Project Feasibility Study

A Project Feasibility Study is the systematic investigation, which ascertains whether the business
undertaking is viable and if so, the degree of its profitability.
Objectives of the feasibility Study
The primary objective of PFS is to guide project promoters, business managers, and financial
executives in determining the actions they must take on a project in order to bring about its
successful operations. However, the project’s set of objectives varies from one user to another,
since it can be prepared for several parties, such as:
To management of an existing firm
o To determine feasibility of expansion programs
o To determine the reasonable price of an existing business it is considering to take
over
To Stock Holders
o To evaluate if an investment on a project or existing enterprise should be made or
not
o To decide to sell or buy an existing company and if so, at what price
To promoters or proponents of new project
o To ascertain viability of new projects
o To choose from among the alternative projects or project to be pushed through
To banks or lending/financing institutions
o To ascertain whether financial assistance should be extended or not
o To determine the terms and conditions should the loan be given/granted
To government and its agencies
o To determine if the project is entitled to a government incentives and level of such
incentive
o To determine whether goals set in the economic plan and program can be achieved
through the emergence of these potential business undertaking
Basic steps in Preparing Project Feasibility Study
It generally involves:
Collection of data which are relevant and necessary to all aspects of the undertaking.
Evaluation and analysis of the data gathered
Formulation of recommendation

Basic Considerations in a Project Feasibility Study

Society and the Government
It must be ascertained that at point, there must be at least a compromising effect on
the needs of both sides. The needs of the society cannot be contradictory to that of
the needs of the government.
 Constant state of evolution or revisions
Revisions are necessary to support the determination of its viability to arrive at an
honest evaluation of the undertaking
Time and cost involved
The time and cost involved depends largely on the type of the industry, the size of
the project, its purpose and the party engaged in the preparation of the study.

Scope and Limitation of Project Feasibility Preparation

The study is primarily based on forecasts of demand, prices, supply, new products that will come
out, technological developments, amendment to laws, changes in tariff and trade agreements, and
availability of financing. Such forecasts are based on available information, and on the opinion of
the party or the person preparing the project study. As a result, the study would be subject to
following limitations:
certain required information are usually or may not be available;
Error in judgment by the person preparing or making the project study either due to his
incompetence or inexperience may result in formulating wrong conclusions or
recommendations;
Uncertainties.
Significance of the Project Feasibility Study
Notwithstanding the inherent limitations of a project feasibility study, it still offers the advantage
of presenting a more realistic basis of possible actions based on the given information. This could
be the basis of determining the maximum degree of probability of evaluating a proposed
undertaking. It helps in minimizing the risk of business failures thus reducing the possible wastage
of valuable resources, such as money, other assets, efforts and time. Most common factors of
business venture failures are:
Unforeseen presence of existing or new products which are more superior that the project
products,
Inability to perfect the manufacturing process,
Inability to price products or services rightly (right price),
Inability to finance the current operations, and
Inability to introduce products or services on time.
Characteristics of a good Project Feasibility Study
The characteristics of a good project feasibility study are: comprehensiveness, propriety and clarity
of language, conciseness, fine visual presentation, coherence, clear-cut scope and assumptions,
reliable sources and appropriate methods of data gathering, logical derivation of projections, and
well premised conclusions.
To achieve comprehensiveness, the PFS must have adequate information to meet the needs of the
users, areas covered must be clearly defined and well investigated, and PFS must have all the
necessary facts to support the study and all the details must be properly examine and considered
to be helpful to the users.
To achieve propriety and clarity of language, PFS must present in the appropriate or proper
language that business people are using, language used must be clear and easy to understand.
Terminology used in the study, which is not common, must be given meaning for the context it is
used.
Conciseness can be achieved through clear and succinct word use for information and explanation.
It must be brief but concise and a lot of sentence. It must be specific but not too detailed. In either
to have a fine visual presentation, information that could be quantified must be presented in figures
such as tables, graphs or pictures and avoid to many narrative presentations.
Coherence means that information must be logically connected. Tables or figures and reports must
be in agreement with each other.
To achieve clear-cut scope and assumptions, PFS must show a precise range and basis for
discussion, list of assumptions for every aspect must be enumerated, where such assumptions are
based on common industry practices, if known. If such assumptions could be different to what is
observed, a justification must be presented.
In a PFS, sources must be reliable, source data must be valid, statistical tool used in determining
sample must be appropriate and questionnaire developed must be appropriate to target respondents.
As data are gathered and analyzed, projections will be logically presented in the financial aspect.
Projected financial statements, ratios and other performance measurements must be presented,
such as, ROI’s, breakeven analysis, turnovers and other financial measures.
Based on the financial measures presented, conclusions could be developed. Though it is
quantitatively supported, the decision maker must use PFS with caution bearing in mind the
limitations mentioned.
The Project Feasibility Study Format and its Major Parts
Project feasibility study is divided into two parts. The first part (Part A) pertains to the summary
of the study which composes of: I. Name of the firm or project; II. Location: head office and
factory site, if any; III. Brief description of the project which includes the company background,
nature or kind of industry and type of organization; IV. Project’s general objectives; V. Specific
objectives of the project and; VI. Executive/Project summary (highlights of each aspect) which
includes market study, technical study, management and legal study, financial study and socio-
economic study.
Part A- Summary of the study
I. Name of the firm or project
II. Location: head office and factory site
III. Brief description of the project
a. company background
 b. nature or kind of industry
c. type of organization;
IV. Project’s general objectives;
V. Specific objectives of the project
VI. Executive/Project summary (highlights of each aspect
a. Market study
b. Technical study
c. Management and legal study
d. Financial study
e. Socio-economic study.
Part B- detailed Presentation of All Aspects
I. Market Study
The market study is virtually the lifeblood of every project feasibility study, though
profitability is generally the focal point of every venture. It must answer the question,
“Is there a demand for the project?” Obviously, there can be no discussion of
profitability or other aspects anymore if there is no demand, thus market study is the
starting point of every project. It must contain the following:
The market study general objectives
To determine the general marketability of the product or service.

