Economic Feasibility
yas1410
FinalReport790.pdf
Course: EM 540 / CEM 540 / PROJECT MANAGEMENT
Second Semester 2019-2020
Term (192)
Feasibility Study in Project Management
Project Execution Manual
Instructor: Dr. Ali A. Shash
Student Name: ID#:
Osama G. Almuhtaseb 201472540
Zaid A. Khallaf 201473200
Yaman Al Nahhas 201474840
Youssef El Ghazzawi 201805860
Ibrahim Zakot 201472480
Fiber-Optic Lines Installation Firm
May 2020
I
TABLE OF CONTENTS
TABLE OF CONTENTS........................................................................................................... I
LIST OF FIGURES ................................................................................................................... V
: PROJECT SELECTION ............................................................................. 1
1.1 Search Areas ..................................................................................................................................... 1
1.2 Project Selection Process................................................................................................................... 1
1.2.1 Brain Storming .................................................................................................................................. 2
1.2.2 Selection Criteria ............................................................................................................................... 2
1.2.3 Weighted Evaluation ......................................................................................................................... 3
: NEED ANALYSIS ......................................................................................... 5
2.1 Fiber Optics ........................................................................................................................................ 5
2.2 Fiber Optics Supply ............................................................................................................................. 7
2.3 Demand Over Fiber Optics.................................................................................................................. 7
: PROGRAMMING ......................................................................................... 9
3.1 Functional Programming .................................................................................................................. 9
II
3.1.1 The Purpose of the Project ................................................................................................................. 9
3.1.2 Project Scope ..................................................................................................................................... 9
3.1.3 General Policies ................................................................................................................................. 9
3.1.4 Firm's Management ......................................................................................................................... 10
3.1.5 Miscellaneous .................................................................................................................................. 15
3.1.6 Expansion Plans ............................................................................................................................... 16
3.2 Architectural Programming ........................................................................................................... 16
3.2.1 General Management Department ................................................................................................... 16
3.2.2 Engineering Department .................................................................................................................. 17
3.2.3 Financial Department ...................................................................................................................... 17
3.2.4 Human Resource Department .......................................................................................................... 17
3.2.5 Quality Control Department ............................................................................................................ 18
3.2.6 Contract Administration Department ............................................................................................... 18
3.2.7 Procurement Department ................................................................................................................. 18
3.2.8 Operation & Maintenance Department ............................................................................................ 18
3.2.9 Miscellaneous .................................................................................................................................. 20
3.2.10 Proposed Architecture Design for The Company and the facilities. .............................................. 21
III
: SITE SELECTION ............................................................................................ 30
4.1 Factors considered: .......................................................................................................................... 30
4.2 Site Selection Process: ...................................................................................................................... 30
4.3 Brainstorming ................................................................................................................................... 31
4.4 Criteria selection (City) ..................................................................................................................... 31
4.5 Weighted Evaluation (City) ............................................................................................................... 32
4.6 Criteria selection (District) ................................................................................................................ 33
4.7 Weighted Evaluation (District) ......................................................................................................... 34
4.8 Advantages: ..................................................................................................................................... 36
: ECONOMIC FEASIBILITY ............................................................................. 38
5.1 Investment cost ................................................................................................................................ 38
5.1.1 Design cost ....................................................................................................................................... 38
5.1.2 Construction cost ............................................................................................................................. 39
5.1.3 Equipment cost ................................................................................................................................ 41
5.1.4 Machineries cost .............................................................................................................................. 42
