Seminar on

Project/Immersion

Dr. Enrique Deronia Rodrigo

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 Course Description:

This course develops a student’s ability to undertake complex feasibility

studies. Students will learn these skills and techniques through performing
various feasibility studies of differing size and complexity. A feasibility study
is designed to establish whether a project or initiative is worth the investment
in time and money needed to get it off the ground. Of course this includes the
cost of developing the initiative, but it also look at the availability of funding,
both to initiate the project and to keep it going. However, the feasibility study
also looks at the evidence of need, potential take up and constraints such as the
capacity of buildings, staff and the community. The course also utilizes
practical situations, using the analytical and assessment tools such as
spreadsheets and Web Analysis, Critical Path, evaluation and review programs.

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 Course Aims:

This course has Overall objectives of the Decision: Know the meaning of
analysis and evaluation of projects. What are the links to the project. Study
stages throughout the project. What information is needed to analyze the
projects. How to analyze the commercial viability of any project. Analysis
of the financial feasibility of new projects under certainty conditions.
Analysis of the financial feasibility of new projects under uncertainty
conditions. Criteria for evaluating projects.

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 Course outcomes:

At the completion of the subject, students should be able to: Understand the
principles of feasibility studies. Be able to complete a cash flow and financial
forecast as part of the feasibility study process. Understand risk and be able to
undertake a risk assessment. Understand the principles of an options appraisal.
Conduct a Community consultation. Have the knowledge to provide a
comprehensive funding analysis. Be able to calculate projected income through
funding and trading. Understand the factors both internal and external that
impact on the feasibility of a project. Have the knowledge of the components
of a feasibility study. Have a grasp of project costs, both direct costs and core
costs. Be able to identify appropriate organizational structures and
management structures which promote the feasibility of a project.

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Feasibility Study
What is a feasibility study?
A feasibility report is a testimony that attempts to create some sort of action.
Feasibility reports are created to persuade/help the decision makers to choose
between available options. Remember that your option is not the only one, the decision
makers will probably have many to choose from. A feasibility report also determines
whether or not the investigated task can be done with the amount of resources
available or how many resources will be necessary in order to complete the task. A
feasibility may be useful in a lot of different situations such as event planning, finances,
or even remodeling your home.
Feasibility reports are usually used to sway decision makers towards one direction or
the other. Many times there is only course of action but, there needs to be second
course of action.

A project feasibility study is the systematic gathering and analysis of data for the
purpose of finding out whether a business undertaking is practicable, and if found
practicable, to determine the degree of profitability.

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What is a feasibility study?

A feasibility study is a way to evaluate the practicality and desirability of a project.

Before a company invests time and money into a project, they need to know how
successful the project will be before investing. Sometimes companies want to
understand input costs, the amount of research that will need to be done, or even
the marketability of a project. With input prices, it is essential that companies
understand, (even before they put time and research into the project), how much it
would cost to go trough with their product. Companies also like to know if they put
time into research and go through with their change or promotion of a product,
how the public/people will react to the change. Will people be fighting over the new
product or will it fall through? The purpose of feasibility studies is to provide
companies information and analysis on whether or not you or your company
should pursue this course of action.

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 What are the uses of a project feasibility study?

The uses are:

1) To the proponent of the project, it serves as a basis for a. selecting a good
venture, b. implementing the project, and c. formulating long-range plans.
2) To creditors and investors, it is a basis for a. deciding whether to grant
financing, and b. determining the amount and terms of financing.
3) To the national economy, it assists in minimizing the risk of failure of
business ventures, reduces waste of valuable resources, thereby
accelerating economic growth.

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 What are the stages in the overall cycle of a project?

The stages are:

1) Pre study stage – This is the stage where the idea for the project is
conceived;

2) Project study stage – At this stage, data relevant to the project is

gathered, analyzed, and presented for consideration by the proponent and
other interested parties.

3) Post-study stage – At this stage, the project proponent decides, on the

basis of the result of the feasibility study, whether or not to implement the
project.

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What is a pre-feasibility study (or a prima facie study)?

A pre-feasibility study is the process of gathering a reasonable percentage of acts

and opinions, weighing them, and taking into account unknown information for the
purpose of determining whether a tentative project is worth pursuing more deeply.

What is the purpose of a pre-feasibility study?

The purpose is to avoid unnecessary time and expense in undertaking a full-blown
feasibility study for projects whose impracticability may be detected by a brief but
efficient, evaluation of the areas essential to the project decision. Depending on the
findings of a prefeasibility study, a decision is made on whether to proceed with a
fuller study.

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What areas are covered in a pre-feasibility study?
In general, more emphasis is usually given to market considerations, but technical,
financial, and political areas may also be covered.