The market study specific objectives regarding:

o The appropriate marketing program for the product or service
o The supply situation, size of market, nature or type of market, growth of
total demand.
o Appropriate pricing strategies.

The product description must indicate the following:

o Name of the product – popular and specific (if any) and the reason for
choosing such name.
o Product properties – physical, chemical, and/or agronomic.
o Uses of the product – as a finished commodity, as an input or raw materials
of another production activities.
o Major users of the product – individual or firm; be able to differentiate users
and buyers.

The demand situation must indicate the following:

o Who and where is the market?
o Identify needs of the consumers and determine their willingness to buy for
the product.
 o Analysis of past demands and considers population growth, price variations,
degree of urbanization, tastes and preferences, and income distribution of
the target market.
o The size, nature and growth of total demand for the product.
o Market segmentation according to type, manner of use, income
classification, location, age, etc. For example, the product is automobile,
segment the market by income classification, if machinery segment market
by type of industry growth.
o Total domestic demand and possible foreign market.
o Evaluation of demand growth patterns to come up with a projected demand
by applying appropriate projection methods or models.

The supply situation must indicate the following:

o Who and where are the direct competitors?
o Classification of supply as to size, product quality, location, performance,
and market segment performance.
o Existing type of competition – Are there big firms controlling the supply,
or are there many small firms in the industry?
o Historical domestic supply as comprised by local production and
importation.
o Determine the historical supply patterns in the targeted countries, for
foreign market as comprised by their local production and importation for
export project.
o Evaluation of supply growth patterns and project future supply by applying
appropriate projection methods or models.

