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Documenti di Professioni
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OF A
COLLEGIATE FEASIBILITY STUDY
TABLE OF CONTENTS
Preface
Cover Pages
Acknowledgments
Table of Contents
Executive Summary
Definition of Terms / Glossary
Project Background and History
Chapter I Marketing Aspect
Chapter II Organization and Management Aspect
Chapter III Technical Aspect
Chapter IV- Project Implementation Schedule
Chapter V Financial Evaluation
Chapter VI Socio-Economic Implications and Benefits
Last Sections of the Feasibility Study:
Conclusion and Recommendation
Appendixes
Bibliography
PREFACE
One of the few things many college students try to avoid, but cannot, is the
preparation of a feasibility study. They look at preparing one as something tedious,
for doing so would be a horrifying experience. It requires an open view of the scope
of the study as well as the gathering of relevant data to determine the feasibility of a
project proposal.
Yet, the more understanding students who also find the preparation of a
feasibility study as terrible, although necessary, may be faced with problems like
what to study, how to start with the study, what facts are to be presented, and how
certain facts and figures of the study should be presented to give a macro view of the
entire business proposal. They know that a project feasibility study must be thorough
and must be analyzed systematically so that all factors as to its viability could be
ascertained.
On the other hand, some instructors may find it difficult to check the originality
of submitted feasibility studies, for more clever students can merely copy an existing
study, do a little juggling in the manner it was presented and updating of facts and
figures to make the copied one look original. To avoid this, it is therefore a must that
criteria for approving a project proposal be set.
Hence, this outline. This Suggested Outline of the Feasibility Study aims to
assist college students in collecting and presenting the facts and details required in a
real feasibility study, and the instructors in determining its originality.
The outline suggests that the study be divided into six major parts, namely;
Marketing & Promotion, Organization & Management, Technical Process, Project
Implementation, Financial Evaluation, and Socio-Economic Implications and Benefits.
This also includes sections like the cover page, acknowledgments, table of contents,
executive summary, definition of terms, project background, conclusion, and
attachments.
It is the wish of the undersigned that advisers/instructors brief their respective
students on the proper presentation of data collected, by presenting its highlights,
descriptive definition, long-range objectives, feasibility criteria, history and basic
assumptions and using this outline for a better understanding of all the facts
presented.
A C DESCALZO, C.P.A.
COVER PAGES
The cover pages include the Title Page and Approval Sheet. For feasibility
studies, a title might logically include the name of the university and college, the
exact title of the study, the course, the date, and the name of the proponent(s)
suitably capitalized, centered, and spaced upon the page. An Approval sheet may
follow the Title Page.
ACKNOWLEDGEMENTS
The proponent(s) of the study may express their appreciation and gratitude to
those who have assisted in the preparation and/or completion of the study in this
section.
TABLE OF CONTENTS
The Table of Contents includes all the components of the study. The primary
purpose of this section is to facilitate the location of the contents of the study. It is
therefore mandatory that each page be numbered accordingly and consecutively.
EXECUTIVE SUMMARY
The Executive Summary, for some should summarize all conclusions and
recommendations covering all critical aspects of the study. It includes the following:
Statement of the Problem
Objectives of the Feasibility Study
Major Assumptions and Point of View taken
Methodology
Indicate:
Method(s) of projection used and reason for selection
Steps taken/followed in preparing the study
Project Background and History
Indicate:
Name and address of project proponent(s)
Project orientation: whether market or raw material oriented
Market orientation: whether for domestic or export
Economic and industrial policies supporting the project
Project background
b. Project Engineering
Describe plant layout
State technology finally selected
Summarize equipment required
Indicate any construction works to be done
c. Plant capacity
d. Materials and Inputs:
e. Supply Programs:
f. Production program/process
Project Implementation/Schedule
Duration of plant erection and installation
Duration of production start-up and operational period
Financial Evaluation/Analysis
a. State Total investment costs by listing major investment data in local and
foreign exchange as required.
b. Capital Budgeting Evaluation
Sources of financing
Impact of costs of financing and debt servicing on project proposals
City ordinance and regulations on financing
Financing institutions
Projected financial statements and cash-flows
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CHAPTER I
MARKETING ASPECT
Before the proposed project is conceptualized, the size and composition of the
present effective market demand, by segment, should be determined in order to
estimate the possible degree of market penetration by a particular product or service.
