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Feasibility Analysis

In: Business and Management

Submitted By JasyDas
Words 7292
Pages 30
Chapter-1
Introduction

Before an investment decision is made it is necessary to determine whether or not the planned investment idea is feasible. The feasibility of an investment has to be considered with respect to several different aspects in order to determine whether the investment should be realized or not. Carrying out a feasibility analysis is therefore one of the most critical steps in the decision-making process.

A feasibility analysis is an effective analytical tool that can be used to evaluate investments from various perspectives, e.g. technical, social, legal, financial, market, and organizational. Financial feasibility is often a predominant factor in feasibility analysis, as most investments are not realized if they do not generate profit for the project owners. The focus of this thesis is on financial feasibility analysis and its application in the decision-making process.

Precision and reliability of feasibility analysis relies on the accuracy of information used in the analysis. The appropriate level of detail has to be decided with respect to what stage the investment is on. On early stages the level of uncertainty is often high, but as the investment opportunity evolves information become more detailed and reliable. As uncertainty can highly affect the results of the analysis, the level of detail has to be taken into account when basing decisions on the results.

To assess the feasibility of investments relevant criteria have to be chosen. Feasibility calculations need to be done with care and the complexity of the calculations depends on the number of different aspects that need to be considered. The assumptions used in the calculations can, and often will, change as the project progresses and then the analysis needs to be updated.

The objectives of this thesis are summarized in the following two research questions:

1. How

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