Transcript Project Feasibility Analysis 1

Feasibility Study: A Schematic Diagram
• The important Facets of Project
Analysis are:
Market Analysis
Technical Analysis
Financial Analysis
Economic Analysis
Ecological Analysis
Market analysis is concerned primarily with two questions:
• What would be the aggregate demand of the proposed product / service
in future?
• What would be the market share of the project under appraisal?
To answer the above questions, the market analyst requires a wide variety
of information & appropriate forecasting methods. The kinds of
information required are:
• Consumption trends in the past & the present consumption level
• Past & Present supply position
• Production possibilities & Constraints
• Imports & Exports
• Structure of competition
• Cost Structure
• Elasticity of Demand
• Consumer behaviour, intentions, motivations, attitudes, preferences &
requirements
• Distribution channels & marketing policies in use
• Administrative, technical, & legal constraints
•Identification of a process
•Level of Technology
•Proven or unproven
•Technical Know-how package
•Specification of the end
product
Financial analysis seeks to ascertain whether the proposed project
will be financially viable in the sense of being able to meet the
burden of servicing debt and whether the proposed project will
satisfy the return expectations of those who provide the capital.
The aspects which have to be looked into while conducting
financial appraisal are:
 Investment ourtlay & cost of project
 Means of financing
 Cost of capital
 Projected profitability
 Break-even point
 Cash flows of the project
 Investment worthwhileness judged in terms of various criteria of merit
 Projected financial position
 Level of risk
Economic analysis also referred to as social cost benefit analysis, is
concerned with judging a project from the larger social point of view.
In such an evaluation the focus is on the social costs and benefits of a
project which may often be different from its monetary costs and
benefits. The questions sought to be answered in social cost benefits.
The questions sought to be answered in social cost benefit analysis
are:
 What are the direc teconomic benefits & costs of the project measured
in terms of shadow (efficiency) prices and not in terms of market
prices?
 What would be the impact of the project on the distribution of income
in the society?
 What would be the impact of the project on the level of savings &
investment in the society?
 What would be the contribution of the project towards the fulfillment
of certain merit wants like self-sufficient, employment and social
order?
In recent years, environmental concerns have assumed a grat deal of
significance – and rightly so. Ecological analysis should be done
particularly for major projects which have significant ecological
implicatrions like power plants and irrigation, schemes, and
environmental – polluting industries (like bulk drugs, chemicals, and
leather processing). The key questions raised in ecological analysis are:
 What is the likely damaged caused by the project to the environement?
 What is the cost of restoration measures required to ensure that the
damage to the environment is contained within acceptable limits?
Exhibit 1.2 summarises the key issues considered in different types of
analysis