Evaluation of the Feasibility of the Project using MS Excel

This memo evaluates the feasibility of a project using MS Excel. Financial indicators such as net profit, net profit margin, cash flow, return on assets are indicating that the project plan is financially sound one. The only consideration for the company is the liquidity requirements of the company as in the third year it is seen that the company has forecasted negative cash flow and also the current ratio of the company for the Second, third and fourth years show negative results which is an indication that the project might face certain liquidity crisis.

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Memo:
To: Director of Business Development
From: Executive in Head office of the Company.
Date: 25th March 2018
Subject: Evaluation of the Feasibility of the Project
The main purpose of the memo is to analyse the viability of the project which is being
considered by the company. The company is planning on opening a pipeline which will take two
years in construction during which the company will not be earning any revenues and all
expenses incurred forms part of the construction cost of the company. As per the forecasted
results of sales the company will be able to earn increasing amount of profits from the year the
pipeline starts operating. The net profit of the first year is $ 12,65,56,146 and the amount is on an
increasing trend as per the forecasted results of the company. Moreover, the cash flow of the
company for the first two years also show positive results (Robinson & Sensoy, 2016). As per
the forecasted figures, the net profit margin of the company shows an increasing trend and show
a profit margin in the first year at 42.61% and by the tenth year it is expected that the same will
be at 58.73%. Therefore, there are performance indicators that the project will be operating
efficiently. Thus, the project of the company can be approved as various financial indicators such
as net profit, net profit margin, cash flow, return on assets are indicating that the project plan is
financially sound one (Heikal, Khaddafi & Ummah, 2014).
The only consideration for the company is the liquidity requirements of the company as
in the third year it is seen that the company has forecasted negative cash flow and also the
current ratio of the company for the Second, third and fourth years show negative results which
is an indication that the project might face certain liquidity crisis. This is can be due to the heavy

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loan repayment schedule which the company intends to follow. The liquidity crisis of the
company can be reduced by reducing the costs of the maintenance of the company.

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Reference
Heikal, M., Khaddafi, M., & Ummah, A. (2014). Influence analysis of return on assets (ROA),
return on equity (ROE), net profit margin (NPM), debt to equity ratio (DER), and current ratio
(CR), against corporate profit growth in automotive in Indonesia Stock
Exchange. International Journal of Academic Research in Business and Social
Sciences, 4(12), 101.
Robinson, D. T., & Sensoy, B. A. (2016). Cyclicality, performance measurement, and cash flow
liquidity in private equity. Journal of Financial Economics, 122(3), 521-543.