Solution:

(1) Technical Feasibility :

• The technical feasibility of the proposal/project contains the resource and technically analysis of the feasibility study.

• It deals, with the production cost of the item. If the production cost of the item is low, the item can be sold at a competitive price in relation to a similar quality product.

• For example, hand operated fan at cheaper cost will be economically feasible but technically unsound.

• The use of solar energy may be technically viable but it is not economically feasible yet because the experiment on this line has not been finalised.

• Technical appraisal deals with the following components:

  • (a) Location of the unit.

  • (b) Size of the plant.

  • (c) Process of Manufacture.

  • (d) Factory layout.

  • (e) Personnel.

  • (f) Availability and cost of raw material.

  • (g) Power and water, facilities.

  • (h) Technological viability in the application of the finished product.

(4) Economic Viability :

• Economic viability is an important criteria for evaluating a project.

• Whatever may be the motivation in starting a project from the point of view of the promoters, it shall be necessary that the operations quantified on a year to year basis should generate sufficient profits.

• A project without adequate profits or which is likely to incur losses, could not be classified as commercially viable.

• Evaluation of economic viability can be carried out through projection of profitability worked out for a period ranging from three to ten years.

• In case of financial applications, such projections should be carried out for a period covering the term of the loan to be negotiated with banks and financial institutions.

• In any case, the profitability of a project should be established on a long-term basis, keeping in view a spread of five years after a reasonable level of capacity utilization is achieved.

• A Projected Profitability Statement has to be prepared by taking into account-capacity utilization and all costs, it shall be necessary to proceed further and calculate certain ratios to evaluate the economic viability of the project.

• Some of the ratios are debt service coverage ratio, pay back period, average rate of return, net present value, break-even sales and internal rate of return.