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Chapter 1
INTRODUCTION TO PROJECT FEASIBILITY STUDY PREPARATION
Project Feasibility Study is a thorough and systematic analysis of all the factors that
affect the possibility of success of a proposed undertaking.
Importance of a Project Feasibility Study
Project Feasibility is an essential medium of progress as a means:
o to initiate profitable projects for sectoral enhancement and expansion
o to evaluate actual project results
Features
o It is a synthesis of separate studies namely: market, technical, financial, socio-
economic and management aspects of the project.
o The data, facts and other findings presented in the study then become the basis
for deciding whether the project is to be pursued, abandoned, or revised.
o It is not an antidote to failure but its primary purpose is to enhance the probability
of success of a specific undertaking.
o It is a result of the belief that a carefully planned activity has better chances to
succeed than an activity without previous plan.
o As a process, it requires tedious activities of gathering, collating and interpreting
relevant, realistic and updated data.
o The project feasibility study is one of the best instruments to meet the challenges
of constant change.
PROJECT SUMMARY
Project summary presents the highlights, descriptive definition, long range
objectives, feasibility criteria, history and basic conclusions of the project study. It gives
the analyst and investors a “capsule view” of the whole project. It is presented first
before the Market Study and is done after the project feasibility study is completed.
A. Name of the project
Briefly explain the reason for such choice of name.
B. Location
Pinpoint exact location of head office, plant site or farm site and give main
reasons for choosing them. The project must choose a location where maximum
efficiency can be attained at the lowest possible cost.
Factors which affect the choice of location are:
Sources of raw materials, labor and utilities
Proximity to the market
Nature of available transportation
Cost of land and buildings
C. Descriptive Definition of the Project
Is the project in line with any government-encouraged undertaking? Is the project
a result of findings in certain regions or sectors of the country?
D. Project’s Long-Range Objectives
What does the project expect to achieve in 10 years in terms of size, capacity,
volume, worth, and role in its industry and in the economy.
E. Feasibility Criteria
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What were the most important guidelines used to judge the feasibility of the
project: Profitability, impact on the socio-economic environment or both?
F. Highlights of the Projects
1. History
How the project did come about?
2. Project time table and status
What stage is the project presently in?
3. Nature of the Industry
Briefly describe the industry where you belong, its product lines, the demand
supply situation, history, growth patterns, problems and role in the economy.
4. Mode of financing
Briefly discuss the sources of funds, the financing terms and the reasons for
choosing such sources.
5. Investment Costs or the Initial Asset Requirement
Briefly describe how much funds are necessary to make the project
operational. How are these funds allocated?
G. Major Assumptions, Summary of Findings and Conclusion on the
following:
1. Market Study
Product to be marketed
Historical Demand and Supply of the Product
Projected Demand-Supply Analysis
Specific target markets
Own Marketing Program
2. Technical Study
Nature of Product Line
Technology necessary and availability
Proper mix of resources
Optimum Production Volume
3. Organization and Management Study
Management Structure
Salary scale
4. Financial Study
Overall financial picture (Financial Statements
Result of capital Investment analysis
5. Socio-Economic Study
Effects of Project on the society
SAMPLE PROJECT SUMMARY
General Information
Project Title: Bluesea Lobster Production
Project Location: Purok-2 Barangay Arellano, Libjo, Dinagat Province
Total Project Cost: Php 6,488,237.40
Equity: Php 1,297,647.48
Proposed Loan: Php 5,190,589.92
Loan Purpose: Acquisition of Equipment, Furniture and Fixtures, Building, and
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Tools and production materials
Term of Loan: 3 years
Interest Rate: 12%
Mode of Payment: Annually
General Project Description
The type of ownership is Partnership with three (3) members. Twenty percent
(20%) of its capital comes from members and 80% comes from a loan.
Market Study
Only one product will be produced by the business which is live lobster. The live
lobster will be sold at its good size weight, .50 kg up to 1 kg and will be sold at
₱2,250.00 per kilogram to the existing local traders in Surigao City. 1
Lobster is of high demand both locally and internationally. It is mostly used as
part of the daily menu of premium hotels and restaurants globally. The current supply of
lobster locally and globally is definitely not enough to meet the existing demand.
The target market of the business are the local traders of Surigao City who also
sell their lobsters to domestic premium hotels and restaurants, markets and
consolidators for export. The business aims to contribute to the supply of lobster in the
country which is needed to meet the demand locally and internationally. It will compete
to the existing lobster producers in Dinagat Province.
