Financial Feasibility quantifies the costs of development to determine whether the returns justify the investment. The financial feasibility of a development project includes estimating the elements of the project budget, operating pro forma, cash flow, debt and equity financing alternatives; and evaluating a project’s return to the investor(s).
Typical Components of a Financial Feasibility Study include:
- Executive Summary
- Introduction
- Project Description – Site Plan, project size and mix, amenities
- Project Costs – Hard costs & soft costs
- Project Financing – Conventional, Tax-exampt, HUD, etc.
- Sources and Uses of Funds
- 10 Year Project Pro forma
- Key Ratios – Internal Rate of Return, Debt Coverage Ratios, Net Present Value
- Sensitivity Analysis
- Conclusions and Recommendations