Sample Size
In case, a sample is to be used in the study, the need to determine the sample size
(n) is imperative. The most common formula to determine the sample size (n) is the
Sloven’s Formula:
𝑁
𝑛=
1 + 𝑁𝑒 2
Where:
n is the number of respondents
N is the population size; and
e is the margin of error usually 0.01 or 0.05
Sampling Techniques
There are two types of sampling techniques: probability sampling and non-
probability sampling. The difference between them is that in probability sampling,
every unit has a “chance” of being selected, and that chance can be quantified. This
is not true for non-probability sampling; every item in a population does not have
an equal chance of being selected.
Probability sampling involves the selection of a sample from a population, based
on the principle of randomization or chance. It is more complex, more time-
consuming and usually more costly than non-probability sampling.
Simple Random Sampling
To prevent the possibility of a bias or erroneous inference, a random
sampling is commonly recommended. Under the concept of randomness,
each member of the population has an equal chance to be included in the
sample gathered.

Systematic Random Sampling

The items or individuals are arranged in some way – perhaps
alphabetically or other sort. A random starting point is selected; and then
every kth member will be the succeeding samples.

Stratified Random Sampling

In this type of planning a population is first divided into subsets based on
homogeneity called strata. Thus, in stratified random sampling, the strata
are internally homogenous as possible and at the same time each stratum
is different from one another as much as possible. Then samples are
selected proportionally from each stratum which can be done through
simple or systematic random sampling. This type has an advantage in
some cases to reflect more accurately the characteristics of the population.
Cluster Sampling
Can be done by subdividing the population into smaller units and then
selecting only at random some primary units where the study would then
be concentrated. It is sometimes referred to as an “area sampling” because
it is frequently applied on a geographical basis. In general, we can get
more precise results under cluster sampling when each cluster contains as
a varied mixture as possible and at the same time one cluster is as nearly
alike as the other.
Use of Questionnaire
The questionnaire has been used increasingly to inquire into the opinions and
attitudes of a group. It is a major instrument for data gathering in descriptive-survey
studies and is used to secure information from varied and widely scattered sources.
The questionnaire is particularly useful when the researcher cannot personally and
readily see all the selected respondents or when there is no particular reason to see
the respondent personally.
Criteria for constructing a questionnaire
o It must be short enough so that the respondents will not reject it completely
and so that it will not take too much time which might be a serious drain on
the work of the employees.
o It must be of sufficient interest and must have enough appeal so that the
respondent will be inclined to respond and to complete it.
o The questionnaire should contain in-depth questions in order to avoid
superficial replies. It is desired that the questions evoke real consideration
to the many factors which enter into a decision.
o The ideal questionnaire must not be too motivational or, on the other hand,
too unstimulating. This is particularly true with reference to choice.
o The questionnaire should elicit responses which are definite but not
mechanically forced. A response which is vague or ambiguous or
uncrystalized is not desirable unless it accurately represents the state of
mind of the individual.
o Questions must be asked in such a way that the responses will not embarrass
the respondent. They must be worded such that answering “no” or giving a
neutral response is just as respectable as giving an affirmative one.
o Questions must also be asked in such a manner as to allay suspicion on the
part of the respondent concerning any hidden purpose in the questionnaire.
o The questionnaire must not be too narrow, restrictive, or limited in its scope
or philosophy.
o The responses to the questionnaire must be valid and the entire body of data
taken as a whole must answer the basic question for which the questionnaire
was designed.

 Experts in research emphasize that the vocabulary chosen should be simple –

within the grasp of the least intelligent in the group studied. As to the
arrangement of the questions, it is suggested that the questions that are easy to
answer should be placed first in the questionnaire. As to subject-matter
sequence, it is important that all questions pertaining to one subject should be
grouped together.
Demand
It is very essential to know the demand of our products in order to answer our
customer needs and wants. Knowing the demand will help us to determine the trend
for our products. Analyzing the demand thoroughly will give the projection of the
total number of quantity of each product that we are going to produce daily, weekly,
monthly and annually.
Past Demand
o For the Industry

