Professional Documents
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Economic Indicators
Demand Estimation
End-user profile
Influencing Factors
Market Potential
Contd…
Technical Feasibility
The technical feasibility analysis of a project can vary with the size and complexity
involved in setting up the project. An analysis of certain below mentioned points are
to be done :
Plant location and site access
Reception of equipment
Projections
Period of Financing Financing
for prices of
estimation alternatives charges
products
Financial Projections
The unit will remain in existence in India for one year; the software is expected to get developed within this time frame.
The US based company will be subject to corporate tax of 30 per cent and a withholding tax of 10 per cent in India and
will not be eligible for tax credit in the US.
The software developed will be sold in the US market for US $ 12.0 millions.
Rent for fully furnished unit with necessary hardware in India Rs 15,00,000
Man power cost (80 software professional will be working for 10 hours each day) Rs 400 per man hour
Advise the US Company on the financial viability of the project. The rupee-dollar rate is Rs 48/$.
Solution
Proforma profit and loss account of the Indian software development unit
Rent 15,00,000
Manpower (Rs 400/hr x 80 x 10 x 365) 11,68,00,000
Note: Students may assume the year of 360 days instead of 365
days as has been done in the answer provided above. In such a
case where a year is assumed to be of 360 days, manpower cost
is Rs11,52,00,000 and repatriated amount Rs 22,87,15,000.
2 • Industry Analysis
3 • Economic Analysis
4 • Cost of Project
5 • Inputs Available
Contd..
Content of Project Report - 2
1 • Technical Analysis
2 • Financial Analysis
3 • Social Cost Benefit Analysis
4 • SWOT Analysis
5 • Project Implementation Schedule
Cost of Project
Raw Materials
Power
Labour
Technical Analysis
New
Right Plant & Plant layout, Blue
Knowhow Storage Tanks Factory/(Industrial
Machinery Print
Estate New Co.)
Example of Financial Analysis
Projected Profitability and Cash Flow Statement (Rs in cr)
50 15 65
The cash flow of Rs 65 cr when discounted at the company’s cost of capital rate gives net cash
flow of Rs 30 cr .
Hence net present value of 10 cr is available [Net Cash Flow -Capital Cost].
Thus the project seems to be feasible.
Social Cost Benefit analysis
Foreign Exchange
Labour
Political risks
Economic risks
Exam Question (8 Marks)(May
2011)
Jumble Consultancy Group has determined relative utilities of cash flows of two forthcoming
projects of its client company as follows :
Cash (15000) (10000) (4000) 0 15000 10000 5000 1000
Flow (Rs)
Project A
Cash Flow (Rs) -15000 - 10000 15000 10000 5000
Probability 0.10 0.20 0.40 0.20 0.10
Project B
Cash Flow (Rs) - 10000 -4000 15000 5000 10000
Probability 0.10 0.15 0.40 0.25 0.10
15000 40 0.40 16
10000 30 0.20 6
5000 20 0.10 2
Total 2
Solution
Project B
15000 40 0.40 16
5000 20 0.25 5
10000 30 0.10 3
Total 17.55
Identification of project/product
Selection of site.
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