What are the major aspects (parts) of a project

feasibility study?
The major aspects are:
1. Marketing
2. Engineering or Technical
3. Management
4. Taxation
5. Legal
6. Financial
7. Sources of financing
8. Economic benefits
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Which aspects of a project feasibility study are usually
the most important?
In general, the three most important aspects are:
1. Marketing
2. Engineering or Technical
3. Financial
Note: If a fourth aspect is needed, “Management” may be included.

State briefly what is involved in each of the major

aspects of a project feasibility study.
(1) Marketing – The marketing study examines the current demand and supply situation
and determines the probable future market for a product. If the present market potential is
favorable, an estimate is made of the market portion that the project can expect to fill.
A marketing program is then formulated to enable the project to attain its expected share
of the market.
(2) Management – The management study determines the structure, policies, and
personnel which can best carry out the plans of the project.
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(3) Engineering – The engineering study determines the feasible of manufacturing process,
machinery design, labor, material, power, water, location, layout, and other technical factors
that will enable a project to operate at minimum cost and/or maximum profit in
manufacturing the product.
(4) Taxation – The taxation study determines the effects of liquidation of a project, for the
purpose of minimizing tax liabilities, and thereby enhancing the profitability of the project.
(5) Legal – The legal study examines the various legal aspects which are relevant to a
project and can affect important decisions, such as the legal capacity to do business, the
requirements applicable to a business organization, the restrictions on operations in certain
industries, and the protection accorded to business properties.
(6) Financial – The financial study quantifies the results of the marketing, engineering,
management, taxation, and legal phases of the project study, and sets down in peso terms
the possible outcome of operating the project.
(7) Sources of financing – If the financing requirements of the venture cannot be met in
entirety by the proponent, the possible sources of outside financing are presented in this part.

(8) Economic benefits – This study examines the project’s contribution to the Philippine
economy. It is necessary if the study report is to be coursed to Philippine government
institutions or international agencies for financing. (Adapted from Preparation of Feasibility
Studies in the Philippines, by the Presidential Economic Staff).
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The data, analyses, and conclusions of the feasibility study are assembled and
organized in the form of a study report for consideration by the project proponent
and other interested parties.
What are the characteristics of a good feasibility report?

The characteristics are:

1) Comprehensiveness – The areas covered by the study should be clearly defined
thoroughly investigated. The subject matter covered should meet the requirements of the
user or users of the report.

2) Objectivity – The report should be objective. Both the good and the weak points of the
project should be presented, and there should be “a well-balanced combination of persuasion
and proof, citing facts, figures, opinions, and assumptions which are concretely documented.

3) Simplicity – As much as possible, the report should be couched in simple, non-technical

language that can be readily understood by those who will read it. When technical terms are
necessary, they should be clearly explained and defined.

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Accountants are primarily involved in the financial aspects of a project
feasibility study. What are the major parts of a financial
study?
The major parts are:
1. Statement of assumptions
2. Projected financial statements
3. Details of various amounts contained in the projected financial statements
4. Analysis of the financial projections

What is the nature of the statement of “assumptions”

in a financial study?
Assumptions are explicit statements about the possible future behavior of certain
variables affecting a project which serve as the premises for projecting probable
financial results.

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Why are assumptions necessary?
Assumptions are needed to provide a definite and specific basis for financial projections.
Whenever possible. Financial projections should be based on actual data. This is not always
possible, however, because at the time the projections are made, certain factors may not have
been definitely decided upon (e.g. location of the plant), or cannot be forecast with certainty
(e.g. changes in price levels). Accordingly, assumptions must be made regarding these
variables.

What is a statement of assumptions important?

Assumptions are important because they are the basis upon which financial
projections are made. The projections will vary depending upon the assumptions
made, and their accuracy will depend on the validity of underlying assumptions,

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What is necessary in order to establish “valid”
assumptions.
To be valid, assumptions must be reasonable and realistic. They must be based on facts or on
well-considered circumstances.

What are some assumptions that are ordinarily made

in a financial study?
A financial study will usually include, among others, assumptions regarding:
1. Sales volume, selling price, and channel(s) of distribution
2. Plant capacity, location, and requirements
3. Taxes
4. Foreign exchange rate
5. Price level changes
6. Project timetable

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Which aspects of a project feasibility study are usually
the most important?
They are:

(1) Projected income statement (sometimes called Profitability statement) – This shows
expected revenues, costs, and net income for each of the operating periods covered by the
financial projections.

(2) Projected cash flow statement – This shows the expected cash receipts,
disbursements, and balances for each of the periods covered by the financial projections.

(3) Projected balance sheet – This shows the expected resources (assets) to be used by
the project, and the manner in which they will be financed (by creditors or owners), at the
end of each of the periods covered by the financial projections.