Also, the revenue from sales should be projected taking into account available
technology, plant capacity, production process and marketing strategy. The latter
has to be set up during the feasibility study giving due consideration to product
pricing, promotional measures, distribution channels and related costs.
Once the sales projections are determined, a detailed production program
should be made showing the various production activities and their timing. The final
step at this stage of a feasibility study is to determine the plant capacity including
alternative levels of production, investment outlay and sales revenues.
Demand Study
Data and alternative projection methods
List and describe data needed for the demand study
List and describe possible alternative methods of data evaluation and
determination of present and future demand making use of surveys,
interviews, and historical data.
Select a method of data evaluation and state reasons for selection
Discuss fully the methods of data evaluation and demand determination
to be used for the project under consideration.
Determination of demand for products/services
Evaluate data and present final results showing:
The size and composition of present effective demand (total
and by segment)
The demand projections for the market (total and by segment)
for the lifetime of the project
The estimated market penetration by products
Supply Study
Data and alternative projection methods
List and describe data needed for the supply study
List and describe possible alternative methods of data evaluation and
determination of present and future supply.
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CHAPTER II
ORGANIZATION AND MANAGEMENT ASPECT
This aspect covers the type or form of business organization, organizational
set-up, composition, and division of functions within the organization. Legal
requirements in setting-up a business organization may also be included in this
aspect.
Project engineering or construction and organizational planning are closely
related and should therefore be undertaken jointly in a series of feedback operations.
Organizational planning will enable the calculation of overhead costs that in some
projects can be decisive to their profitability. A feasible division of the organization
into components (production, sales & marketing, and administrative cost centers) is
imperative for a realistic assessment of overhead costs.
Forms of Business Organization
Data and alternatives
State data to set up the type of business organization suitable for the
proposed project, whether:
Sole Proprietorship
Partnership
Corporation
Other type of set-up
Cost Centers
Data and alternatives
State data to set up cost centers, such as:
Construction layouts
Production program and capacity
Office functional set-up
Types of cost centers (production, sales, administration)
Prepare alternatives, if possible
Selection of cost centers
Select and describe in detail the composition of cost centers
State reasons for selection
Show selected cost centers
Overhead Costs
Data and alternatives
State data list of cost items and differentiation between factory and
administrative overheads, depreciation and financial costs.
List alternative arrangements
Selection of cost items and their groupings as overheads
Select and describe in detail the composition of overhead cost items
State reasons for selection
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Manpower Compliment
Personnel required for the project under consideration at various levels
of management; production, sales and other related activities should be
assessed together with the requirements of training at various levels and
during different stages of the project.
(a) Management Team
Data and alternatives
Describe data required for the determination of management positions
Prepare manning table, considering:
Organizational structure
Defined strategies and objectives of management
Functions and responsibilities at various levels
Cost estimate: Estimate annual administrative cost s
(b) Labor-Factory
Data and alternatives
Describe data required for the determination of labor inputs
Prepare alternative manning table, considering the:
Organizational Layout
Strategies and objectives of management for operating the
factory
Skill requirements and level of training of labor
Availability of labor, local/foreign
Selection of labor
Select and describe in detail the manning table for labor
State reasons for the selection
Describe in detail the selected alternative
Show the workforce structure (organization)
Prepare detailed manning table considering the
subdivision into production labor and nonproduction labor (e.g. administration)
Cost estimate: Estimate annual labor cost at normal feasible capacity
(c) Staff -Office
Data and alternatives
Describe data required for the determination of staff inputs
Prepare alternative manning table, considering:
Organizational Layout
Strategies and objectives of management for administering and
operating the factory, marketing the products, etc.