Past demand for industry or the whole streetfoods is computed by getting

the target market population times the frequency of agreement. It increases
annually based on the annual growth of population. In the example below,
the annual growth rate of Parañaque City by 2.94%.
Since there is no statistical data recorded in NSO and DTI regarding the
demand for streetfoods, past demand is computed by getting the target
population in Parañaque City for the year 2006 – 2010 multiplied by market
acceptability which is obtained by getting the percentage of respondents
who are willing to eat streetfoods in a kiosk with 83.46% and multiplied to
the frequency of agreement or the times the customers avail the products
annually. It increases annually based on the annual growth of population of
Parañaque City by 2.94% and based on the percentage of every products on
the survey, we distributed the annual past demand to get the past demand
for every products.
Table 1: Past Demand for the Industry
Year M.A. Target Population F.O.A. Annual Demand
2006 83.46 159,344 75 11,529,309
2007 83.46 164,029 75 11,868,261
2008 83.46 168,851 75 12,217,166
2009 83.46 173,819 75 12,576,336
2010 83.46 178,929 75 12,946,023

o For Every Product

Since we determined already the computation for the industry, past demand
for every streetfoods that the respondents usually eat are computed to the
percentage of each products answered by the respondents multiplied to the
annual past demand of industry.
 Table 2: Past Demand for the Products
Street Foods
Year Balut Adidas Chicken Skin Fishball Isaw
(4.51) (4.01) (7.02) (15.79) (7.77)
2006 449,834 399,963 700,184 1,574,916 774,991
2007 463,060 411,723 720,771 1,621,222 797,777
2008 476,672 423,826 741,960 1,668,881 821,229
2009 490,697 436,296 763,719 1,717,983 845,391
2010 505,123 436,296 786,244 1,768,489 870,245
Total 2,385,386 449,122 3,712,949 8,351,491 4,109,633
Street Foods
Year Calamares Kwek-kwek Pork Barbeque Total
(14.04) (23.56) (23.30)
2006 402,955 2,349,907 2,323,974 9,974,138
2007 414,803 2,418,998 2,392,303 10,267,395
2008 426,997 2,490,110 2,462,630 10,569,228
2009 439,560 2,563,375 2,535,068 10,880,199
2010 452,482 2,638,734 2,609,614 11,200,060
Total 2,136,797 12,461,124 9,860,959 52,891,020

Projected Demand
o For the Industry
The annual increase of demand for the years 2011 – 2015 is based on the annual
population growth rate from 2006 – 2010 by 2.94%. The annual projected
demand was obtained by multiplying the market acceptability which is 83.43 to
target population and to the frequency of agreement. Based from the obtained
demand, it was distributed again to every product in order to determine its
demand.
 The projected demand for industry in 2011 – 2015 is as follows:

Table 3: Projected Demand for the Industry

Year M. A. Target Population F.O.A. Annual Demand
2011 83.46 184,189 75 11,529,309
2012 83.46 189,604 75 11,868,261
2013 83.46 195,178 75 12,217,166
2014 83.46 200,916 75 12,576,336
2015 83.46 206,822 75 12,946,023

For the Products

It is computed by multiplying the projected annual demand of industry to the
percentage of each product based on the survey.
Projected Demand
Table 4: Projected Demand for the Products
Street Foods
Year Balut Adidas Chicken Skin Fishball Isaw
(4.51) (4.01) (7.02) (15.79) (7.77)
2011 519,972 462,325 809,357 1,820,478 895,827
2012 535,259 475,917 833,152 1,873,998 922,164
2013 550,994 489,908 857,645 1,929,090 949,271
2014 567,193 504,311 882,859 1,985,803 977,181
2015 583,866 519,136 908,811 2,044,177 1,005,906
Total 2,757,284 4,451,597 4,291,824 9,653,546 4,750,349
Street Foods
Year Calamares Kwek-kwek Pork Barbeque Total
(14.04) (23.56) (23.30)
2011 1,618,715 2,716,305 2,686,329 11,529,309
2012 1,666,304 2,796,162 2,765,305 11,868,261
2013 1,715,290 2,878,364 2,846,600 12,217,166
2014 1,765,718 2,962,985 2,930,286 12,576,336
2015 1,817,622 3,050,083 3,016,423 12,946,023
Total 8,583,649 14,403,899 14,244,943 61,137,095

