Project Feasibility Study[1]

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Project Feasibility Study:

Project Feasibility Study A project is a temporary and one-time endeavour undertaken to create a unique product or service, which brings about beneficial change or added value. Project planning refers to the plans of an undertaking to build up productive capacities or to diversify its business or to extend its existing capacities .

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Project management is the discipline of organizing and managing resources (e.g. people) in a way that the project is completed within defined scope, quality, time and cost constraints Generation of ideas SWOT analysis Clear articulation of objectives Cost reduction Productivity improvement Increase in capacity utilization Improvement in contribution margin Expansion into promising fields Fostering a conducive climate

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Generation of ideas Initial screening Is the idea prima facie promising? Plan feasibility analysis Conduct market analysis Conduct technical analysis Conduct financial analysis Conduct Economic and Ecological analysis Is the project worthwhile? Prepare funding proposal Terminate Terminate Yes NO NO Yes

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Scouting for project ideas Analyze the performance of existing industries Examine the input and output of various industries Review import and export Study plan outlay and government guidelines Look at suggestion of financial institutions Investigate local material and resources Analyse economic and social trend Study new technological developments Explore possibility of reviving sick units Identify unfulfilled psychological needs Attend trade fair

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…. Preliminary Screening Compatibility with promoters Consistency with government priorities Availability of inputs Adequacy of market Reasonableness of cost Acceptability of risk level

Market & Demand Analysis:

Market & Demand Analysis Situational analysis and specification of objectives Collection of secondary information Conduct of market survey Characterization of the market- effective demand in the past and present, breakdown of demand, price, methods of distribution and sales promotion, government policy Demand forecasting Uncertainty in demand forecasting Market planning

Technical analysis:

Technical analysis Whether the preliminary tests & studies have been done or provided for ? Whether the availability of raw materials,power & other inputs have been established? Whether the selected scale of operation is optimal? Whether the production process chosen is suitable? Whether the equipment & machines chosen are appropriate? Whether the auxiliary equipments & supplymentary engineering works have been provided for? Whether provision has been made for treatment of effluents?

Technical analysis ….:

Technical analysis …. Whether the proposed layout of site ,building & plant is sound? Whether work schedule has been realistically drawn up? Whether the technology proposed to be employed is appropriate from the social point of view?

Environmental aspect:

Environmental aspect What are the types of effluents and emissions generated? What needs to be done for proper disposal of effluents and treatment of emissions? Will the project be able to secure all environmental clearance and comply with all statuary requirements?

Financial Analysis:

Financial Analysis Investment outlay & cost of project Means of Financing Cost of Capital Projected profitability Break-Even Point Cashflows of Project Projected Financial position Level of Risk

Ecological Analysis:

Ecological Analysis What is likely damaged caused by the project to the environment? What is the cost of restoration measures required to ensure that the damage to the environment is contained within acceptable limits?

Project Report:

Project Report A Project can be undertaken only on the basis of project report. Project report is pre-investment & comprehensive study of investment proposals of an organization which encompasses a thorough investigation relating to economic, technical, financial, social, managerial & commercial aspects. It seeks to evaluate the socio-economic & technical viability of a project before it is undertaken.

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A project report deals with the various aspects of a new project with reference to : Location of a project The size & capacity level. The technological aspects production process ,availability of raw material, requirements of labour & machines Management policies regarding organization & control aspects of a project.

Advantages of a Project Report:

Advantages of a Project Report It lays down objectives in various spheres of business. It evaluates the objectives in the right perspective. It identifies constraints on resources Viz. manpower, equipment, financial & technological well in advance to make remedial measures in due course of time. It paves the way for management to seek financial accommodation from financial institution & banks. They require a detailed project report to evaluate project viability for raising funds from capital market. Successful implementation of a project depends upon the line of action as suggested in the project report. Besides,comparision of results will depend upon the projected profitability and cashflows ,production schedule and target as laid down in the project report.

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The foregoing discussion thus shows the necessity of preparing a project report in advance. It requires a team of specialized and technical experts to cover different aspects viz. financial, technical, commercial, socio-economic & government rules and regulation and also to follow a multi-disciplinary approach to analyse the following factors

Contents of a Project Report:

Contents of a Project Report Information about industry and its status in the economy, present production and demand pattern, indicating licensed, installs capacities, Government policies & export potential. Broad market trend of the product and by products within & outside the states for 5 years Raw material survey, giving specification and quality of raw materials required & their sources of availability. Production process –broad description of different processes & their relative economies Availability of technical know-how within & outside country.

Contents of a Project Report …:

Contents of a Project Report … Location of Plant , its advantages & justification. Water requirement of water for process ,boiler feed, cooling etc. Sources of water available & making it usable for factory & to townships Power –total power requirements for the factory specification of power & choice between purchased power & generated power. Fuel-its requirement for steam raising or processing source and price at which it will be available for factory including taxes & surcharge.

Cost of Project ..Specify Foreign exchange cost ,if any:

Cost of Project .. Specify Foreign exchange cost ,if any Land inclusive of development expenditure to be incurred on land. Building to be erected for housing the plant & Machinery ,the administrative office, stores, services..Cost estimate to be included in the project cost. Plant & machinery including other equipments & their estimated cost. Offsite facilities, utilities & auxiliary facilities. Preliminary expenses (Share issue, stamp duty, cost of raising equity etc) Contingencies. Cost of Spare, repairs & maintenance during trial run & commissioning period. Pre-commissioning & commissioning period. Working capital margin-details of estimation to be given.

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Details of Capital Structure or financing mix-broad pattern to be indicated in report. Cost of Production-Project broad pattern for five years vis -a- vis design capacity. Break even point of production cost should be given, effect of variation of cost of raw material, utilities, selling price etc be indicated & elaborated. Price trend of raw material & finished goods be discussed. Profitability for five years after commission of the project should be worked out in the prescribed format. Cashflow statement & pay back period should be worked out for the project. Technical feasibility be discussed in detail with financing viability. Organisation & Management –Description of corporate management ,promoters experience & background ,organizational chart, key personnel & delegation of power & responsibility structure to be fully described.

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