MK.

TEKNOEKONOMI
PS TEKNIK INDUSTRI PERTANIAN

PENILAIAN KELAYAKAN
PRODUK
& TEKNOLOGI PROSES
AGROINDUSTRI
feasibility ANALYSIS
• Feasibility analysis is the process of
determining whether a business idea is
viable.
• It is the preliminary evaluation of a
business idea,conducted for the purpose of
determining whether the idea is worth
pursuing.
Opportunity Studies
Identification of investment
Pre feasibility Studies
opportunities
A detailed review of available
opportunities
Financial and economic impact
Support Studies
Studies to cover aspects of an
investment projects
e.g. market studies; raw material
and factor supplies studies;
Laboratory and pilot plant tests;
location studies; environmental
impact assessments; economies
of scale studies; equipment
selection studies
Feasibility studies
Should provide all data
Appraisal Report
necessary for an investment
decision in several aspects
(commercial, technical, Appraisal of the investment
financial, economic and project in accordance with
environmental prerequisities) stakeholders’ individual
objectives
PRE-FEASIBILITY STUDY
1. Strategic orientation (marketing, production and supplies, research
and development, financing, personnel, management and
organization, participation, acquisition and cooperation)
2. Scope of projects
3. Data for pre-investment studies
• Estimates
• Cost parameters
• Published reference data
• Selection and verification of alternatives
• Accounting terminology and related matters
The project team
• Industrial Economics
• Marketing (market analyst or marketing experts)
• Process engineering and technology
• Mechanical and industrial engineering
• Civil Engineering
• Environmental impact assessment
• Industrial management
• Industrial financing and accounting
It can be used for
more than one
reason:

Planning for
business.
Reviewing
Current Business
state
Monitoring
Business
Performance
Feasibility study
FEASIBILITY STUDY

MARKET IMPLEMENTATION
RAW MATERIALS LOCATION, SITE & ENGINEERING & ANALYSIS & ORGANIZATION & HUMAN PLANNING & FINANCIAL
& SUPPLIES ENVIRONMENT TECHNOLOGY MARKETING OVERHEAD COSTS RESOURCES INVESTMENT ANALYSIS
CONCEPTS APPRAISALS
FEASIBILITY STUDY: executive summary
Summary of the project background and history:
• Name and address of project promoter
• Project background
• Project (corporate) objective and outline of project strategy
• Project location: orientation towards the marketing resources (raw
materials)
• Economic and industrial policies supporting the project
marketing
PRODUCT
MARKET FIT
Market analysis and marketing concept
• Summarize results of marketing research: business environment, target market and
market segmentation (consumer and product groups), channels of distribution,
competition, life cycles (sector, product)
• List annual data on demand (quantities, prices) and supplies (past, current and
future demand and supplies)
• Explain and justify the marketing strategies for achieving the project objectives and
outline the marketing concept
• Indicate projected marketing costs, elements of the projected sales programme and
revenues (quantities, prices, market share etc.)
• Describe impacts on: raw materials and supplies, location, the environment, the
production programme, plant capacity and technology etc
• Assessment of the target market structure
• Customer analysis and market segmentation
• Analysis of the channels of distribution
• Analysis of the competition
• Analysis of the socio-economic environment
• Corporate (internal) analysis
• Projections of marketing data
• Conclusions, prospects and risks
 CUSTOMER ANALYSIS
• What is bought on the market?
• Why is it bought? What is the
purchasing motive?
• Who are the buyers, the
purchasing decision makers and
persons
• participating in the decision?
• When is it bought (decision-
making process, purchasing
practices such as seasonal
purchases)?
• How much is bought (purchasing
quantity and frequency)?
• Where is the purchase made?
CONSUMER-GOODS
MARKET
• The customer has complex
needs that he or she is often
only partially aware of;
• The performance offered has
not only a functional, but
also an emotional
significance to the customer;
• There is often no real
decision-making process, but
rather brand-oriented,
routine or impulse buying;
• Customer opinion is highly
important
CAPITAL-GOODS MARKET
• The items purchased are intended for
further use in a production process;
• Customer needs are most frequently
based on a clearly defined purpose;
• There is often a complicated decision-
making process within organizations
with many internal opinion leaders;
• The customer often has a deep or
expert knowledge of the product;
• There is a relatively long period of
time between the first customer
contact and the conclusion of the
contract
MARKET SEGMENTSSegmentation can be based on the following
A market segment has to meet
three requirements:
• Customer behaviour within the
segment has to be as uniform as
possible;
• The segment has to be clearly
distinct from others;
• The size of the segment has to
be big enough to ensure that a
differentiated market treatment
by the enterprise would pay off
factors:
• Geographical or linguistic criteria, such as
nationality, region, urban or Rural
predominance etc.;
• Socio-demographic criteria for individuals
(age, sex, income, education, profession,
size of household etc.) or enterprises
(corporate size, industrial branch etc.);
• Psychological criteria (innovativeness of
customers, purpose, status etc.)
• How do the competitors use
their marketing tools?
• Which target groups
(segments) do they work on
and how extensively?
• In which segments have
they special strengths and
where are their weaknesses?
assessment
Raw materials and
supplies
• Describe general availability of:
• Raw materials
• Processed industrial materials and components
• Factory supplies
• Spare parts
• Supplies for social and external needs
• List annual supply requirements of material inputs
• Summarize availability of critical inputs and possible strategies
(supply marketing)
SPECIFICATION OF REQUIREMENTS
• Socio-economic factors: social environment, socio economic
infrastructure
• Commercial and financial business factors: project size, skill and
productivity and the labour cost, market demands regarding product
quality, product mix, competition for materials, supplies and services
• Technical factors: type of industry, technology and production process,
type of machinery and equipment, production capacity and estimated
production etc
PROJECT CHARACTERISTICS AND MATERIAL INPUTS
• A Process flow sheet
• Material and energy balance