Supply
Based on the percentage of the population who already availed street foods from
our survey questionnaire, we determined our past supply.
o Past Supply
It was multiplied from the percentage of purchases which is 79.70%to the target
population and to the frequency of agreement. The increase in supply was also
based in the growth rate of population. It was also distributed per product to
know the past supply.

o For the Industry

Table 5: Past Supply for the Industry
Year Percentage of Purchases Target Population F.O.A Annual Past Supply
2006 79.70 159,344 75 9,524,788
2007 79.70 164,029 75 9,804,833
2008 79.70 168,851 75 10,315,192
2009 79.70 173,819 75 10,390,031
2010 79.70 178,929 75 10,695,481
 o For Every Products
Table 6: Past Supply for the Products
Street Foods
Year Balut Adidas Chicken Skin Fishball Isaw
2006 429,568 381,944 668,640 1,503,964 740,076
2007 442,198 393,174 688,299 1,548,183 761,836
2008 465,215 413,639 724,126 1,628,769 801,490
2009 468,590 416,640 729,380 1,640,586 807,305
2010 482,366 428,888 750,823 1,688,816 831,039
Total 2,287,937 2,034,285 3,561,268 8,010,318 3,941,746
Street Foods
Year Calamares Kwek-kwek Pork Barbeque Total
2006 1,337,280 2,244,040 2,219,276 9,524,788
2007 1,376,599 2,310,019 2,284,526 9,804,833
2008 1,448,253 2,430,259 2,403,439 10,315,192
2009 1,458,760 2,447,891 2,420,877 10,390,031
2010 1,501,646 2,519,855 2,492,047 10,695,481
Total 7,122,538 11,952,064 11,820,165 50,730,321
Projected Supply
The projected supply will help to determine the total satisfied market or the total
number of customers who availed street foods for five years. It was obtained by
percentage of purchases to the target population with 2.94% growth rate to the
frequency of agreement and it was distributed per product to determine the total
satisfied market for every product.
o For the Industry
Computation of projected supply for product is the same in past supply per
product. It changed only in the target population based on the annual growth
rate of 2.94%.
Table 7: Projected Supply for the Industry
Year Percentage of Purchases Target Population F.O.A Annual Past Supply
2011 79.70 184,189 75 11,009,897
2012 79.70 189,604 75 11,333,578
2013 79.70 195,178 75 11,666,764
2014 79.70 200,916 75 12,009,753
2015 79.70 206,822 75 12,361,470

For the Products

Table 8: Projected Supply for the Products
Street Foods
Year Balut Adidas Chicken Skin Fishball Isaw
2011 496,546 441,497 772,895 1,738,463 855,469
2012 511,144 454,476 795,617 1,789,571 880,619
2013 526,171 467,837 819,007 1,842,182 906,508
2014 541,640 481,591 843,085 1,896,340 933,158
2015 557,502 495,695 867,775 1,951,876 960,486
Total 2,633,003 2,341,096 4,098,379 9,218,432 4,536,240
Street Foods
Year Calamares Kwek-kwek Pork Barbeque Total Supply
2011 1,545,790 2,593,932 2,565,306 11,009,897
2012 1,591,234 2,670,191 2,640,724 11,333,576
2013 1,638,014 2,748,690 2,718,356 11,666,765
2014 1,686,169 2,829,498 2,798,272 12,009,753
2015 1,735,550 2,912,362 2,880,223 12,361,470
Total 8,196,757 13,754,673 13,602,881 58,381,461

The Demand-Supply Situation

It is now essential to combine the findings on the demand and supply situations. It
must indicate the following:
a. Comparison of the demand and supply trends.
 b. The amount of demand unsatisfied, especially in the projections. If demand
appears to fairly satisfied by supply, it is important to consider either or both
of the following:
1. Whether the factors affecting the market may disrupt the equilibrium as to
demand to grow faster than supply.
2. Whether the quality of the product is such that it may create additional
demand or redirect part of existing demand in its favor.
c. The share of the market by establishing the proposed production volume (could
be determined in the technical study) as against the total market size.
BALUT
Year Demand Supply Gap
2011 519 972 496 546 23 426
2012 535 259 511 144 24 115
2013 550 994 526 171 24 823
2014 567 193 541 640 25 553
2015 583 866 557 502 26 364

