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Feasibility Studies

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How to prepare and analyze feasibility studies.

Published in: Economy & Finance, Business
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Feasibility Studies

  1. 1. Feasibility Studies Preparation & Analysis Basel Abu-Ali
  2. 2. What/Why • Idea! • Product / Service / Project • New / Running / Expansion • Return / Risk • Different Aspects 2
  3. 3. Questions • Is there a demand for the product (market)? • What about the competition? • What are the product components? • How about production costs? • What is the project / product profitability? • … 3
  4. 4. Preparation Gather: information Analyze: data Decide: results 4
  5. 5. Structure Technical Study Financial Study Market Study 5 Analysis Results
  6. 6. Market Study • Product & Price (4Ps) • Market size and value • Market share and competition • Economic factors • SWOT Analysis Projected Sales 6 Projected Sales Share & Competition Product & Price Market Size & Value Economic factor SWOT Analysis
  7. 7. Technical Study • Production Planning • Production Mix • Production Formula • Operating Expenses (OPEX) • Capital Expenditures (CAPEX) • Depreciation • Staffing 7
  8. 8. Financial Study • Financing (Capital required) • Cost of Capital (WACC) • Statement of Income (P&L) • Statement of Financial Position (Balance Sheet) • Statement of Cash Flows 8
  9. 9. Financial Analysis • Financial Ratios (ROA, ROE, etc.) • BEP & Cost Analysis • Free Cash Flow (FCF) • Results Analysis • Projects Ranking • Sensitivity & Scenario Analysis 9
  10. 10. Free Cash Flow (FCF) • Pre-operating (start-up) expenses • Revenue • CGS/COS EBITDA • OPEX (cash) • Change in Working Capital (A/R, Inv., A/P) NPV & IRR • Capital expenditures • Terminal (residual) Value • Discount rate (WACC) • 5+ years projections 10
  11. 11. Results Analysis • IRR (%) • NPV ($) 11 WACC WACC>IRR <IRR DO NOT TAKE IT ZERO ZERO>NPV <NPV DO NOT TAKE IT
  12. 12. Projects Ranking • The general rule: Take the project with the highest NPV 12
  13. 13. Sensitivity & Scenario Analysis • Sensitivity “What if” Analysis • Scenario Analysis “The good, the bad, the ugly” 13
  14. 14. Other issues.. • EVA, PBP, …etc. • Consider overall corporate goals and objectives • Business plan = document results + strategic management 14
  15. 15. Summary Market Sales Production OPEX & CAPEX Capital Financials Analysis FCF Results Decision 15
  16. 16. Thank you … 16

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