REQUIREMENTS of RAW MATERIALS & FACTORY SUPPLIES

• User demands (expectation of end users on the products will influence the
choice of technology, machinery and equipment, materials and inputs used
• Quantities required (units produced, section of production process, machine
or labour hours, employees)
• Qualitative properties (physical, mechanical, chemical properties)
LOCATION, SITE AND
ENVIRONMENT
• Identify and describe location and plant site selected, including:
• Ecological and environmental impact
• Socio-economic policies, incentives and constraints
• Infrastructural conditions and environment
• Summarize critical aspects and justify choice of location and site
• Outline significant costs relating to location and site
ENGINEERING AND
TECHNOLOGY
• Outline of production programe and plant capacity (feasible normal
capacity vs nominam maximum capacity),
• Describe and justify the technology selected, reviewing its availability
and possible significant advantages or disadvantages, as well as the life
cycle, transfer (absorption) of technology, training, risk control, costs,
legal aspects etc.
• Describe the layout and scope of the project
• Economies of scale
• Summarize main plant items (equipment etc.), their availability and costs
• Describe required major civil engineering works
ORGANIZATION &
OVERHEAD COSTS
• Describe basic organizational design
and management and measures required
• General management of the enterprise
• Finance, financial control and
accounting
• Personal administration
• Marketing, sales, and distgribution
• Supplies, transport, storage
• Production: (main plant, service plants,
QA, Mainterenance and repair)
HUMAN RESOURCES