BALUT
600000 583866
580000 567193
557502
560000 550994
541640
535259
540000 526171
519972
UNITS

520000 511144
496546
500000

480000

460000

440000
2011 2012 2013 2014 2015
YEAR

Demand Supply

ADIDAS
Year Demand Supply Gap
2011 462 325 441 497 20 828
2012 475 917 454 476 21 441
2013 489 908 467 837 22 071
2014 504 311 481 591 22 720
2015 519 136 495 695 23 441
 ADIDAS
540000
519136
520000
504311
495695
500000 489908
481591
475917
480000 467837
UNITS

462375
454476
460000
441497
440000

420000

400000
2011 2012 2013 2014 2015
YEAR

Demand Supply

CHICKEN SKIN
Year Demand Supply Gap
2011 809 357 772 895 36 462
2012 833 152 795 617 37 535
2013 857 645 819 007 38 638
2014 882 859 843 085 39 774
2015 908 811 867 775 41 036
 CHICKEN SKIN
950000
908811
900000 882859
867775
857645
843085
850000 833152
819007
UNITS

809357
795617
800000 772895

750000

700000
2011 2012 2013 2014 2015
YEAR

Demand Supply

FISHBALL
Year Demand Supply Gap
2011 1 820 478 1 738 463 82 015
2012 1 873 998 1 789 571 84 427
2013 1 929 090 1 842 182 86 908
2014 1 985 803 1 896 340 89 463
2015 2 044 177 1 951 876 92 301

FISHBALL
2100000 2044177
2050000
1985803
2000000 1951876
1929090
1950000 1896340
1873998
1900000 1842182
1820478
UNITS

1850000 1789571
1800000
1738463
1750000
1700000
1650000
1600000
1550000
2011 2012 2013 2014 2015
YEAR

Demand Supply
OVERALL TOTAL
Year Demand Supply Gap
2011 11 529 309 11 009 897 519 412
2012 11 868 261 11 333 576 534 683
2013 12 217 166 11 666 765 550 402
2014 12 576 336 12 009 753 566 583
2015 12 946 023 12 361 470 584 553

OVERALL TOTAL
13500000
12946023
13000000
12576336
12361470
12500000 12217166
12009753
11868261
12000000 11666765
UNITS

11529309
11333576
11500000
11009897
11000000

10500000

10000000
2011 2012 2013 2014 2015
YEAR

Demand Supply

The gap or the unsatisfied market is obtained by subtracting the projected demand
to the projected supply which shows the available market for street foods. It also
shows the number of persons whom we need to supply to answer their demand for
street foods. We now show the gap for every product using the data from the
projected demand and projected supply.
The Price Strategies
In economic theory, price is determined mainly by the demand-supply situation. An
increase in demand with supply constant will increase prices. The reverse would
result in lowering of prices. There are, however, other factors which exert some
influences on the price setting. Without any change in demand or supply, price may
go up if raw materials and other production input costs increase; if there are
government interventions. Keeping all of these in mind, price setting or strategies
must consider the following:
o The selling prices of all similar and substitute products
o History of price variations (including range of fluctuations) and establish
factors that most influence their fluctuations over time.
o Responsiveness of demand to price changes (price elasticity). Will there be
great, slight, or negligible changes (increase or decrease) in demand if prices
are lowered or raised.
o Set the selling price taking into consideration the above plus the operating costs
and expenses and estimate increases as foreseen in the subsequent period.

