MANAGEMENT ADVISORY SERVICES

PROJECT FEASIBILITY STUDY

OCTOBER 2019 BATCH

J.A. SIMBILLO

DEFINITION
A feasibility study is an analysis of the viability of an idea through a disciplined and documented process of
thinking through the idea from its logical beginning to its logical end.

In short, Feasibility study is carried out in order to assess the viability of a new project.

OBJECTIVES OF PROJECT FEASIBILITY

 Gives focus to the project and outline alternatives.
 Narrows business alternatives
 Identifies new opportunities through the investigative process.
 Identifies reasons not to proceed.
 Enhances the probability of success by addressing and mitigating factors early on that could affect the
project.
 Provides quality information for decision making.
 Provides documentation that the business venture was thoroughly investigated.
 Helps in securing funding from lending institutions and other monetary sources.
 Helps to attract equity investment.

PARTS OF A FEASIBILITY STUDY

Most projects need feasibility studies before these could be started. This feasibility study will show the following
major aspects or parts:
1. The Executive Summary
2. Project Background and History
3. Management and Personnel Feasibility
4. Marketing Feasibility
5. Technical (Production) Feasibility
6. Financing Feasibility
7. Financial Feasibility
8. Socio-economic Feasibility
9. Project Implementation and Timetable
10. Conclusion

A useful project study covers the various important phases of a project: organization and management, marketing,
technical taxation and financing. Financial projections which estimate the profitability and cash requirements of a
project should also be included.

COMPONENTS OF A FEASIBILITY STUDY

A. The Executive Summary

B. Project Background and History
C. Management, Proponents, Personnel and Organization
1. Management complement and supporting professional firms
a. During the pre-operating period
b. During the operating period
2. Proponents
a. Owners
b. Project originators, promoters, founders
3. Personnel or Work Force
a. During the pre-operating period
b. During the operating period
4. Organization – Operating Period
a. Form of business organization
b. Internal organization structure
5. Project implementation Time Table
D. Marketing
1. Demand – customers
2. Supply
3. Pricing
4. Marketing Program
 a. Distribution channels and sales
b. Promotions
5. Project sales opportunity

E. Production Facilities and Product

1. Product specifications
2. Product process
3. Productive capacity and production schedule
4. Physical facilities
5. Production inputs
F. Taxation and Legal Aspects
1. Taxation
a. Tax provisions affecting the industry
b. Tax exemptions
c. Tax schemes
2. Legal aspects affecting the project or industry
G. Financing – Sources of financing
1. Internal sources
2. External sources
H. Financial Estimates and Analyses
1. Financial estimates
a. Projected Income Statement
b. Projected Cash Flow Statement
c. Projected Balance Sheet
d. Assumptions, Schedules, Supporting calculations
2. Financial Analyses
a. Return on investment
b. Sales volume and sales price
c. Sensitivity tests
I. Social Desirability
1. Specific project contribution to the country’s economy or society
a. Contribution to government reserves
b. Contribution to foreign exchange reserves
c. Contribution to the growth of related industries
d. Contribution to households
e. Contribution to workforce
2. Social rates of return

ASPECTS OF A PROJECT FEASIBILITY STUDY

A. Technical Feasibility - The technical capability of the personnel as well as the capability of the available
technology should be considered. The Technical Feasibility Study assesses the details of how you will
deliver a product or service (i.e., materials, labor, transportation, where your business will be located,
technology needed, etc.)
B. Managerial Feasibility- involves the capability of the infrastructure of a process to achieve and sustain
process improvement. An Organizational Feasibility Study may also include professional background
information about the founders and principals of the business and what skills they can contribute to the
business.
C. Economic Feasibility -This involves the feasibility of the proposed project to generate economic benefits. A
benefit-cost analysis and a breakeven analysis are important aspects of evaluating the economic feasibility
of new industrial projects
D. Financial Feasibility- involves the capability of the project organization to raise the appropriate funds
needed to implement the proposed project(different from economic feasibility) A financial feasibility study
projects how much start-up capital is needed, sources of capital, returns on investment, and other financial
considerations.
E. Cultural Feasibility- deals with the compatibility of the proposed project with cultural setup of the project
environment.
F. Social Feasibility- addresses the influences that a proposed project may have on the social system in the
project environment
G. Safety Feasibility- is another important aspect that should be considered in project planning. It also refers
to an analysis of whether the project is capable of being implemented and operated safely with minimal
adverse effects on the environment
H. Political Feasibility- A politically feasible project may be referred to as a "politically correct project. Political
considerations often dictate direction for a proposed project.
I. Environmental Feasibility - Concern must be shown and action must be taken to address any and all
environmental concerns raised or anticipated.
J. Market Feasibility- Another concern is market variability and impact on the project. This area should not be
confused with the Economic Feasibility. The market needs analysis to view the potential impacts of market
demand, competitive activities, etc. and "divertible". The primary area that the feasibility study needs to
address is potential market opportunities, market competition, and market analysis.
K. Legal Feasibility - The legal feasibility study would determine whether the proposed project conflicts with
legal requirements
L. Socio-Economic Desirability - The social feasibility of its part would determine the proposed project will be
satisfactory for the people or not. This assumption would in general examine the probability that the
project would have to be accepted by the group of people that are directly affected by the proposed system.