INTRODUCTION

Feasibility Study: The feasibility study

focuses on helping answer the essential
question of Should we proceed with the
proposed project idea? All activities of
the study are directed toward helping
answer this question.
The
feasibility
study
provides
an
investigating
function. The
feasibility
study outlines and analyzes several
alternatives or methods of achieving
business success.
The feasibility study helps to narrow the
scope of the project to identify the best
business scenario(s). The feasibility study
is conducted before the business plan

adequate throughput and response time?

Information -- Does current mode provide
end users and managers with timely,
pertinent,
accurate
and
usefully
formatted information? Economy -- Does
current mode of operation provide costeffective information services to the
business? Could there be a reduction in
costs and/or an increase in benefits?
Control -- Does current mode of operation
offer effective controls to protect against
fraud and to guarantee accuracy and
security of data and information?
Efficiency -- Does current mode of
operation make maximum use of
available resources, including people,
time, flow of forms,...? Services -- Does
current mode of operation provide
reliable service? Is it flexible and
expandable?

A good feasibility study will show the

strengths and deficits before the project
is planned or budgeted for.
Feasibility study should be undertaken
any time that a completely new project,
process, vendor is being used, or
business is being built. A feasibility study
does not only provide the direction but
also will define the focus for your team.
TYPES
OF
ASPECTS

FEASIBILITY

w/

its

1. Operational Feasibility- Rocky

Operational feasibility is a measure of
how well a proposed system solves the
problems, and takes advantage of the
opportunities identified during scope
definition and how it satisfies the
requirements
identified
in
the
requirements analysis phase of system
development.
The PIECES framework can help in
identifying problems to be solved, and
their urgency: Performance -- Does
current mode of operation provide

The operational feasibility assessment

focuses on the degree to which the
proposed development projects fits in
with the existing business environment
and
objectives
with
regard
to
development
schedule,
delivery
date, corporate culture, and existing
business processes.
To ensure success, desired operational
outcomes must be imparted during
design and development. These include
such design-dependent parameters such
as
reliability,
maintainability,
supportability, usability, productivity,
disposability, sustainability, affordability
and others. These parameters are
required to be considered at the early
stages of design if desired operational
behaviors are to be realized. A system
design
and
development
requires
appropriate and timely application of

engineering and management efforts to

meet
the
previously
mentioned
parameters. A system may serve its
intended purpose most effectively when
its
technical
and
operating
characteristics are engineered into the
design. Therefore operational feasibility
is
a
critical
aspect
of
systems
engineering that needs to be an integral
part of the early design phases.
The most important part of operational
feasibility is input- from everyone,
especially when it affects how or what an
organization does as far as processes. If
the process were to build a new sports
arena for a client, the a study
determining how the arena will operate in
a way that is conducive to its inhabitants,
parking human flow, accessibility and
other elements is a good example of an
operational feasibility study.

Operational Aspects
Define the urgency of the problem and
the acceptability of any solution; If the
system is developed, will it be used?
Includes people oriented and social
issues:
internal
issues,
such
as
manpower problems, labor objections,
manager
resistance,
organizational
conflicts and policies; also external
issues, including legal aspects and
government regulations, also social
acceptability of the new system.
Operational Aspects
*How do end-users and managers feel
about the problem (solution)?
*It's not only important to evaluate
whether a system can work but also
evaluate whether a system will work.

*A workable solution might fail because

of end-user or management resistance.
-Does management support the
project?
-How do the end-users feel about
their role in the new system? -What
end-users or managers may resist
or not use the system? People tend
to resist change. Can this problem
be overcome? If so, how?
-How will the working environments
of the end-users change?
-Can or will end-users and
management adapt to the change?

Financial feasibility
A study on whether a project is
viable
after
taking
into consideration its total
costs and
probable revenues.
A financial feasibility study projects
how much start-up capital is needed,
sources of capital, returns on investment,
and other financial considerations. It
looks at how much cash is needed, where
it will come from, and how it will be
spent.
If the revenues cover the costs of the
project, then the project is visible. For
instance,
the
cost
of
expanding
production will entail $500,000; however,
the expected increase in revenue will be
$1,000,000.
Thus,
the
project
is feasible as its revenue more than cover
its
costs.

In case of a new project, financial

viability can be judged on the following
parameters:

Total estimated cost of the project

Financing of the project in terms of
its capital structure, debt equity ratio
and promoter's share of total cost

Existing
investment
by
promoter in any other business

the

Projected cash flow and profitability

The financial viability of a project should

provide the following information:

Full details of the assets to be

financed and how liquid those assets
are.

Rate of conversion to cash-liquidity

(i.e. how easily can the various assets
be converted to cash?).

Project's funding
repayment terms.

Sensitivity in the repayments

capability to the following factors:

potential

Time delays.

Mild slowing of sales.

Acute
sales.

reduction/slowing

and

of

Small increase in cost.

Large increase in cost.

Adverse economic conditions.

Financial Aspects
1. Sources of financing for the project
a. Sources selected, for both long
term adn short-term financing
b. Alternative sources considered
and factors used in
determining the selected sources

2. Amount and terms of financing for

each source selected
a. Type of finacing (capital stock,
loan, etc)
b. Use of proceeds (as for
machinery, land, etc)
c. Currency of financing (pesos,
dollars, etc)
d. Amount
e. Security (as collaternal or
guarantee)
f. Repayment period
g. Interest or dividend rate
h. Other features
3. Status of the financing from each
source
a. Actual releases already madeamounts and dates
b. Applications already approved,
but corresponding funds
not yet released - assurance of
release of funds, and
expected date
c. Applications pending (not yhet
approved)
d. Applications still to be made
4. Financing of contingencies and
seasonal peaks in working
capital
a. Contingencies- provision made
for the financing of
contingencies, as overruns in
construction costs or
delay in start of normal
operations
b. Seasonal peaks in working
capital- provisions made for
the financing of seasonal
increases in working capital,
as in the case of a project solely
oriented to the
manufacture of Christmas items
5. Major assumptions used, as on:
a. Project time-table
b. Sales volume
c. Plant capacity
d. Income tax rates
e. Tarriff rates

f. Tax exemptions to be enjoyed by

the project
g. Foreign exchange rate
h. General price levels
6. Financial Statements
Projected financial staemetns, with
supporting
computations and subsidiary
assumptions;
a. Projected income statement
b. Projected cash flow statement
c. Projected balance sheet
7. Financial Analysis
a. Break-even point

1. Profit break-even pointvolume and selling price

2. Cash break-even pointvolume and selling price
3. Debt service sales volume
b. Capital, recovery and earnings.
1. Cash pay off period
2. Accounting rate of returns
3. Dsicounted cash flow rate of
return
c. Others
Disclaimer: This is an accumulation of
articles in the Internet; I own nothing
here nor do I claim it to be mine.