Marketing Program/Strategy
The marketing program must be the end product of a market study. After deciding
market and price targets, the marketing program comes in as the implementing arm.
Marketing strategy is defined as the marketing logic by which business unit hopes
to achieve its marketing objectives. In designing the marketing program, the
following must be considered:
Type of marketing programs prevalent in the industry and their respective
effectiveness

Marketing plan
o Target market- A set of buyers sharing common needs or characteristics
that the company decides to serve
o Selling price- The sum of the values that consumers exchange for the
benefits of having or using the product or service
o Packaging of the product- The activities of designing and producing the
container or wrapper for a product
o Distribution net work- A set of interdependent organizations involved
in the process of making a product or service available for use or
consumption by the consumer or business user
o Sales management mechanism-The analysis, planning, implementation
and control of sales force activities; includes setting and designing sales
force strategy, and recruiting, selecting, training, supervising,
compensating and evaluating the firm’s salespeople.
o Advertising program- Any paid form of non-personal presentation and
promotion of ideas, goods or services by an identified sponsor.
Marketing experts’ suggestions
4 Ps 4Cs
1. Product Customer needs and wants
2. Price Cost to customers
3. Place Convenience to customers
4. Promotion Communication to customers
 TECHNICAL STUDY
The technical study determines the feasible combination of manufacturing process,
machinery design, labor requirements, material to be used, utilities requirements, water
supply, plant location, plant layout, and other technical factors that will enable a project
to operate at minimum cost and/or maximum profit. Care must be observed in the
technical study as the consequences of errors or miscalculation can be extremely
serious and the project may suffer major capital losses.
Manufacturing process- The choice of the process presents no problem if only one
method of manufacturing the product is known. However, some industries have
two or more ways of making a product. The choice must be justified quantitatively
and qualitatively.
Machinery requirements- The machine design, specifications, rated capacity, spare
parts, expected useful life, labor, power and water supply requirements, overall
plant capacity, and costs of the machinery, as well as the arrangements with the
suppliers must be well presented.
Plant capacity- The key factor in determining the plant size or capacity is the initial
sales volume projected and its changes over the years as presented in the market
study.
Estimate of total cost- This comprises the total cost for the machinery requirements,
probable supplier’s terms and conditions to project cash flows. Estimated annual
costs may include that of raw materials, processed industrial materials,
manufacturers, auxiliary materials, factory supplies and utilities.
Plant location- The selection of the plant location takes into account the various
factors affecting the costs of a project.
o Availability and cost of transporting raw materials from source to the plant
o Availability and cost of transporting finished goods from plant to distribution
center or to customers
o Availability and cost of power supply (electricity and water)
o Availability and cost of labor in the area
o General weather condition in the area
Plant layout- The layout refers to the arrangement inside the plant which will
minimize the time and effort applied in various phases of the operations. A good
plant and machinery layout results in a smooth flow of materials and minimum of
backtracking. On the other hand, an inefficient layout can hamper the productivity
of the workers, require extra materials handling equipment, and causes a high rate
of breakage or rejects. Aside from positioning the machinery, the layout must
provide allowances for future production expansion.
 Production schedule- In making a decision about the production schedule,
budgeting can be a very helpful tool. That is, prepare the sales budget, followed by
production schedule, and materials purchase schedule. This includes the volume
requirements per year and if the product is seasonal, a monthly schedule is better to
avoid work delays for non-availability of raw materials and stock-out for non-
production.
Raw materials- The study must indicate the exact specifications and quality of the
raw materials, quantity or volume of requirements (in relation to storage problem
for inventory), selection of sources (local or imported), selection of suppliers (as to
terms and condition of payment as well as reliability of deliveries on time), and
selection of method of transportation or delivery.
Utility requirements- The plant utilities cover the power, water and waste disposal
system. The study must fully indicate the power and water requirements for
machinery and office use, and waste disposal system must be carefully laid out in
accordance with the prescribed rules and regulation of the locality or city and must
consider the environmental effects to the nature and the community.
Project scheduling- This refers to the identification and analysis of the activities
from the project planning stage up to the start of normal operations. This could be
best presented in a Gantt chart. The objectives of project scheduling are (1) to
determine the probable starting time of normal operations, (2) to pinpoint activities
which should be expedited faster so that the starting time of the normal operations
may be advanced or just in time, and (3) to identify dates when certain phases of
the construction work should be completed, and thus materials be made available.
Total project cost- This refers to the total cost of the project necessary to start
operation. This is in terms of needed investment cost, capital costs and initial
operating costs.
Management And Legal Study
This study is applicable to an entirely new firms entering in the business. If the project
feasibility is for an existing firm only related ruled and policies for the particular
venture would be indicated. Assuming that the project feasibility is for an entirely new
firm, the management study must include the following:
Organization Chart
The organization chart tailored made to the first number of projected operational
years. An allowance for expansion could be presented.

