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Feasibility Study

Competencies
  • Interpret how the components of a balance sheet and income statement communicate the financial position of an organization.
  • Interpret the components of a cash-flow statement to describe the liquidity of an organization.
  • Evaluate financial ratios to differentiate profitability and liquidity across organizations.
  • Analyze leverage and activity ratios to review operating performance across organizations.
  • Determine current values of cash streams utilizing discounted cash flow techniques.
  • Critique organizational investments using forecasting scenarios.
Student Success Criteria

View the grading rubric for this deliverable by selecting the “This item is graded with a rubric” link, which is located in the Details & Information pane

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Scenario

You recently went to a dealership for an oil change on your vehicle, as no independent oil change companies or auto repair shops are within 50 miles of your home. You paid $250 for this oil change on your Chevy Camaro.

Given your entrepreneurial spirit and frustration with the cost of the oil change, you have an idea for a mobile oil change company. You have completed a marketing survey to determine potential interest in such a company. The marketing survey results suggested that 50% of vehicle owners would entertain using a mobile oil change company for oil changes if such a company existed.

You live in a town with 30,000 registered vehicles, of which their owners take 15,000 to the dealerships for oil changes. Most owners take their vehicles to the dealership three times a year.

You will need the following to start this business and to gain funding from investors.:

  • 3 Mobile Oil Change Trucks (General Modifiable Flatbed Commercial Trucks)
  • Oil Changing Supplies (i.e., motor oil, clean cloths, drip pans, and oil filters)
  • Oil Changing Tools (i.e., Motor Oil Tank, Motor oil extractor, and a Fluid Flush Machine Mobile Oil Dispensing Kit)
  • Insurance (i.e., Auto for all three trucks and General Liability Insurance for the Business)
  • Budget for 3 Employees (Hourly Pay)

Pro forma financial statements, a financial plan, and a business plan are required for all potential investors and creditors. Prepare a 10-15 slide PowerPoint presentation and include financial proforma statements with the above information to present to potential investors and creditors.

Instructions

Using PowerPoint (or similar) and this Module 7 Feasibility Calculations Template – 2023, you have been asked to develop a feasibility study presentation to determine the feasibility of this idea for a new company.

Module 7 Feasibility Calculations Template  – 2023.xlsx

 Your feasibility study presentation should include the following:

  • Develop a conservative forecasted sales budget based on the survey results using the Excel template. Make sure your price is less than what the dealership charges.
  • Within the Excel spreadsheet, Identify fixed and variable costs for each oil change. Using these values, develop an operating budget to determine the contribution margin for an individual oil change and the total amount for the forecasted sales budget.
  • Develop a proforma income statement, balance sheet, and statement of cash flows for the first year of business. The business Tax Rate is 20%.
  • Based on these proforma financial statements, calculate one financial ratio in each category of profitability, liquidity, and solvency ratios.
  • Based on a 40-hour work week, estimate how many oil changes one person can realistically perform. Given the projected sales forecast, develop a capital investment proposition for additional trucks with anticipated useful lives of 5 years. Use the discounted cash flow method at an interest rate of 6%. Develop a 10-15 slide PowerPoint presentation summarizing these figures above and provide a recommendation to invest in this mobile oil-changing business based on the feasibility report provided.

NOTE – Be sure the documents display proper grammar, spelling, punctuation, and sentence structure.

Assessment Requirements/Submission Requirement:
  • Submit a 10-15 slide PowerPoint presentation, including attribution for outside sources.
  • Submit the Excel Feasibility Spreadsheet to show all calculations used for the scenario.

A – 4 – Mastery

Accurate and appropriately conservative forecasted sales budget based on the survey results.

A – 4 – Mastery

Correctly identifies fixed and variable costs for each oil change and develops a realistic operating budget.

A – 4 – Mastery

Accurate and complete proforma income statement, balance sheet, and statement of cash flows for the first year of business.

A – 4 – Mastery

Accurately calculates all profitability, liquidity, and solvency ratios.

A – 4 – Mastery

Accurately develops a capital investment proposition and PowerPoint presentation for potential investors.

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