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smu mba solved assignments for spring 2014 for mb0049 Q1. Write short notes on : • Commercial and economic feasibility • Technical feasibility

Answer: Commercial and economic feasibility:
 The economic feasibility aspect of a project relates to the earning capacity of the project. Earnings of the project depend on the volume of sales. Here, the following important indicators are taken into consideration:
 ·         Present demand of the goods produced through the project i.e. market facility (or) getting a
feel of the market.
·         Future demand of the goods. A projection may be made about the future demand. The period normally depends upon the scale of investment.
·         Determining the extent of supply to meet the expected demand and
·         arriving at the gap.
·         Deciding in what way the project under consideration will have a reasonable chance to share the market.
·         Anticipated rate of return on investment. If it is positive, the project justifies the economic norm in the relationship between cost and demand.

Future demand can be estimated after taking into consideration the potentialities of the export market, the charges in the income and prices, the multiple uses of the product, the probable expansion of industries and the growth of new industries. The market share of the proposed project could be identified by considering the factors affecting the supply position such as competitive position of the unit, existing and potential competitors, the extent
feasibility report should give a description of the project in terms of the technology to be used and the requirement of equipment, labour, and other inputs. Location of the project should be given special attention in relevance to technical feasibility. Another important feature of technical feasibility relates to the types of technology to be adopted for the project. The exercise of technical feasibility is not done in isolation. The scheme has to be viewed
also from economic considerations; otherwise, it may not be a practical proportion, however sound, technically it may be.

The promoter of the project can approach the problem of preparation of technical feasibility studies in the following order:

·         Undertaking a preliminary study of technical requirements to have a quick evaluation.
·         If preliminary investigation indicates favourable prospects working out further details of the project, the exercise begins with engineering and technical specifications and covers the requirements of the proposed project as to the quality, quantity, and specification type of components of plant and machinery, accessories, raw materials, labour, fuel, power,water, effluent disposal, transportation, etc.changes, and technological innovations bringing substitute into the market.

Technical feasibility
The examination of this aspect requires a thorough assessment of the various requirements of the actual production process and includes a detailed estimate of the goods and services needed for the project. So, the feasibility report should give a description of the project in terms of the technology to be used and the requirement of equipment, labour, and other
inputs. Location of the project should be given special attention in relevance to technical feasibility. Another important feature of technical feasibility relates to the types of technology to be adopted for the project. The exercise of technical feasibility is not done in isolation. The scheme has to be viewed also from economic considerations; otherwise, it may not be a practical proportion, however sound, technically it may be.

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