FEASIBILITY

STUDY
Introduction
A project study is a examination of all
factors which affect the viability and
chances of a proposed undertaking
leading towards a decision to proceed
with, abandon, or revise the project. The
proposed undertaking may be a new
enterprise, or a new undertaking by an
existing enterprise, or an expansion of
present operations.
 A business project, whether an entirely new
venture or an expansion of an existing one, is
undertaken in order to accomplish an
objective: to produce and sell
products/services for profit at an attractive
rate of return to the investors. To accomplish
this require adequate planning and
implementation.
 Today, more and more firms, entrepreneurs
and other investors resort to the project
feasibility study as a tool for planning the
project and as a guide in its implementation.
A feasibility study is a preliminary
study undertaken before the real work
of a project starts to ascertain the
likelihood of the project's success. It
is an analysis of all possible solutions
to a problem and a recommendation
on the best solution to use. It involves
evaluating how the solution will fit into
the corporation.
BASIC COMPONENTS
1. Management
The Management aspect is aimed
at designing the form of ownership (for
new ventures) although in most cases
this is already predetermined, as well
as the internal structure for managing
the project.
2. Marketing
The market study is aimed at
determining and analyzing the demand
and supply for the products/service in the
past and making projections of demand
and supply in the future; ascertaining its
competitive position in the industry, and
designing the marketing program for the
product/services.
3. Production
The production aspect describes the
technology that will be used in making the product.
It includes the product specification (mechanical,
chemical and physical properties), description of
equipment and raw materials to be used and the
process involved. It also includes a study on the
plant location, layout and other facilities vital to the
operation.
For services, a description of the types of
service(s) to be rendered, the equipment, supplies,
facilities and manpower are required to render the
service efficiently
4. Financing
The financial aspect is meant to
determine the cost of the project and cash
requirement and the source and cost of
financing the project. Financial projections
are made over a period of at least five years.
Financial analysis is presented showing
returns in investment, return on equity
breakeven analysis and price sensitivity test.
 GENERAL FORMAT
I. Introduction
This portion discusses the
background and rationale why
feasibility study is being undertaken.
II. Summary of the Project Study
A. Name of the Firm
B. Location of the head office
C. Brief description of the project
1. Brief history of the business (if
already existing) and/or nature or
kind of industry.
2. Highlights of the findings in each
phase of the project study.
III. Proponent, Management and Personnel
A. Proponent: Refers to owners, project
originators, promoters and founders. In
many cases, these roles are
represented by just one person (as in
sole proprietorship) but this may not
necessarily hold true to other forms of
ownership like corporation where
owners (stockholders) are not
necessarily the founders or promoters.
III. Proponent, Management and Personnel
B. Management
 Officers of the business and
their qualifications.
 Supporting professional firms (if
any) during the pre-operating
period and during the operating
period.
III. Proponent, Management and Personnel
C. Personnel or work force
 During the pre-operating period.
 During the operating period.

