SIMPLIFIED FEASIBILITY STUDY

Feasibility Study Definition:

- an evaluation and analysis of the potential of the proposed project which is
based on extensive investigation and research to support the process of decision
making.
Advantages:
1. Means of determining whether valuable resources maybe committed in an
undertaking.
2. Reduces potential risk of failure.
3. Allows identification of critical issues and critical resources in an undertaking

Disadvantages:

1. It requires technical knowledge.

2. It requires initial expenses.
3. It requires time and effort.

Uses/Purposes:
1. To evaluate the profitability of a new business.
2. To evaluate benefits gained in the expansion of a business.
3. To evaluate financial impact for changes in business location.
4. To evaluate benefits of new methods of production, technology, or machinery.
5. To evaluate changes in an organization.
6. To evaluate benefits from business mergers or business acquisition.

In its simplest terms, the two criteria to judge feasibility are cost required and value to be
attained.

Preparation

Characteristics of information:
1. Accuracy – actual information of the industry.
2. Reliability –dependable sources from the industry or market.
3. Timeliness – current data that most closely reflect present situation.

Components:

1. Market Feasibility (Market Research)

1.1 Market Information

1.2 Production/Technical Information
1.3 Organization and Manpower Information
1.4 Financial Information
1.5 Government programs, policies, regulations
 Sources of Information:

1. Reading in the library

2. Using the internet/internet chatting
3. Asking persons in authority
4. Interviewing knowledgeable people
5. From Television
6. Through discussions
7. From local shopkeepers/sellers

2. Production/Technical Feasibility

2.1 Product description

2.2 Production process(material, equipment, energy requirement)
2.3 Plant size and production schedule
2.4 Machine and equipment
2.5 Plant/business locations
2.6 Building and Facilities
2.7 Plant layout
2.8 Raw materials
2.9 Utilities
2.10Waste disposal
2.11 Production Cost

3. Organizational/Management Feasibility
- Organizational structure
- Duties and responsibilities

4. Financial Feasibility

- sources of financing and cost involved

Balance Sheet (Assets, Liabilities, Equity)

Income Statement (Projected revenue, expenses)
Cash Flow Statement (Inflow-receipts or sources and Outflow-payments or
uses of cash)
Financial Projections
Projected Financial Statements
Projected Financial Performance

(Financial Analysis)
1. Payback Period
2. Return on Investment
3. Break-Even Analysis
4. Net Present Value and Internal Rate of Return
A well-designed feasibility study should provide:

 a historical background of the business or project,

 description of the product or service,
 accounting statements,
 details of the :
 operations and management,
 marketing research and policies,
 financial data,
 legal requirements and
 tax obligations.

If a significant market for the product or services cannot be established, then there
is no project.

FORMAT

I. Executive Summary

II. Introduction

III. The Market Feasibility

IV. The Production/Technical Feasibility

V. The Organizational Feasibility

VI. Financial Feasibility

VII. The Socio-Economic Impact

VIII. The Conclusion of the feasibility study (viable/ profitable or not?)