Skill requirements and level of training of staff
Availability of staff, local/foreign
Selection of staff
Select and describe in detail the manning table for staff
State reasons for selection
Describe in detail the selected alternative
Cost estimate: Estimate annual cost of local and/or foreign staff
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Legal Requirements
List and describe requirements in setting-up selected business
organization in the Philippines, including:
Registration
Business Documents
Taxes and licenses
Government reportorial requirements
Others
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CHAPTER III
TECHNICAL ASPECT
The technical aspect should deal on the manufacturing process, operating
requirements, plant capacity in relation to designed plant layout.
Direct Materials and Inputs
There is a close relationship between the definition of input requirements and
other project formulation stages, such as definition of plant capacity, location and
selection of technology and equipment, as these inevitably interact with one another.
The main basis for the selection of materials and inputs is the demand analysis and
the production program and plant capacity derived therefrom.
The following issues relating to material and input requirements should be
covered in the feasibility study:
Materials and inputs should be classified into:
Raw materials (unprocessed and semi-processed)
Processed industrial materials (intermediates)
Manufactures (sub-assemblies)
Auxiliary materials
Factory supplies
Utilities
Data and alternative
Describe data for the selection of materials and inputs
List all required materials and inputs and show alternatives
Selection and description of materials and inputs
Select and describe in detail the chosen materials and inputs
State reasons for selection
Describe materials and inputs, stating:
Qualitative properties
Quantities available
Sources & Availability of supplies
Unit costs
Supply Program / Inventory Management
Fundamental data and alternatives
Describe fundamental data for the preparation of supply program
Prepare supply program, show alternatives
When setting up the supply program, consider the:
Production program
Availability of supplies
Characteristics of supplies
Technology and equipment
Wastage of raw materials inputs due to transport and storage
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Production Program
Data and alternatives
Describe the data required to set up a production program
Describe possible alternative production programs
When preparing the production program, keep in mind among
other things:
Anticipated sales
Minimum storage requirements
Expected wastage
Parameters of plant capacity
After-sales requirements
Reserves due to operational reasons
Selection of production program
State reasons for selection
Describe in detail the production program
For each product (and by-product):
Quality specifications
Quantities produced annually
Time schedule of production (start-up, test-runs, full capacity
production)
If plant is to be used as an industrial site:
(a) Set up provisions for emissions such as:
Wastes and effluents (to be treated or not), dust, fumes, noises
Quality of emissions
Quantities of emissions
Time schedule
Means of treatment
(b) Estimate costs of emissions disposal
Treatment (as far as not covered under equipment and civil
works)
Disposal in dumps and/or sewage system
Compensation payments to neighbors for damage caused by
emissions
Plant Capacity
Data and alternatives
Describe data for the determination of plant capacity (feasible
normal as opposed to nominal maximum capacity)
List possible alternatives on plant capacity
Determination of feasible normal plant capacity
Select and describe in detail the feasible normal plant capacity
State reasons for selection
Describe nominal maximum capacity
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Select and describe in detail optimum layouts, state the reasons for the
selection, show selected layouts by appropriate drawings.
(b) Scope of Project
Data and alternatives
State the data required to define the scope of the project
Prepare and describe alternatives
Selection of the scope of the project
Select and describe in detail the optimum scope of the project
State reasons for the selection
Use physical layout drawings to show the scope of the project and
project component
Number and list the project components required to serve as bases
for further engineering and cost estimates.
(c ) Technology(ies)
Data and alternatives
State the data required for the technologies to be used
Describe alternative technologies
Selection of technology
Select and describe in detail the optimum technologies
When selecting the technologies the following aspects should be
considered:
The nature of the technologies required (e.g. labor versus
capital intensity, non-obsolescence)
Sources
Means of acquisition; licensing; purchase; joint venture
Costs
State reasons for the selection
Describe the selected technology, stating the type, source, and
specification.
Cost estimate
Investment costs
Lump sum payments
Part of production cost
Royalties
Fixed annual payments
(d) Equipment. Equipment should be classified into production, auxiliary,
service equipment, spare parts and tools.