5.2 Operating cost ................................................................................................................................. 42
5.2.1 Cost of goods sold: .......................................................................................................................... 43
IV
5.2.2 Operational expenses: ..................................................................................................................... 43
5.3 Revenues .......................................................................................................................................... 44
5.4 Simulating cash flow ........................................................................................................................ 45
5.5 Sensitivity analysis ........................................................................................................................... 47
V
LIST OF FIGURES
Figure 1.1: Weights of Selection Criteria ........................................................................... 3
Figure 1.2: Evaluation Process ........................................................................................... 4
Figure 3: Fixed Broadband Services ................................................................................... 6
Figure 4: Mobile Broadband Services ................................................................................ 6
Figure 3.1: Manegerial Hirarchy of the Firm .................................................................... 10
Figure 6: the proposed architecture design for the first floor ........................................... 22
Figure 7: the proposed furniture for the first floor ............................................................ 23
Figure 8: the proposed architecture design for the second floor ....................................... 24
Figure 9: the proposed furniture for the second floor ....................................................... 25
Figure 10: the proposed architecture design for the third floor ........................................ 26
Figure 11: the proposed furniture for the third floor ......................................................... 27
Figure 12: the proposed architecture design for the parking lots ...................................... 28
Figure 13: the proposed architecture design for the warehouses ...................................... 28
Figure 14: the proposed architecture design for the company and the facilities .............. 29
Figure 15: Criteria scoring Matrix (city) .......................................................................... 32
VI
Figure 16:Analysis Matrix (city) ...................................................................................... 33
Figure 17: Criteria scoring Matrix (district) ..................................................................... 35
Figure 18:Analysis Matrix (district) ................................................................................. 36
Figure 19: Cash flow simulation for 350 SR/m ................................................................ 46
Figure 20:Cash flow simulation for 300 SR/m ................................................................. 47
Figure 21:Cash flow simulation for 400 SR/m ................................................................. 48
1
: Project Selection
The selection phase is a critical part of the study that affects all future decisions. Several factors
should be taken into consideration while selecting a project. These factors include the type and
style of the project, the provided services, and the offered opportunities.
1.1 Search Areas
The search for a project covered the following areas:
• Educational sector
• Health-care sector
• Information Technology sector
• Energy sector
• Entertainment sector
• Transportation sector
1.2 Project Selection Process
The steps followed in the project selection process are shown as the following:\
1- Brain storming
2- Selection Criteria
3- Weighted Evaluation
2
1.2.1 Brain Storming
In this part of the project selection process, all ideas generated by the team members were
noted. There was no comments or rejection of any idea at this stage. After that, the
generated ideas were filtered and a final list of ideas that will pass to the next stage was
made. The final ideas are shown as the following:
1- A Metro connecting Dammam city to 2nd industrial city.
2- A General Hospital.
3- A power generation plant.
4- A Fiber-Optic lines installation Firm.
5- A university.
1.2.2 Selection Criteria
In this part, the criteria based on which the project from the final list will be chosen are
determined. These criteria are illustrated as the following:
1- Availability of Data: the amount of data available on the topic, the ease of
accessibility to the data, its quality and its source.
2- Supply and Demand: the amount of demand on the type of projects considered and
whether the current supply meets the demand or not.
3- Compliance with Governmental Plans: does the suggested project agrees with the
governmental plans or not.
4- Profitability: the amount of profit expected to be earned from the suggested project
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5- Completion time: the amount of time required to complete the project.
6- Constructability: how easy and feasible to construct the suggested project.
1.2.3 Weighted Evaluation
In this stage, the selection criteria are ranked depending on their relative importance. After
that, each factor is assigned a weight corresponding to its rank. Figure 1 shows the ranked
factors and their weights.
Figure 1.1: Weights of Selection Criteria
Figure 2 shows the evaluation process where each project is evaluated against each factor
by assigning a value corresponding to how good the factor performs when considering a
certain project. The assigned values range between 4 and 1, indicating excellent and poor
performances, respectively. The assigned performance values are then multiplied by the
corresponding factors' weights and summed up. The project with the highest total weighted
score is then selected.
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Figure 1.2: Evaluation Process
It is seen from Figure 2 that the project with the highest total weighted score is the fourth
project which is the Fiber-Optic lines installation firm. The project has a total weighted
score of 80. Therefore, the ''Fiber-Optic lines installation firm'' is the selected project.
5
: Need Analysis
The advantages of fiber optics can mean cost savings for businesses of any type and size.
While fiber optics may have a higher upfront cost, the long-term savings will more than
make up for it. More and more companies are going paperless, and that means
transferring data from spreadsheets and other documents to large database management
systems, as well as adopting cloud-based technology. This only highlights the increased
importance of quick, reliable fiber connectivity.
