UNIT-3

FEASIBILITY ANALYSIS
MARKET, TECHNICAL, FINANCIAL, OPERATIONAL
FEASIBILITY
MEANING AND DEFINITION

 A Project is Speculative Imagination, a scheme of

something to be done, a proposal for an undertaking.
 Thus Innovation and Vision form important aspects of a
project.
 The World Bank has defined project as “An approval for a
capital Investment to develop facilities to provide goods
and services.”
 Thus a project may be defined as a scientifically evolved
work plan devised to achieve a specific objective within a
specified period of time.
Characteristics

 There are 4 basic characteristics of a project:

 Investment Pattern
 Benefits or gains
 Time Limit
 Location.
PROJECT FEASIBILITY ANALYSIS

 A Project Feasibility Analysis includes Market Analysis,

Technical Analysis, Financial Analysis and Social
Profitability Analysis.
 Although every feasibility Analysis is different and it is
tailor made to suit the product the goal is to identify the
existing strengths and weaknesses of the project.
MARKET ANALYSIS

 Market Analysis covers the following:

 A Brief description including market area, existing rates
of transport, channels of distribution etc.
 An analysis of the past and present demand.
 An analysis of the past and present supply broken down
as whether imported or domestic.
TECHNICAL ANALYSIS

 A Technical Analysis should incorporate:

 A description of the product including specification
relating to its physical mechanical and chemical
properties and its uses.
 A Description of the selected manufacturing process
showing flow charts.
 A Determination of the plant size and production
schedule.
TECHNICAL ANALYSIS……..

 Selection of the machinery and equipment including

specifications quotations from suppliers delivery dates,
terms of payments.
 An identification of plant’s location and an assessment of
its desirability in terms of its distance from raw material
sources and markets.
 A design of the plant layout and an estimate of the cost
of the proposed buildings.
 An estimate of the labour requirements including a
detailed breakup of labour requirements.
FINANCIAL ANALYSIS

 For projects that involve new companies statements of

total project costs initial capital requirements and cash
flows relative to the project schedule.
 For all projects, supporting schedules for financial
projections stating assumptions made as to collection
period of sales, selling administrative expenses etc.
 For all projects a financial analysis showing returns on
investments returns on equity, break even volume, and
price analysis.
PROJECT APPRAISAL

 Project Appraisal can be defined as the promoter

taking a second look critically and carefully at a
project as presented by the promoter person who
is in no way involved in or connected with its
preparation and who is as such able to take an
independent and objective view of the project.
 The person who carries out appraisal of a project is
usually an official from the financial institution.
SCOPE OF APPRAISAL

 The appraisal of a project is undertaken by the financial

institutions with the twin objectives of determining the
market potential of a project and selecting an optimal
strategy.
 The methods of analysis vary from project to project.
 The different aspects of a project are not independent
entities but are highly interrelated and a meaningful
project appraisal depends upon the appreciation of this
fundamental fact.