• Describe the socio-economic and cultural environment as related to

significant project requirements, as well as human resources
availability, recruitment and training needs, and the reasons for the
employment of foreign experts, to the extent required for the project
• Indicate key persons (skills required) and total employment (numbers
and costs)
Project Implementation Schedule & Budget
• Indicate duration of plant erection and installation
• Indicate duration of production start-up and running-in period
• Identify actions critical for timely implementation
FINANCIAL ANALYSIS
Financial analysis and investment appraisals
• Summary of criteria governing investment appraisal
• Total investment costs
Major investment data, showing local and foreign components
Land and site preparation
Structures and civil engineering works
Plant machinery and equipment
Auxiliary and service plant equipment
Incorporated fixed assets
Pre-production expenditures and capital costs
Net working capital requirements
Financial analysis
• Expenditures and costs
• Revenue and income
• Total investment costs
land and site preparation; technology; equipment (production, auxiliary, costs of
environmental protection technology, waste disposal, internal infrastructural
services, spare parts); civil works, pre-production expenditures, working capital
• Total costs of products sold
Total production/manufacturing costs, marketing costs (costs of sales and
distribution)
Production & marketing costs
A. Factory costs
• Material inputs (direct variable costs, in particular raw materials and factory supplies
• Human resource costs (wages, salaries, mostly direct costs either fixed a=or variables)
• Products rejected or returned
• Effluent and waste treatment, environmental protection costs
B. Factory overheads (direct and indirect fixed costs of production)
• Services (supervision, QC, internal transport, consuling engineers)
• Royalties (fixed and variable costs)
• Rents, leasing fees for production buildings, machinery and equipment (fixed or variable costs)
• Research and development costs
• Product storage costs direct and indirect costs)
C. Administrative overheads (usually indirect, basically fixed costs)
• Salaries, wages,
• Office supplies, materials
• Rents, leasing fees for office buildings and equipments
• Services (communication, transports
D. Operating Costs (A+B+C)
E. Depreciation costs (usually indirect fixed costs)
F. Cost of financing
G. Production costs (D+E+F)
H. Marketing costs
• Direct marketing costs (packaging, storage; cost of sales, promotional costs,
distribution costs)
• Indirect marketing costs (overhead costs of the marketing department:
personnel, communication, materla and services, marketing research, general
promotional costs)
I. Total costs of products sold
HOW TO PREPARE
FINANCIAL FEASIBILITY
STUDY

How to Prepare a Financial Feasibility Study? | eFinancialModels

FINANCIAL FEASIBILITY STUDY
• The financial feasibility study is the one that translates the results of
all other feasibility studies into financial projections and, based on a
thorough financial analysis, determines whether a project is financially
feasible or not.
• the financial feasibility study can only be completed once all other
studies are done and rely on the assumptions researched by other
studies for its projections.
• A feasible project is when the project can create a profit, cover its cost
of capital and compensate all capital providers with sufficient returns
for the risk they take
Questions to answer from feasibility study
• What are the total project costs?
• Multi-year projections for Income Statement, Balance Sheet, and Cash Flow
Statement
• How profitable will that project become?
• Can the project cover its cost of capital?
• How much funding will be required?
• How much debt financing can be obtained from banks?
• What will be the return for shareholders?
• What are the most likely scenarios, and where are the risks?
12 elements of financial feasibility study
• CAPEX • Financial Statement Forecast
• Revenue Projections • Financial Ratios Forecast
• Cost Projections • Free Cash Flow Forecast
• Net Working Capital • Uses and Sources of Funds
Requirement • Financial Metrics
• Fixed Asset and • Break-Even Analysis
Depreciation Schedules
• Scenario analysis and Risk
• Debt Financing Identification
• Tax Analysis
capex – Capital expenditures
• A financial feasibility analysis needs to identify the total capital
expenditures (CAPEX) required to start a new project.
• CAPEX might e.g., include the costs of building a new factory
consisting of the costs to purchase the land, construction costs for a
new factory building, warehouses and administrative areas, planning
and costs for architects, purchasing costs for new machines, vehicles,
certification and installation costs.
• CAPEX analysis also needs to define when which parts of the CAPEX
items are going to be spent and how eventual cost increases due to
inflation are accounted for
Projected revenues
• Revenue projections should start first with the identification of the
expected sources of revenue.
• E.g., the sale of manufactured products, maintenance service contracts,
consulting and licensing fees of the technologies. Typically, businesses might
have different sources of revenue.

• What we also need to define is the lifespan of our new plant.