Technical Study
The proposed product of the business will be sold live to the prospective buyers
and is placed in a Styrofoam boxes filled with a minimum population of 30 kgs. per
Styrofoam boxes. The total area of the lobster farm is 240 sq. meter having 12
cages (4m x 5m) per cage in size and will only utilize 65% of its capacity in preparation
for the next ten years increase of production size. It could be harvested after 6-10
months considering the right feed formulation, required population per cage and
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maintenance and care. The production volume will be 273 kilograms that is
equivalent to 5,460 pcs of 50-grammer lobster fingerlings in the first year.
The business will be located at Purok-2 Barangay Arellano, Municipality of Libjo,
Province of Dinagat Islands. The said location has been proven to be suitable for lobster
production by its previous lobster growers.
The proposed business will need a storage space before it will be brought to the
buyers, one pump boat for transportation of inputs to the site and for the delivery of
products to the nearby markets. In addition, the direct materials will be purchased from
the existing growers of Dinagat and the indirect supplies from nearby sources. Feeds
will be bought directly from the fishermen of the place to lower down cost. Furthermore,
the proponent will employ 3 direct laborers who will be in-charge from stocking lobster
fingerlings, feeding twice a day, maintenance, harvesting and weighing for delivery.
Management Study
The proposed product will be a partnership and will hire 1 General Manager, and
1 bookkeeper for the daily operation of the business with their individual duties and
responsibilities. In addition, 1 Security Maintenance for protecting the farm daily from
stocking until harvesting against culprits.
Financial Study
The project needs Php 6,488,237.40 upon its implementation. Eighty percent
(80%) of the total project cost which is amounted to Php 5,190,589.92 will be funded by
the bank and the remaining twenty percent (20%) amounted to Php 1,297,647.48 will be
the partner’s equity. Capital Investment Analysis shows the business is feasible and
profitable. The business will recover its initial investment in three (3) years. The project
is indeed acceptable.
Socio-Economic Study
The actualization of the project will benefit not only the proponent but also its
employees as they will earn stable income from the said project. In addition, it will help
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the community to reduce the unemployment rate and can be a work diversion for those
who are engaged into illegal way of fishing. Furthermore, more taxes will be generated
by the local and national government can be increased their revenue upon the project
implementation.
POINTERS IN EVALUATING A PROJECT
❖ MARKET STUDY o Is there a demand?
The final conclusion whether or not there exisrts substantial
demand, demand can be created, or demand is fully met is the heart
of the whole study.
o Can the marketing program effectively meet this demand?
The selling price, product quality, place (channel of
distributions) and promotions must be considered.
❖ TECHNICAL Product Quality
/PRODUCTION o Can the product compare with existing competing ones?
o Is the product appropriate and suitable for its intended
use(s)?
o What characteristics distinguish the product from the others of
the same category?
Resource Availability and Accessibility
o Are raw materials/inputs needed always available and can be
readily transported?
o Are labor, equipment, machineries, utilities, technology
necessary for production available at sufficient quantities and
at reasonable costs?
Optimal Use of Resources
o Does the project employ the most efficient way of allocating
resources to produce the desired product quality at the lowest
possible cost?
o Is there sufficient production to meet demand?
❖ FINANCIAL FEASIBILITY Capital Investment Analysis
o Are there financial statements prepared?
o Is the investment analysis conducted favorable?
o Is the projec’s profitability comparable with that of the
industry?
Financing Focus
o Are there enough sources for the initial capital requirement?
o Are financing arrangements and terms reasonable and viable?
❖ ORGANIZATION AND Optimum organizational effectiveness
MANAGEMENT o Is the organizational set up carry out its functions effecrively
while having the lowest manpower level possible?
o Is there a clear and precise identification of duties and
responsibilities, flow of authority and manpower level
requirement?
Qualifications of Key personnel
o Are the recommended key officials the best qualified under
the circumtances?
o Is careful decison being done in deciding the positions
created, relationship of positions, number and the kind of
men to employ?
❖ SOCIO-ECONOMIC o Does the society and economy derive net positive gains from
the project?
o Are there better income-earning opportunities?
o Does it seriously consider the environment?
o Does the project contribute to the upliftment of socio-economic
conditions ?
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