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Project Feasibility Studies

Engr. Christopher C. Mira


Polytechnic University of the Philippines
Sta. Mesa, City of Manila
Project Feasibility Study

It is a thorough and systematic analysis of all the factors


affecting the chances of success of a proposed
undertaking.

It is a synthesis of separate studies usually dealing with


the Marketing, Technical, Financial, Management, and
socio-economic aspects of a project.

The data presented hereto shall be the bases for deciding


on whether the project is to be pursued, revised, or
otherwise abandoned.
Project Feasibility Study

Major Contents

Introduction
Summary of the Project
Marketing Aspect
Technical Aspect
Management Aspect
Financial Aspect
Socio-Economic Aspect
Project Feasibility Study

Introduction

This section depicts the researcher’s view on how


they were convinced to study the topic, implying
thereto the need for such scrutiny and
understanding. It also expresses the specific area/s
on how they acquire the idea and being influenced
to review it for greater purpose.
Project Feasibility Study

Summary of the Project


Consist of a brief description of the proposed
undertaking considering the possible effects and
outcomes of the proposal.

This section shall constitute a brief yet succinct


deliberation of the facts gathered through
investigation, sampling, and survey.

It shall show the panorama of the salient points of


the project.
Project Feasibility Study

Marketing Aspect

This is the lifeblood of virtually every project study.


While profitability is generally the focal point of a
project study, the question of demand is the most
basic issue. Obviously, there can be no discussion
of profitability or of the other aspects of feasibility
evaluation, if there is no demand of the product or
services being considered. It is therefore imperative
that the market study be given first-hand concern
and sensitivity.
Project Feasibility Study – Marketing Aspect

Goal:

The market study seeks to determine the following:

1. The size, nature, and growth of the total demand for


the product;
2. The description and price of the product to be sold;
3. The supply situation and the nature of the competitors;
4. The diff. factors affecting the market of the
product/services and;
5. The appropriate marketing program for the project.
Project Feasibility Study – Marketing Aspect

Industry Analysis – specifies the particular market


industry to where the product or services belong.

e.g. Bread – baking industry, breakfast foods,


etc.

Competitor Analysis – specifies the direct and indirect


competitors of the product or services, their distribution
style, market demands, mfg. process., etc
e.g. Cold desserts – Magnolia, Presto, Dairy
Queen, Razon’s, Goldilock’s, McDonald’s, etc.
Project Feasibility Study – Marketing Aspect

Market Analysis

Segmentation as to:
Demographic
Technological
Socio-Cultural
Global
Political/Legal
Economic
Project Feasibility Study – Marketing Aspect

Market Demand

Historical Demand – 5 year demand for known


projections or 10-year demand record for no known
projections

Major Consumer of the Product

Forecasted demand & factors considered in preparing


the projections

Current and potential buyers and their locations


Project Feasibility Study – Marketing Aspect

Supply

Historical data
Major producers of the product
Forecasted demand & factors considered in
preparing the projections
Production capabilities and brands used by the
current producers
Project Feasibility Study – Marketing Aspect

Competitive position

Prevailing prices of the product

Quality of the products existing in the market

Other substitute products existing in the market


Project Feasibility Study – Marketing Aspect

Marketing Program

Present marketing practices of the competitor


Selling organizations, Terms of sale, Channels of
distribution, Location of sales outlets, Transportation
and storing facilities
Packaging of the product
Promotional advertising schemes
Possible marketing problems and alternative
solutions
Project Feasibility Study – Marketing Aspect

Computation of Market Gap and Market Share

Gap = Demand - Supply

Market Share = (Gap + other factors) X Potential


Target Market (%)

Remember: Reflect your Potential Target Market in


accordance to your production capacity
Project Feasibility Study – Technical Aspect
Product Description
1. Name of the products, its semblance to the product itself;
2. Features/New features (if similar is already existing) of
the product as to its physical, chemical and agronomic
properties (for crops)
3. Uses of the product as a finished commodity, and as
inputs to other production activities;
4. Major users of the product whether individuals or firms
and;
5. Geographical areas of dispersion as to where the
product/services is mostly found or distributed (for new
commodity)
6. Economic use of the product
Project Feasibility Study – Technical Aspect

Plant size, location and production schedule

Daily and annual production capacity of the plant


(consider 80% utilization of machine in year1, and
increasing by 5% year after)
Number of operating days per annum
Factors used in determining the plant size and
location
Expected attainable annual production fort the next
five (5) years considering start-up and technical
factors
Project Feasibility Study – Technical Aspect

Machineries/Equipment

A. Machine layout
i. Number of machines
ii. Specifications of each machine
iii. Rated capacities of major machines
iv. Prices of equipment
v. Balancing of capacities of each major and
auxiliary equipment
vi. Stand-by units (if necessary)
Project Feasibility Study – Technical Aspect

Machineries/Equipment

Availability of spare parts and repair service of each


machine

Quotations from suppliers, machinery guarantee,


delivery, terms of payments and other arrangements
Project Feasibility Study – Technical Aspect

