Lecture 13

Making a business case for the project

COURSE OUTLINE

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Week 01 Introduction to Financial Management

Week 02 Accounting principles and financial statements
Week 03 Ratio & Cost Benefit Analysis
Week 04 Sources of finance for projects
Week 05 Time Value for Money concept
Week 06 Quiz, Problems & Revision
Week 07 Project Presentation
Week 08 - Mid-term Examination
Week 09 - TVM techniques to evaluate projects
Week 10 - Role of taxation & interest in Project Management
Week 11 - Effects of Inflation & depreciation on projects
Week 12 - Comparing mutually exclusive projects
Week 13 - Making a business case for the project
Week 14 Quiz, Problems & Revision
Week 15 Project Presentation
Week 16 - Final Examination

LECTURE OUTLINE
What is a Feasibility
Objectives of a Feasibility
Feasibility types
Making a business case
Guidelines for Quiz & Project

What is a Feasibility
Evaluation and Analysis of a proposed project
Investigation and Research to support Decision making

Conducts S.W.O.T analysis of the proposed venture

Includes details like background, operations,, marketing
research, financial data, legal and tax obligations
Should be objective & credible based on an unbiased
approach for potential investors and lending institutions

Objectives of a Feasibility
Whether the proposed project
is possible and justified
Assessment of different
alternative solutions
Assessment of benefits from
carrying out the project
Enables management to make
a better decision

Improves and updates

business strategy

Feasibility Types
Technical & Legal Feasibility
Operational Feasibility
Economic & Financial Feasibility
Schedule Feasibility
Other Feasibilities

Legal Feasibility
Legality of the proposed project
Whether the proposal conflicts
with legal requirements

Is there a legal course of action to

implement the proposal

Technical Feasibility
Practicality of technology
Technical expertise to handle the technology
Technology mature enough to be applied

Type of technology
State of the art technology
Mature and tested technology

Availability of technology
Do we have the proposed technology, or
Does it need to be acquired

Operational Feasibility
Stakeholders feedback
About problem identified
Explored solutions

System evaluation
Can the system work?
Will the system work?

Managing resistance
Management support & expected resistance level
Overcoming resistance & adaptability

Economic & Financial Feasibility

Whether solving the problem is worthwhile ?
Costs and benefits of solutions proposed
Tangible benefits (Increased sales. Increased margins)
Intangible benefits (Increased motivation)
Development costs (Hardware, facilities, training)
Operational costs (Incremental with benefits, on-going)

Cost-benefit analysis
Will benefits outweigh costs
Minimal cost to attain a certain system
How soon will the benefits accrue
Which alternative offers the best return on investment
Selection among financing arrangements (rent/purchase)

Schedule Feasibility
Attaining technical expertise
May need to hire new or train existing staff
Hiring or training will impact the schedule

Assess the schedule risk:

Reasonability of deadlines
Mandatory or desirable deadlines

Constraints on project deadlines

Consequences of project overruns
Behind schedule is bad, but product failure is worse

Other feasibilities
Market Feasibility
(Geographic location, jurisdiction)
Resource Feasibility
(Dependencies, development)
Cultural Feasibility
(Cultural clash, social acceptance)

Feasibility Contents
Introduction / Executive Summary
Purpose & scope of study
Brief introduction of the proposed project
Brief description of the problem/opportunity
Importance of your plan

Background / Problem statement

Current situation, problems & constraints
Stakeholders & environmental factors
Risks & opportunities for improvement
Plan to overcome problems & constraints

Feasibility Contents (contd..)

Methodology
Method of analysis for your feasibility study

Overview of Alternatives
State any alternatives and their important features
Pros & Cons, possibilities & constraints

Cost & Benefit Evaluation

Use CBA techniques to assess financial feasibility
Also discuss the technological, legal, operational
etc. aspects of your proposal

Feasibility Contents (contd..)

Recommendations
Identify options which fit in the requirements
What if analysis

Appendices
Tables
Spread sheets
Graphs
Calculations
References

Guidelines for Quiz-2

o Weightage

05 marks

o Time

20 mins, No extra time for late comers

o Calculators

Allowed, no borrowing

o Mobile phones

Strictly NOT allowed

Guidelines for Project Presentation

Making a business case for a project
Time for presentation in class

: 15 minutes

Maximum marks allocated

: 20 marks

Min/Max students per group

: 2/3

Presentation & submission (hard copy)

: Lecture 15

Must email CR the soft copy before presentation

ZERO marks for not complying with the guidelines

Learning outcomes

What is a feasibility

What are the objectives of a feasibility

How many feasibility types

How to make a business case

Guidelines for Quiz & Project