2.1 Fiber Optics
Telecommunication and information technology are among the major industries that rely
significantly on an optical fiber network infrastructure. The demand for fiber optic cables
has been rising in line with the evolving fiber-rich network infrastructure. The growing
demand for high bandwidth communication is one of the prominent drivers for optical
fibers and hence the preform market. The rise in data traffic in line with the continued
proliferation of tablets, smart devices, laptops, and other portable devices is anticipated to
further trigger the demand for optical fiber. The fiber optic preform market is evolving
continuously, as it happens to be a vital element of the supply chain associated with the
broader optical fiber and cable industry.
6
Figure 3: Fixed Broadband Services
Figure 4: Mobile Broadband Services
7
2.2 Fiber Optics Supply
The annual report of the Ministry of Communication and Information Technology (MCIT)
states the numbers and information of fixed broadband subscribers throughout the years
between 2014 and 2018 as it is displayed in table 2.1. Moreover, mobile broadband service
is clarified as well in table 2.2 in the years 2014 till 2018. Data shows the great incensement
of subscriptions from 2015 till 2018 in fiber optics service which in turn caused dispensing
in other services like DSL from 1.62 M to 0.82 M and wireless subscribers from 1.1 M to
0.3 M. The total data subscriptions decreased from 19.96 M to 8.37 M. This comes as a
result of the introduction of the fiber optics that offers better utilities as the percentage of
usage of it changed from 16.2% to 21.7%. These numbers were based on the statistics done
by the General Authority of Statistics (2018) taking into consideration the total number of
Saudi household (3,591,098).
2.3 Demand Over Fiber Optics
In the current time, (2.6 M) 72.2% of the total Saudi household are not connected to fiber
optics. The population in Saudi Arabia (35 M) will increase 70% (50 M) by the year 2030
based on forecasted statistics which will lead in turn to the incensement in the demand on
fiber optics service. The COVID-19 crisis lead the world to activate social distancing
facilities, mainly the usage of internet technology. Educational institutions utilized
intensified online courses, as well as various business sectors, private and public, that
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followed up with their employees and clients through online applications. This whole
situation directed people towards admitting to the easier, safer and faster choice which is
the fiber optics service that offers special features for its subscribers. We assume that this
huge turnout towards fiber optics service will cause a great demand on the service which
will cause evolution of its technology by the government and in turn give a rise to the
projects and expansions in the range of coverage of this service all over the Kingdom. It is
presumed that 60% of the 72.2% households that are not connected to fiber optic
(2,591,098) will choose to go with this service, taking into consideration the fact that these
numbers cover houses and residential units only as insufficient data was found about the
usage and accommodations of private and public companies. We assume that these
companies will head to apply the fiber optics technology indeed due to it’s great
effectiveness on work.
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: Programming
3.1 Functional Programming
3.1.1 The Purpose of the Project
The purpose of the project is to start a firm specialized in the installation of fiber lines and
the provision of connectivity to fiber networks.
3.1.2 Project Scope
The project scope focuses on the establishment of the main office of firm and the necessary
complementing facilities. The main office of the firm will serve as the following:
1- It will serve as a front for the firm where top management is located and the place
where clients can reach for business.
2- It will serve as an operation center to manage all operations, projects, facilities and
offices of the firm distributed all around KSA.
3.1.3 General Policies
1- The firm will be operated by eight departments.
2- Work will be on 6-day basis, 8 hours a day.
3- No segregation between males and females at the main office.
4- All labors at sites are males.
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3.1.4 Firm's Management
The firm will consist of eight departments as stated earlier. Figure 3 illustrates the eight
departments.
Figure 3.1: Manegerial Hirarchy of the Firm
3.1.4.1 General Management Department
This department represents the head of the management and it will be responsible for:
1- Managing and coordination between the various departments.
2- Monitor the firm's performance and setting plans for improving the firm.
3- Achieve the objectives of the firm.
The staff required for this department:
• A number of one General Manager
• A number of one Secretary
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• A number of one Assistant
The general manager will have a separate office and the rest of the personnel will share
offices.
3.1.4.2 Engineering Department
This department will be responsible for:
1- Supervise the work on sites.
2- Prepare required drawings for the work.
The staff required for this department:
• A number of three civil engineers
• A number of three telecommunication engineers
All personnel of this departments will share offices.