Data and alternatives
State the data for equipment engineering
List the necessary equipment and alternative
Selection of equipment
Select and describe in detail optimum equipment
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CHAPTER IV
PROJECT IMPLEMENTATION/SCHEDULE
The project implementation phase embraces the period from the decision to
invest to the start of commercial production and operation. It includes a number of
stages, such as negotiation and contracting, project design, construction and startup. If not planned properly, this phase may extend over enough time to endanger the
potential profitability of the project. The primary objective of implementation planning
is therefore to determine the financial implications of the implementation phase with a
view to securing sufficient finance to float the project until and beyond the start of
production. The choice of financing (equity or loan) as well as the financial
implications of investment delays should receive particular attention.
During the implementation phase a series of simultaneous and interacting
investment activities take place with different financial implications. To measure
them, an optimum implementation program and time schedule should be prepared
and shown in the feasibility study.
Data and Activities
State fundamental data for project implementation
Elaborate implementation program and time schedule
Show alternatives, considering:
Establishment of project implementation management
Arrangements for technology supply
Detailed engineering of equipment
Arrangements for financing
Construction period:
- Purchase of land
- Supervision, coordination, testing and take over of
equipment and civil works
Build-up of administration, recruitment and training of staff
Arrangements for supplies
Arrangements for marketing
Establishment of contracts with public authorities for timely
approval of licenses, contracts, etc.
Preliminary and capital issue expenses
Selection of Project Implementation Program and Time Schedule
Select and describe in detail the optimum implementation program and
time schedule (using GANTT CHART), list activities and show
their sequence in bar diagrams and/or networks
State reasons for selection
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CHAPTER V
FINANCIAL EVALUATION
Preparation of feasibility study should be geared towards the requirements of
financial and economic evaluation. Once all the elements of a feasibility study are
prepared in accordance with the approach outlined in the previous chapters, the next
step is to compute the total investment cost and evaluate the same.
Determining a projects financial viability is one of the most difficult tasks to
accomplish. Having to forecast, analyze and interpret the financial statements would
require the use of judgmental approach.
This aspect determines the profitability level of the project that is generally
defined as the relationship of the net income after taxes to the total investment. It is
largely based on the available opportunity cost in a particular period of time and
place.
Taking the above mentioned matter into consideration, this chapter should be
prepared in the following manner:
A. TOTAL INVESTMENT COST. Calculate the total investment costs by
summarising all investment components as described in the other aspects
of the study.
As defined, investment for a project to be undertaken for the first
time includes the initial outlay of resources and all the additional
investment requirements in the future to sustain the project and bring in the
desired annual cash returns. It consists of the following, both fixed and
variable capital:
1. Purchase price of fixed assets (interest excluded)
2. Incidental costs (freight, insurance, installation costs, test-run costs,
etc.)
3. Working capital requirement to operate at desired level
4. Pre-operating expenses
5. Other assets to be used in the project stated at fair market values
B. STATEMENT OF MAJOR ASSUMPTIONS.
Valid and realistic assumptions must be made and stated in the
study to provide a definite and specific basis for financial projections. The
statement of assumptions includes those on sales volume, plant capacity,
taxes, foreign exchange rate, project timetable, and changes in the
economic environment.
C. PROJECTED
FINANCIAL
STATEMENTS
with
SCHEDULES.
5-year financial statements should include the following:
1. Projected statement of comprehensive income
2. Projected statement of financial position
3. Projected statement of cash flow
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SUPPORTING
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D. ANALYSIS AND
STATEMENTS
INTERPRETATIONS
OF
THE
PROJECTED
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CHAPTER VI
SOCIO-ECONOMIC IMPLICATIONS AND BENEFITS
This aspect should show the relevance of the study undertaken in relation to
the course taken up. The proponents should be able to put together the knowledge
learned from other fields (like marketing, economics, management, finance and other
related disciplines).
It may also show the relevance of the study to the plans of the government in
the particular region/business location selected, the benefits derived directly or
indirectly by the community and other businesses, and the possible effects on the
national economy.
Descriptions of environmental impacts to be expected because of construction
and operation of plant on the population (possible increase in employment);
infrastructure (traffic network development, public utilities, etc.); ecology; and
landscape should also be noted in this chapter.
Since social responsibility is a must for all businesses to observe, it would be
advisable for the proponents to incorporate the same in the study.
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