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4 CHAPTER FOUR Project

This document provides an overview of technical analysis for a project, including pre-feasibility and feasibility studies. It discusses key aspects of feasibility studies such as market and demand analysis. Market analysis examines demand and supply gaps and assesses competitors. Demand projection techniques include qualitative, time series, and causal methods. Time series techniques like trend projection, exponential smoothing, and moving averages are explained with examples. The document concludes with an overview of feasibility study components for commercial projects.

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Ofgaha Alemu
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367 views

4 CHAPTER FOUR Project

This document provides an overview of technical analysis for a project, including pre-feasibility and feasibility studies. It discusses key aspects of feasibility studies such as market and demand analysis. Market analysis examines demand and supply gaps and assesses competitors. Demand projection techniques include qualitative, time series, and causal methods. Time series techniques like trend projection, exponential smoothing, and moving averages are explained with examples. The document concludes with an overview of feasibility study components for commercial projects.

Uploaded by

Ofgaha Alemu
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 PPT, PDF, TXT or read online on Scribd
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CHAPTER FOUR

TECHNICAL ANALYSIS OF
THE PROJECT
Introduction
 As mentioned in the second
chapter, Project preparation
covers the establishment of
technical, financial, economic,
social and institutional
aspects of the project.
Cont…

 The two studies under


project preparation are:
 Pre-feasibility study and

 Feasibility study
Pre-feasibility study

 A pre-feasibility study is a
general assessment (or
examination) of the basic
components of the a
project.
Objectives
 ƒTo examine possible project
alternatives;
 ƒTo determine whether the project

concept justifies further study and


a more detailed analysis; and
 ƒTo determine whether the project

idea is promising or non-viable at


initial screening.
Feasibility Study

 A feasibility study is a
detail assessment (or
examination) of the basic
components of the a
project.
Objectives
 To define, in a more tangible
form, the viability, quality, and
dependability of project ideas
based on detailed and thorough
analysis of the issue.
 ƒTo provide a basis for the final

investment decision.
Cont…
 The five important aspects of
project feasibility studies for a
public sector are:
 Technical feasibility

 Institutional feasibility

 Financial feasibility

 Economic feasibility

 Social feasibility
Cont…
 Commercial project feasibility
study includes:
 Market and Demand analysis
 Raw materials and supplies study
 Location, site, and environmental
assessment
 Production program and plant
capacity
 Technology and engineering study
Cont…

 Organization and Management


 Project charts and layouts
 Structures and Civil works
 Financial Analysis
 Economic Analysis
Cont…

 Environmental Analysis
 Gender Analysis
 Implementation (Work)
scheduling
.

MARKET AND
DEMAND ANALYSIS
Market Analysis
 The major objective of
market analysis is to
determine whether there is a
gap between demand and
supply, i.e., is there a market
for the product?
Cont…

 It includes:
Marketing
Market Research
Analysis of the Channels
of Distribution
Cont…

Analysis of Competitors
Analysis of the Socio-
Economic Environment
Marketing Strategy
Marketing Cost
Demand Projection
 In feasibility study current
demand is determined and the
future potential demand will
be forecasted with the help
of different techniques.
Cont…
 The three major categories
are:
 Qualitative Techniques,

 Time Series Techniques, and

 Causal Methods.
Qualitative Techniques,

 These methods rely


essentially on the judgment
of experts to translate
qualitative information in to
quantitative estimates.
Cont…
 The important qualitative
methods are:
 ƒJury of Executives Opinion,

&
 ƒDelphi Method technique.
Time Series Projection
Techniques:
 These methods generate
forecasts based on an
analysis of data over the
historical time series.
Cont…
 The main time series methods of
projection are:
 ƒ Trend Projection Method,

 ƒ Exponential Smoothing Method,

and
 ƒ Moving Average Method.
Causal Methods:
 The causal methods seek to
develop forecasts based on
cause-effect relationships
specified in an explicit,
quantitative manner.
Cont…
 The following are the major causal
methods:
 ƒConsumption Level Method,

 ƒEnd use [or Consumption


Coefficient] Method,
 ƒLeading Indicator Method,

 ƒChain Ratio Method, and

 ƒRegression Model
Trend Projection Method:
 The trend projection method
involves the following two major
activities:
 ƒDetermining the trend of
consumption by analyzing past
consumption statistics, and
 ƒProjecting future consumption by

extrapolating the trend.


Cont…
 When the trend projection
method is used, the most
commonly employed relationship is
the linear relationship, which is
expressed by the following
equation:
 y = a + bx
Cont…

 where
 y = Dependent variable)

 a = y - axis intercept

 b = Slope

 x = Independent variable
Cont…
 a = y - bx and

 b = Σxy – nx y
Σx2 - nx2

 See example
Consider the following data
Cont…
 Required:
 By using trend projection method, determine
 1. the value of a and b
 2. develop linear model
 3. forecast demand of year 2002
Then convert fiscal year to year of
analysis
Calculations of the least square method
Cont…
 b= 1.097
 a= 12.08
 The develop the model:
 Y= a+bX
 Y= 12.08+1.097X
Exponential Smoothing Method

 In exponential smoothing,
forecasts are modified in the
light of observed errors. In
this regard, the following are
the guiding principles:
Cont…
 If the forecast value for year t,
i.e. Ft, is less than the actual
value for year t, i.e. St, then
the forecast for the year t + 1,
i.e. Ft + 1, is set higher than Ft
 ƒ Conversely, if Ft> St, Ft + 1is

set lower than Ft


Cont…
 In general,
 Ft + 1 = Ft + αet
 Ft + 1= forecast for year t + 1
 α= smoothing parameter (which
lies between 0 and 1), and
 et= error in the forecast for
year t, found as St– F.
 See example
Example
Periods Actual Forecast
1 28 29
2 29 ?
3 28.5 ?
4 31 ?
5 34.2 ?
6 32.7 ?
7 33.5 ?
8 31.8 ?
9 31.9 ?
10 34.3 ?
11 35.3 ?
If alpha = 0.2, prepare forecast
Solution
Moving Average Method
 As per the moving average
method of sales forecasting,
the forecast for the next
period is equal to the average
of the sales for several
preceding periods.
Cont…

 F t + 1= S t + S t – 1+ S t – 2+ ……. + S t – n + 1
N
where,
Ft + 1 represents forecast for the next
period,
St represents actual sales for the current
period, and
n represents the number of periods
To illustrate the use of the moving
average technique, consider the
following time series.
 If n is set equal to 4 (n has to be specified by the
forecaster), the forecast for period 5 will be equal
to:
Cont…
The End

Thank You!!

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