FEASIBILITY STUDIES

Lopez, Jorge
Moreno, Charlstom
Seleccion, Lorenz Rome
Lai, Philip Reginald
FEASIBILITY PROJECT STUDIES
 FEASIBLE – a word defined as capable of being
done or carried out; practicable, possible and
within reason. A project which when carried out
or built is capable of being used or dealt with
successfully. In this case, a reasonable return of
investment or ROI, to the financiers or
developers.
 There are two ways to prepare a feasibility study.
One is the preliminary study which is done by
Lump sum analysis and the other is by detailed
costings which is based on the actual estimates of
details in plan.
1. EXAMPLE OF A PRELIMINARY STUDY
(Note: Prices were based on 1984-85 and is subject
to change)
PRELIMINARY PROJECT STUDIES
Foggy Heights
Townhouses
Baguio City
A. AREA ALLOCATIONS
1. Gross Area (100%) 2,800 sq.m.
2. Residential Lots (72%) 2,016 sq.m.
3. Road Lot (28%) 784 sq.m.
B. LOT AREA
1. Lot Acquisition
Cost 2,800 @ P500 1,400,000.00
2. Site Development
Cost 2,800 @ P300 840,000.00
3. Average lot sizes 80.64 sq.m.
4. Total No. Of Lots 25 lots
5. Selling Price per sq.m. 1,600.00
6. Total Lot Sales 3,225,600.00
7. Selling price per lot 129,024.00
C. HOUSE DATA
1. House Model 2 Bedroom
2. House Floor Area 87 sq.m.
3. No. Of Units 25
4. Construction Cost per sq.m. P 3,200.00
5. Construction Cost per unit P 278,400.00
6. Total Construction Cost
( 25 Units) P 6,960,000.00
7. Selling Price per sq.m. 4,800.00
8. Selling Price per Unit 417, 600.00
9. Total House Sales 10,440,000.00
D. HOUSE AND LOT PACKAGE
1. Lot Selling Price 129,024.00 4. Initial Cash Requirement
House Selling Price 417,600.00 a. Buyer’s Equity (10% downpayment)
House & Lot Selling Price 546,624.00 P 54,662.40
2. Loanable Amount b. Miscellaneous Fees
(90 % of selling price) 491,961.00 1.Origination Fee (5% of loan) P24,598.05
3. Monthly Amortilization
2. Filing and Notarial Fee 1,500.00
(.008333(.83%)) 4,099.67
3. Water and Electric Meter 900.00
4. Occupation Permit 600.00
5. Building Permit 3,500.00
6. Location Plan 200.00
7. Prepaid Insurance(1.2% of
selling Price) 6,559.48
8.Transfer of Title (2% of
selling Price) 10,932.48
 48,740.01
 Total Initial Requirement P 103,452.41
E. CASH FLOW PROJECTION SUMMARY
1. Total Sales - 25 x 546.624.00 P13,665,600.00 g. Marketing Management
2. Project Expenditures 3% of Sales 409,968.00
a. Lot Acquisition Cost 1,400,000.00 h. Selling Commission 683,280.00
b. Pre-Construction Cost (Permits) 25,000.00 i. Bank Repayment 1,080,000.00
c. Construction Expenses 7,800,000.00 Interest 24% of 6 Million (9 mos.
1. Site Development (_,840,000.00) .24 x 6,000,000 = P1,440,000
2. House Construction (6,960,000.00) 1,440,000 / 12 = 120,000.00
d. HFC Fees 120,000 x 9 = 1,080,000.00
1. Application Fee 2,500.00 j. Administrative Expenses
2. Redemption Insurance 2% of Sales 273,312.00
1% of P6,000,000 Loan 60,000.00 Total Expenditures P12,598,372.00
3. Inspection and Appraisal Profit P13,665,600.00 less
0.75% of Loan 45,000.00 P12,598, 372 or
e. Planning and Engineering P1,067,228.00
7% of Construction Expenses(e) 546,000.00
f. Project Management 2% of Sales
(13,665,600.00) 273,312.00
F. PROJECT ANALYSIS
1. PROFITABILITY
a. Investment
1. Lot Acquisition Cost P 1,400,000.00
2. Initial Cash Requirement 827,619.00
TOTAL P 2,227,619.00
b. Profit 1,067,228.00
c. Return on Investment
1,067,228.00
2,227,619.30 = 47.91% per year
2. FINDINGS
a. Return on Investment at 47.80%
per year for this kind of project.
b. On the House and Lot package:
1. The package is highest
P546,624.00 and may not be
affordable to the area.
2. The selling price of the lot at
P1,600 per square meter is high
brought about by a low land value
of P500.00 per square meter which
is quite high.
If in case the owner of the land wants to be a
partner of the development and participate in the
profits, this will be called a joint venture.
 JOINT VENTURE ANALYSIS
PROPOSED FOGGY HEIGHTS SUBDIVISION

 TOTAL SALES P13,665,600.00

Less: Project Expenditures 12,598,372.00

JOINT VENTURE PROFIT P 1,067,228.00

EQUITIES
OWNER’S EQUITY:
1. Current value of land............... P1,400,000.00
DEVELOPER’S EQUITY
1. Permits(b).............................P 25,000.00
2. HFC Fees(d).......................... 107,500.00
3. Architectural/Engineering... 546,000.00
4. Project Management(f)......... 273,312.00
5. Marketing Management(g).. 409,968.00
6. Administrative Expenses(j). 273,312.00
P 1,635,092.00
TOTAL EQUITIES........................... P3,035,092.00
SHARING PERCENTAGE
1. OWNER P1,400,000.00
3,035,092.00 = 46.12%

2. DEVELOPER: P1,635,092.00
3,035,092 = 53.87%
SHARING OF PROFIT
1. Owner’s Share : P1,067,228.00 x 46.12% =
P492,312.28

2. Developer’s Share : P1,067,228 x 53.87% =

P574,915.72
ROI
 OWNER: 492,312.28
1,400,000.00 = 35.16%

 DEVELOPER: 574,915.72
1,635,092.00 = 35.16%