FEASIBILITY STUDY

Feasibility Study is a written document that is very similar in content to a Business Plan but of a slightly bigger and more complex. It is made for investments of a higher total value (in Croatia usually above EUR 100,000.00).

Investors, for example banks, are investing their available funds to ensure the realization of an investment project, expecting a certain money return because they have given up spending on those assets in the present. Entrepreneurs who use this borrowed capital for the realization of their projects, start from the assumption that its realization will bring benefits to themselves, as well as to the owners of borrowed funds or other sources of financing. Therefore, there is a need to calculate the economic profitability of the investment, from a financial efficiency standpoint.

The financial efficiency of investment project is determined by considering the cash flows of the investment, taking into account the time preference of money and using different methods of financial decisions making. Methods for measuring the financial efficiency of investment projects attempt to relate the financial effects of a potential investment project to the invested amount, through mathematical expressions.