Chapter 22

Project Feasibility Study

Objectives
Discuss nature of Project Feasibility Study Project Team Areas covered in a Project Study Steps of a Project Study Outline of Feasibility Study

Project Feasibility Study

- is the systematic investigation w/c ascertains whether a business undertaking is viable and if so the degree of its profitability - In other words, this is the use of information that will help a business to survive

Project Team
Depending on the situation, any project would ideally comprise the ff team members: a. One industrial economist b. One market analyst c. One or more technololgist/engineer specialized in the appropriate industry d. One civil engineer e. One industrial management expert f. One accounting expert

8 Areas covered in a Project Study

1. Organization and management - study of types of business org 2. Marketing - study of present and future demand and supply for product, competition, selling prices etc 3. Technical - study of production process, plant capacity, plant location and layout and other operating requirement

8 Areas covered in a Project Study

5. Financing - will cover the determination of financial requirements, financing leverage as well as possible sources of financing 6. Financial Projections - covers the presentation of expected profitability, cash needs and cash sources based 7. Profitability - shows the relationship between capital to be invested and expected net profit

8 Areas covered in a Project Study

8. Social Desirability - study of benefits from its contribution to the community, to other business firms and to national economy as a whole.

Steps of a Project Study

1. Gathering and collection of data through research work that are necessary and relevant to all aspects of the undertaking 2. Evaluation and analysis of data obtained 3. Formulation of conclusions and recommendations

Outline of a Feasibility Study

A. Executive Summary B. Project Background and History C. Economic Aspect D. Technical Aspect E. Management F. Manpower

Chapter 23

PFS: Project Background & Economic Aspect

Objectives
Presentation in Project Background Demand and Forecasting Techniques (Market Analysis)

The following should be presented in Project Background

Project background Project promoter and initiator Project history Feasibility study Cost of preparatory studies and related investigations

Economic Aspect: Market Analysis

Demand and forecasting techniques: 1. Trend method (1) (2) y= a + bx

Y - Y1 = Y2 Y1 X X1 = X2 - X1 Where: Y is dependent variable (total demand) X is independent variable (factor that affects y)

2. Regression models - forecast are made on basis of relationship estimated between the forecast and explanatory variable 3. Consumption Coefficient or End-Run Method - used for assessing intermediate products 4. Consumption Level Method - it considers level of consumption and can be useful when a particular product is directly consumed. 5. Market Surveys - expensive and time consuming way to forecast demand