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 What periods or dates should be covered by the
projected financial statements?
In general, the projected statements may cover the project’s initial year only, or
the first two years, or any number or years depending on the requirements of the
study.
For management purposes, the projected income statement ordinarily covers three, five, or
ten years of operations depending upon what is needed and the extent to which projections
in later years can be relied upon. For purposes of obtaining a loan, the whole repayment
period should ordinarily be covered.

For projected cash flows statement should cover the pre-operating period as well as the
operating periods covered by the projected income statement.

A balance sheet may be prepared as of the end of each of the periods covered by the
projected cash flow statement. As a minimum it should be presented as o the first and the
last day od operations.

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What is the purpose of including an analysis of financial
projections in the financial study
The purpose is to help readers of the report evaluate the results of the financial
projections, particularly as to profitability, liquidity, and solvency of the project, and
its ability to withstand adversities.

What are some ratios and tests that may be included in

an analysis of financial projections
Some ratios and tests that may be useful to the readers are:
(1) Measures of profitability, such as
a) Common size projected income statements
b) Rate of return on investment
 Discounted rate of return
 Net present value
 Accounting rate of return
c) Cost-volume profit
 Breakeven volume
 Breakeven sales
d) Earnings per share 20
FEASIBILITY STUDY
WRITING

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I. CLASS MEETING:

II. COURSE DESCRIPTION: This course covers the procedure

preparation and evaluation of different project feasibility
studies in the Philippines both public and private sector. It is
focus on the importance of project study.

III. PRE- REQUISITE: Financial Management/ Financial

Accounting

IV. COURSE OBJECTIVES: At the end of the period of the

students should be able to understand the different
components/ parts of feasibility study and to be able to
write effectively and accurately.
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V. COURSE REQUIREMENT AND PERFORMANCE CRITERIA/
GRADING SYSTEM:

◦ Attendance
◦ Active Class Participation
◦ Quizzes/ major Examination
◦ Comprehensive written Examination
◦ Comprehensive oral Examination
◦ Final submission of Feasibility Study

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Distribution are as follows:

Attendance/ Class Participation 10%

Originality of the report study 25%
Oral and written examination/ Defense 40%
Submission of report/ study Book Bind 25%

100%

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VI. METHODOLOGY:
1. Lecture and discussion/ open forum
2. Advising (all chapters)

VII. COURSE COVERAGE/ OUTLINE

1. Introduction to Industry Analysis
2. Project Development Framework
3. Project Identification and Project Preparation

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 CHAPTER 1
INTRODUCTION

Statement of the problem

Objectives of the study
Significance of the study
Scope and Delimitation of the study
Methodology
Review of Related Literature
Definition of Terms

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 CHAPTER 2
MARKETING ASPECT
Industry Profile
Description and Uses of the product
Consumer Behavior
Demand Analysis
Historical Demand/Historical Data
Estimation of Past and Present Demand
Projected Demand
Supply Analysis
Projected Supply
Demand and Supply Consolidation
Competitors
Market Share 27
Purchases
Projected Purchases
Marketing Strategy/ Market planning/ Market Segmentation
Promotional Strategy/ Activity
Pricing Strategy
Cost per Unit
Selling Price
Terms of Sales

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 CHAPTER 3
PRODUCTION AND TECHNICAL ASPECT

Description of Operation/ Process

Designing Production Facilities
Plant Location
Profile of Plant Location
Plant Layout
Property Plant and Equipment
Property Plant and Equipment Layout
Internal Control
Quality Control Techniques

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 CHAPTER 4
ORGANIZATION AND MANAGEMENT ASPECT
Types of Organization
Organization Structure
Personnel and Laborer Components
Duties and Responsibilities
Compensation Scheme/ Salary and Wages
Owners/ Partners/ Incorporators Office Profile Qualification
Project Timetable

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 CHAPTER 5
FINANCIAL ASPECT
Capital Requirements
Sources of Financing
Basic Assumption
Operating Expenses
Schedule of Salaries
Schedule of Fringe Benefits
Financial Statements
Income statement
Balance Sheet
Cash Flow
Financial Ratios
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 Solvency
Operational Efficiency
Profitability
Evaluation of Project Study
Net Present Value
Payback Period
Return on Investment
Accounting Rate of Return

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 CHAPTER 6
POTENTIAL PROBLEM
CHAPTER 7
SOCIAL DESIRABILITY
CHAPTER 8
FINDINGS AND RECOMMENDATIONS
CHAPTER 9
SUMMARY OF THE STUDY
CHAPTER 10
REFERENCE (BIBLIOGRAPHY)

CHAPTER 11
CURRICULUM VITAE OF THE RESEARCHER
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