Management and Employees Duties and Functions

Summarized duties and responsibilities must be highlighted to identify any job
overlapping or work overload by each officer and employee
 Internal Control
Administrative and accounting controls must be presented in summarized form as
highlighted in the officers and employees duties and functions

Company Rules and Policies

These are guides and basic rules formulated by management to govern actions at
all levels in the organization and are intended to achieve predetermined objectives.
The policies to be indicated are the basics only. Detailed ones could be ignored and
just presented in the comprehensive “Company Rules and Policies”. The basic
policies must be related to:
o Personnel
o Production
o Credit and Collection
o Financial Policies

Legal and Taxation Aspects

The company’s rules and policies must be in accordance with the existing
government laws, practices not contrary to moral and values observed In the place
of where it is situated. References must be the following:
o Labor Laws
o Social Security Act and other related employee benefits
o Local tax codes in the respective locality
o Business and income tax laws

FINANCIAL STUDY
The final test for the feasibility of the project is consolidated and shown in the financial
study. This includes the following:
Projected financial statements for the number of years projected
o Balance Sheet
o Income Statement
o Cash Flows Statement

Supporting Schedules
To prove the correctness of the financial statements based on the projections made
as presented in the market study, technical study and management study, such as
o Sales schedule
o Production Schedule
o Purchase Schedule
o Labor costs schedule
o Operating costs schedule
o Business tax computations
 o Any other schedule deemed necessary in the project, such as cost per unit,
time required to produce one unit or to serve one customer, etc.

Financial Evaluation Measures

Just like any actual operating results, the management evaluates the performance
of the company using different financial evaluation measures to come-up with a
decision, in this case is to go or not to go for the project:
o Rate of returns
o Turnovers
o Ratios
o Cost structure/common size statement
o Trend analysis for the total number of years projected
o Breakeven analysis
o Capital budgeting evaluation measure
o Payback period
o Accounting rate of return
o Net present value
o Profitability index

SOCIO-ECONOMIC STUDY
In any business undertakings, management should also consider not only its financial
empowerment but also its responsibility as part of Philippine society. The study must
indicate whether the project is to operate and earn according to the vision and mission
of the government in the realization of the government’s thrust n the present time. This
must indicate whether the project will:
Enhance the standards of living of the community where the project is located and
to the Filipino people as a whole
Help preserve the environment
Help the nation in the form of taxes payment
Give the society’s needs

CHARACTERISTIC OF GOOD PROJECT FEASIBILITY DEFENSE

To have an effective project feasibility study defense, the proponent, whether by a group
or individual must observe the following:
Effective planning and division of labor, if by a group
Impressive panel presentation
Enthusiasm of the proponents in defending their project
 The ability to defend the findings and their recommendations

OTHER TYPES OF RESEARCHES AND STUDIES

Business Case
A business case is a tool that supports planning and decision-making including
decisions about whether to buy, which vendor to choose, and when to implement.
Business cases are generally designed to answer the question: What will be the financial
consequences if we choose X or do Y? A good business case shows expected cash flow
consequences of the decision over time, and it includes the rationale for quantifying
benefits and costs.

Case Study
A case study is the process of studying and analyzing a particular case, the purpose of
which is to apply concepts in analyzing issues faced by a specific company or firm. It
is used and has developed into a very effective method in improving an individual’s
ability to analyze a situation, establish premises, arrive at valid conclusions, decide on
courses of action, and visualize consequences and results.

Industry Analysis
An industry analysis is used to account of what happened to a business or industry over
a number of years. It chronicles the events such as changes in the competitive
environment, and charts the responses by the industry.