D. Project Time – Table

IV.Market Feasibility
A. Market Description – a brief description
of the market to describe the buyers and
users of the product and the areas of
dispersion.
B. Demand –
1. Consumption in the past 5 to 10 years
2. Major users of the product
3. Projected consumption for the next 5
years
IV. Market Feasibility
C. Supply –
1. Supply for the past 5 to 10 years broken
down as to source whether imported or
locally produced. For imports, specify form
in which goods are imported, price and
brand. For locally produced goods, indicate
firms producing them, their production
capacities, brands and market share.
2. Factors affecting trends in the past and
future supply.
IV. Market Feasibility
D. Competitive position
1. Selling prices – This includes a price study
indicating the past import and domestic prices,
the high and low prices within the year and the
effect of seasonality.
2. Competitiveness of the quality of the product.
3. Methods of transporting and existing rate
4. Channels of distribution
5. General trade practices – This is a description
of the existing marketing practices of
competitors.
IV. Market Feasibility
E. Proposed Marketing Program
1. Description of proposed product/service
characteristics
a. For tangible products – example, size, color
etc.,
b. Packaging
IV. Market Feasibility
E. Proposed Marketing Program
2. Description of proposed market target. Market
targets maybe classified as follows:
a. Geographical location – ex. Manila, Davao etc.
b. Age
c. Sex
d. Income bracket
e. Educational attainment
f. religious affiliation
g. Others
IV. Market Feasibility
E. Proposed Marketing Program
3. Proposed Prices
4. Proposed channel of distribution
5. Proposed promotional activities
IV. Market Feasibility
F. Projected Sales
Expected annual sales volume for the next
five years considering the supply and
demand situation, the competitive position
and the marketing program.
V. Production – Product/Service
A. Product specification includes
physical, mechanical and chemical
properties (for tangible products) and
description of the kind and quality of
service (for service-industries like
restaurant, hotels, banks etc.)
V. Production – Product/Service
B. Production Process
1. Description of the process showing
detailed flow chart indicating material,
equipment and energy requirement at
each step, and normal duration of the
process
2. Alternative processes considered and
justification for adopting said process.
3. Technological assistance used and
contracts, if any.
V. Production – Product/Service
C. Plant Size and Production Schedule
1. Rated annual and daily capacity per shift,
operating days per year, indicating
factors used in determining capacity.
2. Expected production volume for the next
5 years considering start-up and
technical factors.
V. Production – Product/Service
D. Machine and Equipment
1. Machinery and equipment layout, indicating floor
plan.
2. Specifications of the machinery and equipment
required indicating rated capacities.
3. List of machinery and equipment to be purchased
and origin (local or imported)
4. Quotations from suppliers, machinery guarantees,
delivery rates, terms of payment and other
arrangements.
5. Comparative analysis of alternative machinery and
equipment in terms of cost, reliability, performance
and spare parts available.
V. Production – Product/Service
E. Plant Locations
1. Location map showing plant location.
2. Desirability of location in terms of
distance from the source of raw materials
and markets and other factors.
Comparative study of different locations
indicating advantages and disadvantages
(for new projects).
F. Plant Layout
V. Production – Product/Service
G. Building and Facilities
1. Types of building and cost of
construction.
2. Floor area involved
3. Land improvement such as roads,
drainage, etc., and their respective cost.
V. Production – Product/Service
H. Raw Materials
1. Description and specifications relating to
their physical, mechanical and chemical
properties.
2. Current and prospective cost of raw
materials; terms of payment and long
term contracts; if any.
3. Availability, continuity of supply and
current and prospective sources.
4. Material balance or material chart.
V. Production – Product/Service
I. Utilities
Electricity, fuel, water, steam and
supplies indicating the uses, quantity
required, balance and utilities,
availability, sources and tentative
sources and costs.
V. Production – Product/Service
J. Waste Disposal
1. Description and quantity od waste to be
disposed of.
2. Description of the waste disposal method
3. Methods used in other plants
4. Cost of waste disposal
5. Clearance from proper authorities or
compliance with legal requirements.
V. Production – Product/Service
K. Production Cost
Detailed breakdown of the direct
and indirect labor and supervision
required for the manufacture of the
products indicating compensations,
including fringe benefits.
VI. Financial Feasibility
A. For Existing Projects
1. Audited financial statements for the past 3
years to reflect the following:
a. Aging receivables
b. Schedule of fixed assets showing capitalized
cost, estimated useful life and depreciation
method used.
c. Schedule of liabilities, tax assessments and
other pending claims or litigations against the
applicant.
d. Financial trends and ratio analysis
e. Elements or production, selling and
administrative financial expenses.
VI. Financial Feasibility
A. For Existing Projects
2. Financial projections for the next 5 years
3. Supporting schedules to the financial
projections, stating assumptions used as to:
a. Collection period of sales
b. Inventory levels
c. Payment period of purchases and expenses
d. Elements of production costs – selling,
administrative and financial expenses.
4. Financial analysis to show rate of return on
investment, return on equity, break-even
volume and price analysis.
VI. Financial Feasibility
A. For New Projects
1. Total project costs (fixed & working capital)
2. Initial capital requirements.
3. Pre-operating cash flow relative to the
project timetable.
4. Financial projections for the five years of
operations to include balance sheets,
income.
VI. Financial Feasibility
A. For New Projects
5. Supporting schedules of the financial
projections to include:
a. Collection period on sales
b. Inventory levels
c. Payment period of purchases and expenses
d. Elements of production costs – selling,
administrative and financial expenses.
6. Financial analysis to show rate of return on
investment, return on equity, break-even
volume and price analysis.
VII. Contribution to the Philippine Economy
A. Contribution to Government Revenues
B. Net annual amount of $ earned or
saved
C. Contribution to the growth of related
industries (e.g. feedmill project, poultry & livestock)
D. Contribution to the Philippine
Household.
E. Other benefits
CONCLUSIONS AND
RECOMMENDATIONS