The Islamic University of Gaza
Faculty of Commerce
Department of Economics
Feasibility Studies and Projects’ Evaluation
Prepared by
Mohammed Othman
2014 / 2015
Chapter 1:
Introduction to Feasibility Studies
What is a feasibility Study ?
An analysis and evaluation of a
proposed project to determine if it
(1) is technically feasible, (2) is
feasible within the estimated cost,
and (3) will be profitable.
What is a Feasibility Study
Is this a good business idea?
Helps answer the question of whether to
go forward with the business idea.
What is a Feasibility Study
A feasibility study is valuable for:
Starting a new business
Expansion of an existing business
Purchasing an existing business
A feasible business will:
Generate cash flow and profits,
Withstand risks,
Remain viable in the long-term
Meet the goals of the founders
Reasons to Do a feasibility Study
Gives focus to the project.
Narrows the business alternatives.
Identifies new opportunities.
Provides valuable information for “go/no go”
decision.
Increases probability of business success by
identifying weaknesses early.
Helps receive funding from lenders, grant
providers, etc.
Feasibility Study Phases
Phase 1: A brainstorming for selecting the
project
Phase 2: Pre-feasibility Study
Phase 3: Detailed feasibility Study
Phase 4: Implementation phase
Phase 5: Follow up and Evaluation phase
The detailed Feasibility Study includes
Study 1: Marketing feasibility Study
Study 2: Technical feasibility study
Study 3: Legal and environmental study
Study 4: Financing feasibility study
Study 5: Financial and economical feasibility study
Study 6: National Feasibility study
Major Questions before Preparing Feasibility Study
When to do a Study?
Who will do the Analysis?
How will Monitor the Study Progress?
How to Accept or Reject the Study?
How to Use the Results?
The feasibility study process involves making
rational decisions about a number of enduring
characteristics of a project, which may include:
 Establishing project scope - stating exactly what
the project is.
 Vision/mission statement
 Situation analysis, history and background of the
product/service, industry and the organization
 The aims, goals and objectives of pursuing the
opportunity
 Market opportunities
 Current market segments
 Projected growth in each market segment
 Customer profile and demographics
 Performance objectives expected
 Estimation of customers and potential
revenues
 Critical success factors
 Determination of competitive advantage
 Barriers to entry, education, distribution
channels, costs
 The time frames
 The initial costs involved
 Performance objectives expected
 Financing and projected cash flows - where will
the money come from?
 Break even analysis
 The pay back period
 Return on investment
 A report of costs & benefits
 Development of an action plan for the project
to proceed
 A summary of findings
Are you thinking about starting a business ?

How long have you been dreaming about
starting your own business?

What steps have you taken toward making
your dream come true?
Do you have family support to start your own
business?
Are you thinking about starting a business ?
How much money do you need to make?
What kind of experience do you have in this
industry?
Will this business help you realize your personal
life goals?
How to Write the Aims and Objectives of
your Feasibility Study
You should commence your Feasibility Study
by writing the aims and objectives you
envisage for your study.
Establish the scope of the Feasibility Study state exactly what the project is and what it
is intended to achieve.
Some aims and objectives for a Feasibility
Study could be:
The aims and objectives of this Feasibility
Study are to investigate the feasibility of
importing / selling / manufacturing a new
type of flowers for sale to the Palestinian
market, as well as investigation of the costs
involved and the potential profits and
return on investment.
The Pre-feasibility study : A detailed
review of available alternatives must take
place at the stage of the pre-feasibility
study
The detailed feasibility study should
provide all data necessary for an
investment decision with more details
than the pre-feasibility study.
The feasibility study should include deep analysis
for the following parts
1)
2)
3)
4)
5)
6)
7)
8)
9)
10)
11)
12)
13)
Executive summary about the project and project background
Business environment analysis & Entry Timing
Market analysis and marketing concept
Material inputs
Location, site and environment
Engineering,
Technology and equipment
Human resources
Implementation planning and budgeting
Financial analysis and investment appraisal
National Feasibility Study
Legal study
Conclusion and recommendation
The Outlines of a detailed feasibility study
The structure of a detailed-feasibility study should include
the following components:
1) Executive summary about the project and project
background
 Project history
 Cost of studies and investigations already performed
 Project sponsors
 Definition of the basic idea of the project, objectives and
strategy
2) Business environment analysis & Entry Timing:
 SWOT analysis.
