Economic and financial feasibility studies

Before investing, the right question

Every significant investment decision — building a plant, expanding capacity, replacing a line, buying a venture — comes down to one question: does the project create value? The feasibility study exists to answer that question methodically, before the capital is committed.

The difference between a reliable study and an optimistic spreadsheet lies in the assumptions. Volume, price and margin may come from the market; but effective capacity, maintenance cost, asset useful life and reinvestment needs are engineering assumptions — and that is exactly where Stima combines financial modeling with technical verification in the field.

When the study is required

• Investment decisions — building a new plant, capacity expansion, vertical integration, automation and energy efficiency projects.
• Overhaul or replace — economic comparison between the retrofit of an existing asset, buying new and acquiring used, with the full life-cycle cost.
• Purchase and sale of ventures — price setting, appraisal of going concerns and analysis of asset portfolios.
• M&A transactions — economic and financial due diligence and independent verification of the technical assumptions in the business plan.
• Restructuring and decommissioning — keep operating, mothball or shut down: economic quantification of each alternative.
• Financing and collateral — studies supporting project finance and structured transactions.

What we do

• Project modeling — discounted cash flow with NPV, IRR, discounted payback and profitability index, in an open and auditable model.
• Scenario and sensitivity analysis — optimistic, base and pessimistic scenarios, break-even points and the critical drivers of the result.
• Appraisal of ventures and businesses — discounted cash flow, market multiples and net asset value, depending on the purpose.
• Technical verification of assumptions — on-site inspection of the assets, installed and effective capacity, remaining useful life, maintenance capex and asset-related liabilities.
• Studies of alternatives — overhaul vs. replace, buy vs. lease, operate vs. decommission, with a substantiated recommendation.
• Decision support — executive presentation for the board of directors, the board or the investment committee.

Methodology

1. Understanding the project — the decision's objective, the alternatives under analysis, the appraisal horizon and capital constraints.
2. Technical diagnosis — on-site inspection and characterization of the assets involved, capacity, state of repair and reinvestment needs.
3. Assumption building — volumes, prices, fixed and variable costs, capex, working capital and taxation, with the source of each assumption documented.
4. Modeling — project and equity cash flows, a discount rate consistent with the risk, an explicit horizon and a substantiated terminal value.
5. Scenarios and sensitivity — simulation of the critical variables and identification of the decision's break-even points.
6. Report and presentation — assumptions memorandum, open model, conclusion and recommendation, with a presentation to the decision makers.

Deliverables