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Part III - Project Feasibility

The document discusses the different types of feasibility studies that should be conducted for a project, including pre-feasibility studies and detailed feasibility studies. Detailed feasibility studies examine the market feasibility, technical feasibility, financial feasibility, economic feasibility, and legal feasibility of a project.

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13 views

Part III - Project Feasibility

The document discusses the different types of feasibility studies that should be conducted for a project, including pre-feasibility studies and detailed feasibility studies. Detailed feasibility studies examine the market feasibility, technical feasibility, financial feasibility, economic feasibility, and legal feasibility of a project.

Uploaded by

hiwimathi
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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Project Feasibility

By: Sintayehu H. (PhD)


Contents
• Feasibility study
– Pre-feasibility Study
– Detailed Feasibility Study
• Market feasibility
• Technical feasibility
• financial feasibility
• Economic feasibility
• Legal feasibility
1. Feasibility study
• A feasibility study should form the core of the project proposal
preparation process.

• Its purpose is to provide stakeholders with the basis for


deciding whether or not to proceed with the project and for
choosing the most desirable options.

• It is expected to judge feasibility in terms of cost and benefits


to be attained from the project.

• The feasibility study must provide answers to the following


basic questions:

– Does the project conform to the development and environmental


objectives and priorities of the specific country and or region?
Feasibility…
– Is the project technically and scientifically sound, and
is the methodology the best among the available
alternatives?
– Is the project administratively manageable?
– Is there adequate demand for the project’s outputs?
– Is the project financially justifiable and feasible?
– Is the project compatible with the customs and
traditions of the beneficiaries?
– Is the project likely to be sustained beyond the
intervention period?

Basically, there are two type of feasibility studies (Mollett,


J.A.1984 and Pathirage, P. 2013).
Feasibility…
• 1.1 Pre-feasibility Study:

– Pre-feasibility study is conducted at the project


identification stage in order to assess
needs, interests, strengths and weaknesses of
the project.
– It helps project implementers, stakeholders and
sponsors to understand the viability of the project.

– If the project is not viable then it could be rejected


or changed as the requirements.

– If it viable then policy planners hope to implement


it by conducting a detailed feasibility study.
Feasibility…
• 1.2 Detailed Feasibility Study:

– Thus a detailed feasibility is a comprehensive and


in-depth analysis that explore the, market
feasibility, technical feasibility, Economic
feasibility, and financial feasibility, environmental
and legal feasibilities of the project.

– Following is a description of the various


feasibilities to be conducted (Pathirage, 2013,
www. project feasibility, 2017).
Feasibility…
• Market feasibility

– Market feasibility is a study conducted for assessing


marketability of the project. Particularly it involves, for
instance, testing geographic locations for a real estate
development project related to parcels of real estate land.

– Market Feasibility takes into account the importance of the


business in view of demand, market segments, periphery
and alternative products etc.

– Basically two issues are addressed by a market study.


• What is the expected aggregate demand for the proposed good
or service?
• What is the market for the proposed good or service?
Market feasibility…
• Most market feasibility studies include five
aspects (ttps://www.quora.com, 2018)

1. Current Market Analysis


2. Competition or presence of competing
products.
3. Anticipated future market potential.
4. Potential buyers and sources of revenues.
5. Sales projections.
Feasibility…
• Technical feasibility

– Technical feasibility is an assessment about technical


viability of input, processes, output, fields, programs
and procedures related to proposed project or the
product.

– Thus the assessment is based on an outline design of


system requirements, to determine whether the
company has the technical ability to handle the
project.

– At this level, it concerns whether the project is viable


in terms of technical and legal aspects.
Technical…
• The technical assessment is focused on gaining use of
existing technical resources of the organization and their
applicability to the expected needs of the proposed system.

• It is an evaluation of the hardware and software and how it


meets the need of the proposed project.

• When writing a technical feasibility report, following aspects


are considered mainly.
• Location of the project
• Availability of raw materials
• Power
• Man Power
• Management
• Technical Knowhow
Feasibility…
• Financial feasibility

– The financial feasibility is an assessing commercial profitability of the


project in order to determine whether the financial investment is
profitable or not.

– Financial feasibility is calculated by two approaches and methods.

1. Static Analysis
• Pay Back Period
• Average Rate of Return

2. Dynamic Analysis
• Net Present Value (NPV)
• Internal Rate of Return (IRR)
• Benefit Costs Ratio (BCR)
Financial feasibility…
• Thus, financial viability can be judged on
the following parameters:

– Total estimated cost of the project


– Sources of financing of the project in terms of
its capital structure, debt to equity ratio and
promoter's share of total cost
– Existing investment by the promoter in any
other business
– Projected cash flow and profitability
Feasibility…
• Economic feasibility

– The purpose of assessing economic feasibility


is to determine the effects and impact of the
project on the society both in terms of
economic and social values, particularly in
terms of social costs and benefits.

– It includes quantitative and qualitative


assessment on the costs and benefits. Two
methods applied to measure social values.
Feasibility…
• It includes
– UNIDO Method
– OECD Method

• Legal feasibility

– Determines whether the proposed system conflicts with legal


requirements, e.g. a data processing system must comply
with the local data protection regulations.
Thank you!

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