• E.g., we can expect a solar park to operate between 20 to 30 years, and this
means that within that time, the investment needs to be fully paid, and a profit
needs to be generated. After the end of life is reached, we can either stop
counting the revenues, or we can apply a terminal value model instead.
• For each source of revenue, the expected sales and production
volumes need to be forecasted. For this, we need the results of a
reliable market feasibility study which should tell us what the market
needs and how much volume could be sold
• we then also should take a view on obtainable prices, preferably
backed up by a solid pricing study as part of our feasibility analysis.
The pricing outlook needs to reflect the supply and demand mechanics
in the market and the likely effects on prices over the next months and
years. Seasonal effects also need to be taken into account, in case of
prices fluctuate during the year, as well as the effects of likely price
inflation over the next years.
COST PROJECTIONS
• the ongoing costs that will be generated once the operation is started:
• direct costs
• operating expenses (OPEX).
• Direct Costs only occur when we start production
• e,.g. costs for raw materials, electricity consumption for production machines, direct
labor costs, packaging, and shipping costs
• Operating Expenses are mostly indirect costs, they cannot be directly attributed
to the sales volumes, and some minimum costs are required to run the
operations.
• E.g. indirect labor, repair & maintenance, fuel, etc
• Profit margin are determined by deducting all ongoing costs from the revenues
on a yearly basis and e.g., looking at the projected EBITDA margin
Take a CONSERVATIVE view to avoid unrealistic outlooks
Net working capital
• Net Working Capital for basic financial planning purposes consists
basically of Receivables + Inventory – Payables
• the more net working capital the company has, the better equipped it is
to meet its immediate responsibilities
• Net working capital is required in order to account for the time
invoices are not paid yet, inventory sits in our warehouses, and
suppliers demand payment. We can mostly use Days Receivables,
Days Inventory, and Days Payables assumptions to estimate the
required Net Working Capital levels
• Net Working Capital will need to be built up once operations start.
Fixed asset schedule
• Cumulated CAPEX forms the Gross Fixed Assets on balance sheet
• Needs to take into account yearly depreciation  useful life of these assets 
Maintenance CAPEX (CAPEX to be spent on maintaining the operation of the
plant in the long run)
• Building a CAPEX schedule requires us to forecast depreciation which typically
requires assumptions over the time period assets shall be depreciated and the
depreciation method
• Annual depreciation is tax deductible, so the depreciation schedule impacts the
profit before taxes in our tax analysis. On the balance sheet, we can obtain the
Net Fixed Assets (Gross Fixed less accumulated Depreciation). By doing this,
together with our analysis of the Net Working Capital required, we can obtain a
good idea of how the company’s balance sheet will look on the asset side.
Debt financing
• Feasibility analysis should provide a statement about the likely debt
financing to be obtained for our project
• Analyze the available fixed or other assets which could serve as collateral to a
lender
• How much banks would charge in terms of interest rate and repayment terms
Tax analysis
• Taxes can become a large cost items
• Find out industry-specific tax incentives available in form of tax
credits or holidays
Financial statement Forecast
• Financial statements/reports are the numerical reports which record all the
financial activities and position of a business, individual, or other entity.
• 3 model statement model:
• Income Statement
• Balance Sheet
• Cash Flow Statement
• Income statement forecast allows us
• to understand profits at the level of Gross Profit, EBITDA, EBIT and Net Income
• to compare the respective profit margins with similar companies
• to calculate the future projected financial ratios batter
Financial ratios forecasts
• Liquidity Ratios
• Can we expect the company to meet its short-term financial obligations?
• to obtain a better picture of how much excess cash can be distributed from the company.
• Profitability Ratios
• to understand better if our forecasted profitability is realistic when compared to similar companies
and how attractive a company can turn the invested capital into profits
• E.g. Return on Invested Capital
• Efficiency Ratios
• how efficiently the company’s assets should be used and even give guidance for management during
the setup of the company?
• Bank Ratios (or Leverage Ratios)
• allows us to prepare the negotiations of a term sheet for obtaining financing from a bank and assess
the ability to service debt from the operating cash flows
• Growth Ratios
Free cash flow forecast