 Best entry timing of the project
The Outlines of a detailed feasibility study
3) Market analysis and marketing study:
Demand and market, includes the following:
A. Structure and characteristics of the market
B. The estimated existing size and capacities of the
industry (specifying market leaders),
C. The estimated future growth (specifying major
programs of development),
D. Major problems
E. Analysis of Competitors
F. Demand forecasting
The Outlines of a detailed feasibility study
G.
H.
I.
J.
K.
L.
M.
N.
General quality of goods
Past imports and their future trends,
Prices
Role of the industry in the national economy and
national policies,
Priorities and targets related to the industry
Approximate present size of demand,
The past growth of demand,
Major determinants and indicators
The Outlines of a detailed feasibility study
 Marketing concept, sales forecast and marketing budget
includes the following:
A. Description of the marketing segments,
B. Selected targets and strategies
C. Anticipated competition for the project from existing and
potential local and foreign producers and supplies
D. Localization of markets and product target group
E. Sales program
F. Estimated annual sales revenues from products
G. Estimated annual costs of sales promotion and marketing
The Outlines of a detailed feasibility study
 Production program required, includes the following:
A. Products,
B. Wastes (estimated annual cost of waste disposal)
C. Capacity utilization & Capacity utilization rate
4) Material inputs (approximate input requirements, their
present and potential supply positions, and a rough
estimate of annual costs of local and foreign material
inputs):
 Raw material
 Processed industrial materials
 Factory supplies
The Outlines of a detailed feasibility study
5) Location, site and environment, includes the following
 Pre-selection, including, if appropriate, an estimate of the cost
of land
 Preliminary environmental impact assessment
6) Project engineering:
 Determination of factory capacity
 Quantitative relationship between sales, factory capacity and
material inputs
 Maps and layouts
The Outlines of a detailed feasibility study
 Civil engineering works, includes the following:
A.
B.
C.
D.
E.
F.
Rough layout of civil engineering works,
Arrangement of buildings,
Short description of construction materials to be used,
Site preparation and development
Buildings and special civil works
Outdoor works
Rough estimate of investment cost of civil engineering works
(local and foreign), classified as above.
The Outlines of a detailed feasibility study
7) Technology and equipment, includes the following:
A.
B.
C.
D.
E.
Technologies and processes that can be adopted,
Technology description and forecast
Environmental impacts of technologies
Rough estimate of costs of local and foreign technology
Rough layout of proposed equipment (major components):
E.1. Production equipment
E.2. Service equipment
E.3. Spare parts, wear and tear parts, tools
Rough estimate of investment cost of equipment
classified as above.
The Outlines of a detailed feasibility study
8) Human resources:
 Estimated human resource requirements
 Estimated annual human resource costs
9) Implementation scheduling:
 Proposed approximate implementation time schedule
 Estimated implementation costs
10) Financial analysis and investment:
 Total investment costs
Rough estimate of working capital requirements
Estimated fixed assets
The Outlines of a detailed feasibility study
 Project financing
 Proposed capital structure and proposed financing (local and
foreign)
 Cost of finance
 Production cost (materials, personnel and overhead costs, fixed
and variable costs)
 Financial evaluation based on the above-mentioned estimated
values :
• Payback period
• Simple rate of return
• Break-even point
• Internal rate of return
• Sensitivity analysis
The Outlines of a detailed feasibility study
11) National Feasibility Study
 National economic evaluation (economic cost-benefit
analysis), includes the following:
• Foreign exchange effects
• Value-added generated
• Absolute efficiency
• Employment effects
The Outlines of a detailed feasibility study
12) Legal Study, includes (Registrations , Contracts,
Agreements, …etc)
13) Conclusions and Recommendations