being implemented and operated
safely with minimal adverse effects on the environment.
Political Feasibility:
Political considerations often dictate directions for a proposed project. This
is particularly true for large projects with significant visibility that may
have significant government inputs and political implications. For
example, political necessity may be a source of support for a project
regardless of the project's merits.

Market Feasibility:
This area should not be confused with the Economic Feasibility. The
market needs analysis to view the potential impacts of market demand,
competitive activities, etc. and market share available.
Project Appraisal
Contents
1. Project appraisal.
2. Definition.
3. Aspects of project appraisal.
4. Market appraisal.
5. Technical appraisal.
6. Economic Appraisal.
7. Ecological Appraisal.
8. Financial appraisal.
Definition
 Pre investment analysis of a project with a view to determining
the overall feasibility and measures its investment worth which
provides a comprehensive review /assessment of all aspects of
project that lays the foundation for implementation and evaluation
when it is completed.
 Technical
Appraisal
Economi
Financial
c
Appraisal
Appraisal

Project Ecologic
Market Appraisa
al
Appraisal l
Appraisal
Market appraisal
It is one of the major areas of introducing of any products in market . In
that case , these must be considered before launching in a market.
• What would be the aggregate demand of the proposed product or
service?
• What would be the market share of the project under appraisal?
Market appraisal
(Issues)
• Past and current demand trends
• Past and current supply position
• Production possibilities and constraints
• Imports and exports
• Nature of competition
• Cost structure
• Elasticity of demand
Technical appraisal
• Whether prerequisites for the success of project considered ?
• Good choices with regard to location , size, process, machines
etc..
(Issues)
• Preliminary tests and studies.
• Availability of raw materials, power and other
inputs.
• Optimal scale of operations.
• Choice of suitable production process.
• Choice of appropriate machines and equipment.
• Effluents and waste disposal.
Economic appraisal
• Social cost –benefit analysis.
• Impact on level of savings and investments in
society.
• Impact on fulfilment of national goals.
• Self sufficiency.
• Employment.
• Social order.
Ecological appraisal
Impact of project on quality of
• Air.
• Water.
• Noise.
• Vegetation.
• Human life.
Financial appraisal
• Whether the project is financially viable ?
• Servicing debt.
• Meeting return expectations.
• Investment and phasing of the total cost.
• Means of financing.
• Break even point.
• Cash flows in the project.