• Key Metrics such as IRR and NPV we need to develop free cash flow
forecast
• FCF tell us how much money-free cash flow – a company requires and
can generate
• Unlevered FCF assumes cash flow “as if” the company cowuld not use
financial debt
• Levered FCF (cash flow to equity shareholders) company’s free cash flows
after deducting financial debts
Uses and sources of funds
• Clarify the total funding amount required for this project
• how the intended financing structure will be
• What the money will be spent on
• Uses of funds:
• CAPEX
• Net Working Captial
• Operating Expenditures during startup period
• Cash reserve
• Source of funds
• Financial debts
• Equity Financing
Financial metrics
• Project/company level
• Does the project make sense without considering the effects of applying a
certain financing structure?
• Bank-level
• Does this project allow us to raise debt financing from the banks?
• Investor level
• Are the expected equity returns attractive to investor so that they should be
interested in investing in?
• PAYBACK PERIOD (PBP)
• How many years it will take to recover the costs of initial investment
• PBP is calculated based on Free Cash Flow forecast
• INTERNAL RATE OF RETURN (IRR)
• IRR is the discount rate that leads to NPV = 0
• IRR tells what is the annual implied return
• IRR is calculated based on Free Cash Flow Forecast
• IRR considers the time value of money, meaning positive cash flows early on
lead to a better IRR
• NET PRESENT VALUE (NPV)
• If the NPV is positive  shareholder value can be createdBREAK EVEN
ANALYSIS
• NPV is mostly applied to unlevered free cash flows
Break-even analysis
• To know how many items need to be sold so that all costs can be
recovered
• Based on cost assumptions and prices: how much volumes need to be
sold in order for the profit (e.g. EBITDA or EBIT) to be zero
Return on invested capital - roic
• Fuel efficiency ≈ Return on Invested Capital (ROIC)
• ROIC is an economic profitability ratio that measures the operating
returns of the capital invested in a company
• ROIC can be calculated by dividing the annual Net Operating Profit
Less Adjusted Taxes by the Invested Capital
• ROIC measures how profitable a company’s management can deploy
the invested capital and allows profit comparisons with peer
companies, historical trend analysis, and a better estimation of how
profitability might develop in the future
ROIC

• ROIC can be calculated using select figures included in the Financial Statement
of a company from the Balance Sheet, and the Income Statement
• ROIC = NOPLAT / Invested Capital
• Operating Profit Less Adjusted Tax (NOPLAT) measures a company’s after-tax
profit from its operations
• Net Operating Profits are the same as Earnings before Interest and Taxes (EBIT).
We now extract EBIT from a company’s financial statement and deduct pro
forma taxes by using the company’s Income Tax Rate
• NOPLAT = EBIT * (1 – tax rate)
• Invested Capital can be derived from a company’s Balance Sheet by adding the
Equity Capital to the Financial Debt and deducing Cash
What is Return on Invested Capital (ROIC)? | eFinancialModels
SKENARIO ANALYSIS AND RISK
IDENTIFICATION
• Once our analysis stands, we need to be aware that we just analyzed one possible scenario. We can call this the base case.
Assumptions, by definition, are estimates only and will not reflect reality as they are not actual figures. Therefore, in
reality, the generated results will either be better or worse than what we forecasted.

• What we now need to understand is what could be the range of likely scenarios. We can either do this by running a
sensitivity analysis to understand better the impact of changes to key assumptions of our feasibility analysis, or we can
define alternative scenarios.

• We can now simplify this, assuming the assumptions we entered represent a base case. Then, we need to think about what
the assumptions would be for a worst-case scenario and how the assumptions could change in a best-case scenario.

• For each of the scenarios, we need to calculate the financial feasibility metrics and see when the project would lose its
attractiveness from a financial point of view. Such scenario analysis allows us to understand better the range of possible
outcomes and the risks of the project.

• Once we understand the risks, we can then also double-check if we can find mitigation strategies for reducing those risks.
E.g. transforming fixed costs into variable costs, leasing equipment instead of buying equipment, etc.