3.1.4.3 Financial Department
This department will be responsible for:
1- Preparing annual reports.
2- Preparing income and financial statements.
3- Tracking invoices and bills.
The staff required for this department:
• A number of one Director
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• A number of two accountants
• A number of one clerk
The director will have a separate office and the rest of the personnel will share offices.
3.1.4.4 Human Resource Department
This department will be responsible for:
1- Employees recruitment and employment-related matters.
2- Monitoring and evaluation of employees' performance.
The staff required for this department:
• A number of one Director.
• A number of one assistant.
All personnel of this department will share offices.
3.1.4.5 Quality Control Department
This department is responsible for supervising the work being executed and make sure it
meets the specific requirements.
The staff required for this department:
• A number of two quality engineers
• A number of two safety officers
All personnel of this department will share offices.
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3.1.4.6 Contract Administration Department
This department is responsible for drafting, auditing and reviewing all contracts the firm
holds.
The staff required for this department:
• A number of one contract engineer
• A number of one assistant
The contract engineer and the assistant will have separate offices.
3.1.4.7 Procurement Department
This department is responsible for procurement of materials, tools and equipment
necessary to perform the work.
The staff required for this department:
• A number of one director
• A number of two assistants
All personnel of this department will share offices.
3.1.4.8 Operation & Maintenance Department
This department will be responsible for the following items:
• Warehouse
• Workshop
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• Equipment
• Labor
3.1.4.8.1 The Warehouse
The warehouse is the main storage facility in the firm. Materials, tools and equipment
owned by the firm will be stored in this facility.
The staff required for this facility:
• A number of one Storekeeper
• A number of one assistant
• A number of security guard
3.1.4.8.2 The Workshop
The workshop is place where all the firm's equipment is maintained and repaired.
The staff required for this facility:
• A number of one Mechanic
• A number of one assistant
• A number of security guard
3.1.4.8.3 Firm's Equipment
The equipment needed by the firm to start its operation is:
• A number of one trencher
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• A number of two JCB Backhoes
• A number of five trucks
• A number of two total stations
The staff required to operate this equipment:
• A number of eight operators
• A number of one surveyor
• A number of one assistant
3.1.4.8.4 Labor
The labor employed by the firm is as the following:
• A total number of five teams, four of which are FTTx and one is a civil team.
• An FTTx team consists of two telecommunication technicians, an electrician and a
labor.
• Civil team consist of 4 labors.
3.1.5 Miscellaneous
• A number of five portacabins for use on site.
• A number of 24 Parking lots located at the main office.
• A kitchen and a dining hall accommodating 36 persons at the main office.
• A reception and a waiting area at the entrance of the main office.
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• A total of 6 W.C. units to be distributed proportionally between the two genders at
the main office.
• General Manager has a separate w.c. unit.
• A number of one receptionist at the main office.
• A number of one security guard at the main office.
• A number of two genitors at the main office.
3.1.6 Expansion Plans
• The plan prepared is for the first five years of operation.
• The business is to be expanded by 40% minimum every five years.
3.2 Architectural Programming
This part covers the required spaces to serve the purpose of each function.
3.2.1 General Management Department
The following spaces are allocated to general management department to facilitate
achieving the proposed function and target:
• The height of all rooms in the main building shall be 3 m.
• A number of one 4.56 × 5.26 office room for the general manager
• A number of one 4.10 × 2.90 office room for both the secretary and the assistant
• These spaces shall be placed on the third floor of the building
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3.2.2 Engineering Department
The following spaces shall be provided for the engineering department in order to help
achieving the required functions.
• A number of one 4.08 × 2.05 × 5.07 × 2.00 office room for the engineering
department.
• This room shall be placed on the second floor of the building
3.2.3 Financial Department
The spaces needed in order to achieve the required functions and targets for the
financial department are as follows:
• A number of one 3.88 × 3.22 office room for the director of the department.
• A number of one 4.48 × 4.18 office room for the 2 accountants and clerk of the
department.
• These spaces shall be placed on the third floor of the building
3.2.4 Human Resource Department
The spaces needed in order to achieve the required functions and targets are as follows:
• A number of one 3.88 × 3.22 office room for the director of the department and
his assistant.
