Project Feasibility Analysis

1. Project Feasibility Analysis

2. Feasibility Study: A Schematic Diagram

3. Facets of Project Analysis • The important Facets of Project Analysis are: Market Analysis Technical Analysis Financial Analysis Economic Analysis Ecological Analysis

4. Market 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

5. Technical Analysis • Identification of a process • Level of Technology • Proven or unproven • Technical Know-how package • Specification of the end product

6. Financial Analysis 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

7. Economic Analysis 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?

8. Ecological Analysis 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