Plant Location and Size

Location Map of the plant

Accessibility of the plant to the suppliers and


customers

Plant size and ease of access to major roads


Project Feasibility Study – Technical Aspect

Plant layout

Effect of layout on materials flow and treatment of


materials handling and storage

Provision for expansion


Project Feasibility Study – Technical Aspect

Structure

Building or plant constructed


Cost of construction/development
Other structures and their respective costs
Other improvements to be done (relates to roads,
drainage, facilities, etc.)
Costs of improvement
Project Feasibility Study – Technical Aspect

Raw Materials
Description of raw materials specifically related to their
physical, mechanical and chemical properties
Alternative raw materials considered and factors used in
selecting the raw material
Continuous availability of raw materials
Enumerate of specify the current and prospective sources
of raw materials
Current and prospective costs of the raw material, and
possible contract with the suppliers
Project Feasibility Study – Technical Aspect

Utilities

Utilities required (light, water, power, fuel, etc.)


Uses, quantity required, balances of utilities, availability
of sources, and alternative sources and costs
Determining the costs of utilities on a monthly basis
Identifying the fixed and variable costs for break-even
point analysis
Project Feasibility Study – Technical Aspect

Water Disposal

Kind of waste to be disposed and volume


Waste disposal method to be adopted
Costs of waste disposal
Clearance and costs, if any, and how could it be secured
from the authority
Potential other income from wastes
Project Feasibility Study – Technical Aspect

Logistics

Movements of raw, In-process and finished


materials/products

Points of distribution

Means of distribution – direct selling, distributors,


middlemen, TPL

Means of Collection
Project Feasibility Study – Management Aspect
Operating Activities
Type of business organization
Organizational chart
Functions of each personnel, unit, section,
department, division, and salary of each
personnel
Prod’n.
Personnel Prod’n. Mgr. QA/QC Accountant
Operator
Time devoted
4 8 0 8
to mfg.
Time devoted
4 0 8 0
to admin.
Qualifications … … … …

Remuneration 60,000 20,000 20,000 15,000


Project Feasibility Study – Management Aspect

Status and timetable of the project (to be specific on


monthly/weekly basis prior to start of actual operation)
1. Use Gantt Chart

Company Logo and its meaning (including color


preferences)
Project Feasibility Study – Management Aspect
Mandatory, Fringe and other benefits
Mandatory membership
SSS, PhilHealth, Pag-Ibig,
Fringe Benefits
13th month pay, SL/VL, Maternity Leave, Paternal Leave,
Paternal Leave, Filial Leave, Anniversary/Birthday Leave,
Bereavement Leave, etc.
Other Benefits
Bonuses, Cash Dividends, Stock Dividends, Scholarships,
Meal/Transpo Allowance, Commissions, etc.
Project Feasibility Study – Financial Aspect

1. Total Project Costs

Cost of the project for 5 yrs.

Working capital (approx. 3 month working expenses)

Assumptions made
Project Feasibility Study – Financial Aspect

2. Initial Capital requirement


Amount of capital required
Assumptions made

3. Sources of Financing
Sources of capital
Fund for contingencies and seasonal peaks
Project Feasibility Study – Financial Aspect

Financial statements

Projected income statement for 5 yrs.

Projected Balance sheet for 5 yrs.

Projected Cash Flow for 5 yrs.


Project Feasibility Study – Financial Aspect

Financial Analysis

A. Pertinent financial ratios for 5 yrs.


1. Over-all firm liquidity
a. Current ratio = (current assets /current
liabilities ) X 100
b. Acid-Test ratio = [(current asset –
inventory)/current liabilities] X 100
Project Feasibility Study – Financial Aspect

Financial Analysis

B. Degree of indebtedness

1. Debt ratio = (Total liabilities/Total Assets) X


100

2. Receivable turnover ratio = (Sales/Acct.


Receivables) X 100
Project Feasibility Study – Financial Aspect

Financial Analysis

C. Profitability

1. Total asset turnover = (sales/Total assets) X


100

2. Return on Investment = (Net profit after


tax/Total Investment) X 100

3. Return on Equity = (Net profit after


tax/Owner’s equity) X 100
Project Feasibility Study – Financial Aspect
Financial Analysis

Break-even outputs = total fixed costs / (Unit selling


price-Unit variable cost)

Cash Payback Period = Total investment / Ave. Annual


Profit

Internal Rate of Return compared to Time Deposit with


compounded interests, Surety Bonds, Investment
Bonds (and stocks option), Treasury Bills (Bonds), etc.
Project Feasibility Study – Socio-Economic Aspect

Project impact

Government (Local and national such as collectible


taxes, etc.)

Environment

Population (as to employment, etc.)

Corporate Responsibility Projects


Project Feasibility Study – Socio-Economic Aspect

Other Impacts

Skills Development Projects for Employees and


Stakeholders
- trainings and seminars
- skills contests
- sports and recreation programs
- health activities and programs
- spiritual activities
- team building activities/periodic tool box
meeting
- annual gathering
Project Feasibility Study – Title Defense

Contents:

Proposed Project Title


Brief description of the project
Major competitors
Advantage of the product/services
Target plant/office location
Potential Market as to age, gender, etc.