• These spaces shall be placed on the second floor of the building
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3.2.5 Quality Control Department
The spaces needed in order to achieve the required functions and targets are as follows:
• A number of one 5.03 × 3.93 × 3.10 × 2.85 office room for two quality
engineers and two safety officers.
• These spaces shall be placed on the second floor of the building
3.2.6 Contract Administration Department
The spaces needed in order to achieve the required functions and targets are as follows:
• A number of one 5.26 × 4.56 office room for one contract engineer and his
assistant.
• These spaces shall be placed on the second floor of the building
3.2.7 Procurement Department
The spaces needed in order to achieve the required functions and targets are as follows:
• A number of one 4.18 × 4.48 office room for the director and his two assistants.
• These spaces shall be placed on the second floor of the building
3.2.8 Operation & Maintenance Department
Spaces for the operation and maintenance department are explained as follows:
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3.2.8.1 The Warehouse
The spaces needed in order to achieve the required functions and targets are as follows:
• There will be no office for the worker in the warehouse
• The height of all warehouses shall be 10m.
• A number of one 20 × 20 warehouse for the material storage.
• These spaces shall be placed near the warehouse of the movable equipment
3.2.8.2 The Workshop
The spaces needed in order to achieve the required functions and targets are as follows:
• There will be no office for the worker in the workshop warehouse.
• The height of the workshop shall be 10m.
• A number of one 20 × 15 warehouse for the workshop
• These spaces shall be placed near the warehouse of the movable equipment
3.2.8.3 Firm's Equipment
The spaces needed in order to achieve the required functions and targets are as follows:
• There will be no office for the worker in the equipment’s warehouse.
• The height of the equipment warehouse shall be 10m.
• A number of one 20 × 20 warehouse for the movable equipment
• These spaces shall be placed near the warehouse of the worshop.
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3.2.8.4 Labor
The spaces needed in order to achieve the required functions and targets are as follows:
• There will be no office for the labor since their work will be in the field.
3.2.9 Miscellaneous
3.2.9.1 Meeting Room
It will be a luxury meeting room to accommodate 12 people at once with an area of 30 m2
at the third floor.
3.2.9.2 Restaurant
• A number of one 9.06 × 5.88 restaurant accommodating 36 persons at the main
office located at the the first floor.
• A number of one 4.48 × 4.18 kitchen at the main office located at the at the first
floor
3.2.9.3 Waiting hall
• A number of one 9.08 × 3.88 waiting hall at the main office located at the first
floor.
3.2.9.4 Parking:
• A number of 24 Parking lots of 2.8 × 5.5 located at the main office.
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3.2.9.5 Toilets:
• A number of one of 3.0 × 2.0 bathroom for men at each floor.
• A number of one of 3.0 × 2.0 bathroom for women at each floor.
• A number of one of 3.0 × 2.0 bathroom for the manager at third floor.
• A number of one of 1.0 × 0.5 storage room for cleaning tools.
3.2.9.6 Security
• A number of one 4.48 × 4.39 office room at the main office located at the at the
first floor.
3.2.9.7 Storage
• There will be an area of 100 m2 for the portacabins
Finally, the total area for the company and the facilities shall be 5600 m2 including the area
required for the future expansion
3.2.10 Proposed Architecture Design for The Company and the
facilities.
3.2.10.1 Building of the Company
The following are the proposed architecture design for the company that A/E can refer
while designing the main office of the company.
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Figure 6: the proposed architecture design for the first floor
23
Figure 3: the proposed furniture for the first floor
24
Figure 8: the proposed architecture design for the second floor
25
Figure 9: the proposed furniture for the second floor
26
Figure 10: the proposed architecture design for the third floor
27
Figure 11: the proposed furniture for the third floor
28
Figure 12: the proposed architecture design for the parking lots
Figure 13: the proposed architecture design for the warehouses
29
Figure 14: the proposed architecture design for the company and the facilities
30
: Site Selection
Business location is an essential component in its eventual success or failure. Site selection
can be pivotal in all sorts of businesses. The location factor is very important and requires
careful consideration because of its long term consequences. Any mistake during the
selection of an appropriate location can be costly. Improper location comes with the
following major problems, higher investment, difficult marketing and transportation, more
competitors, poor services, and low availability of high caliber professionals.
