Feasibility Study Guideline

Feasibility Study Guideline
I. Summary of Project
A. Name of Firm
B. Location: head office/factory
C. Brief description of the project
1. History of business
2. Nature or kind of industry
3. Type of organization
4. Officer of the business and their qualifications.
II. Economic Aspects:
A. General market description
1. Market description – a brief description of the market to include the following:
a. Areas of dispersion
b. Methods of transportation and existing rate of transportation
c. Channels of distribution and general trade practices.
2. Demand
a. Consumption for past 10 years.
b. Major consumer of the products.
c. Projected consumption for the next five years.
3. Supply
a. Supply for 10 years, classified as source-imported or locally produced. For imports, specify the form in which goods are imported, the prices, and the brand. For locally produced goods, the companies producing them, their production capacities, brands, and market shares shall be specified.
b. Factors affecting trends in past and future supply.
4. Competitive positions:
a. Selling price – includes a price study indicating the past domestic and import prices, the high and low prices within the year and the effect of seasonality, if any.

B. Marketing programs
1. Description of present marketing practices of competitors.
2. Proposed marketing program of the project describing the selling organization, the terms of sales, channels of distribution, location of sales outlets, transportation and warehousing arrangements, and their corresponding costs.
3. Promotion and advertising plans, including costs.
4. Packaging

C. Projected Sales
Expected annual volume of sales for the next five years considering the demand; supply; competitive position; and marketing program.

D. Contributions to the Philippine Economy
1. Net annual amount of dollars earned or saved, the basis used.
2. Labor employed.
3. Taxes paid.
III. Technological Feasibility

A. Products(s):
1. Description of the product(s) including specifications of their physical, mechanical, and chemical properties.
2. Uses of the product(s).

B. Manufacturing process
1. Description of the process showing detailed flow charts indicating material and energy requirements at each step, and normal duration of the process.
2. Alternative processes considered and justification for adopting said process.
3. Technological assistance used and contracts, if any.

C. Plant size and production schedule
1. Rated annual and daily capacity per shift, operating days per year, indicating factors used in determining capacity.
2. Expected production volume for the next five years considering start-up and technical factors.
D. Machinery and equipments:
1. Machines and equipment layout indicating the floor plan.
2. Specifications of the machinery and equipment required, indicating rated capacities of each piece.
3. List of machinery sand equipments to be bought and origin as to local or imported.
4. Quotations from suppliers, machinery guarantees, delivery dates, terms of payment, and other arrangements.
5. Comparative analysis of alternative machinery and equipment in terms of cost, reliability, performance, and spare parts available.

E. Plant location
1. Location map of the plant
2. Desirability of location in terms of distance from the source of raw materials and market and other factors and a comparative study of different locations, indicating advantages and disadvantages (if new project).

F. Plant Layout
- Description of plant layout, drawn to scale.

G. Building and Facilities
1. Types of building and costs of erection
2. Floor area involved.
3. Land improvements such as roads, drainage, etc., and their respective costs.

H. Raw Materials
1. Description and specifications of their physical, mechanical, and chemical properties.
2. Current and prospective costs of raw materials, terms of payment, and long-term contracts, if any.
3. Availability, continuity of supply, and current and prospective sources.
4. Material balance or material process chart.

I. Utilities
- Electricity, fuel, water, steam, and supplies indicating the uses, quantity required, availability, sources, and tentative sources and cost.

J. Waste Disposal
1. Description and quantity of waste to be disposed of.
2. Description of the waste disposal method
3. Methods used in other plants.
4. Cost of waste disposal
5. Clearance from proper authorities or compliance with legal requirements.

K. Production Cost
- Detailed breakdown of production costs, indicating the elements of cost per unit output.

L. labor requirements
- Detailed breakdown of the direct and indirect labor and supervision required for the manufacture of the product(s), indicating compensation including fringe benefits.

IV. Financial Feasibility:

A. For existing projects
1. Audited financial statements (balance sheets, income statements, cash flow) for past three years to reflect the following:
a. Aging receivables
b. Schedule of fixed assets showing the capital cost, estimated useful life, and depreciation method used.
c. Schedule of liabilities, tax assessments, and other pending claims or litigation against the applicant, if any
d. Financial trends and ratio analysis.
e. Elements of production, selling, administrative, and financial expenses.
2. Financial projections for the next five years (income statements, cash flow, balance sheets)
3. Supporting schedules to the financial projections, stating consumptions used:
a. Collection period of sales
b. Inventory levels
c. Payment period of purchases and expenses.
d. Elements of production cost, selling, administrative, and financial expenses.
4. Financial analysis to show rate of return of investment, return on equity, break-even volume, and price analysis.

B. For new products
1. Total project cost (fixed and working capital)
2. Initial capital requirements
3. Pre-operating cash flows relative to the project time table
4. Financial projections for the five years of operations to include balance sheets, income statements, and cash flows.
5. Supporting schedule to the financial projections to include:
a. Collection on sales
b. Inventory levels.
c. Payment period for purchases and expenses.
d. Elements of production cost, selling, administrative, and financial expenses.
6. Financial analysis showing return on investment, return on equity, break-even volume, and price analysis.