4.1 Factors considered:
• It is essential to choose an area for business purposes to meet rules and
regulations
• The office should be close to the main suppliers and easily accessed
• Selected city must be attractive in terms of work opportunities
• Chosen site should be located in a decent area, taking into consideration
affordable land value
4.2 Site Selection Process:
The process will be consisted of four steps extracted from the concept of “Value
Engineering”. The steps are as follows:
1. Brainstorming
2. Criteria selection (City)
3. Weighted evaluation (City)
4. Criteria selection (District)
5. Weighted evaluation (District)
6. Advantages
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4.3 Brainstorming
In the first stage, all possible sites are listed according to 4 different cities. This
list will go through a factors and criteria-based assessment to select the finest
location. The suggested locations are as follows:
1. Riyadh
2. Khobar
3. Jeddah
4. Yanbu
4.4 Criteria selection (City)
A. Zoning and land use
B. Work opportunities
C. Logistics
D. Nearby suppliers
Criteria Definitions
A. Zoning and land use:
The use of the land should be under the category of business purposes
to build the business.
B. Work opportunities
Ability to have new projects and aim to provide employment for
unemployed people in the area.
C. Logistics
Logistics management that plans, implements, and controls the
efficient, effective forward, and reverse flow and storage of material,
services, and related information between the point of origin and point
of consumption to meet customer's requirements.
D. Nearby suppliers
32
Main suppliers that deliver raw material, equipment and other needs for
the business in order to deliver services.
4.5 Weighted Evaluation (City)
In this stage, the criteria-based assessment will be done, in which all criteria will be
compared to each other and score a preference. Then all locations will be evaluated against
each criterion.
The following table 4.1 shows the criteria raw scores, in which all criteria judged based on
their importance. The final score is summed and used later for weighting each criterion.
Criteria Scoring Matrix
Criteria (City) Raw Scores
A. Zoning and land use 6
B. Work opportunities 9
C. Logistics 3.5
D. Nearby suppliers 7
Figure 11: Criteria scoring Matrix (city)
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Analysis matrix for city selection is shown in table 4.2, in which all criteria are listed with
their raw scores and weights. Each city is given a score by our group members from 1 to 5
regarding each criterion and multiplied by the weight of the specific criterion to find the
weighted score of each alternative. The following weighted scores are summed for each
city to find the total score. As shown in the table the highest rank and the selected location
is Riyadh city.
Analysis Matrix (City)
Criteria A B C D
Weight 6.00 9.00 3.50 7.00
Alternatives: Score W.S Score W.S Score W.S Score W.S Total
1 Riyadh 5.00 30.00 5.00 45.00 4.00 14.00 5.00 35.00 124.00
2 Al Khobar 4.00 24.00 3.00 27.00 4.00 14.00 5.00 35.00 100.00
3 Jeddah 3.50 21.00 3.00 27.00 5.00 17.50 5.00 35.00 100.50
4 Yanbu 3.00 18.00 2.00 18.00 2.00 7.00 1.00 7.00 50.00
Figure 12:Analysis Matrix (city)
4.6 Criteria selection (District)
E. Land Value
F. Accessibility
G. Public Safety
H. Availability of professionals
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Criteria Definitions
E. Land Value:
Land value is the measure of how much a plot of land is worth, not
counting any buildings but including improvements such as better
drainage.
F. Accessibility:
The ease of which the employees can get to the facility and the daily
consumables could be accessed.
G. Public Safety:
Public safety refers to the welfare and protection of the public, and how
the site could potentially affect the public around
H. Availability of professionals:
Frequency of finding the needed professionals/employees that the
company need in a certain area.
4.7 Weighted Evaluation (District)
In this stage, it is similar to stage 3. There is an additional criteria for selecting
the most proper district in Riyadh which will lead our business to a better
selection process.
The following table 4.3 will go through a analysis matrix that will provide a
final score for weighting each criterion.
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Criteria Scoring Matrix
Criteria (District) Raw Scores
E. Land Value 9
F. Accessibility 4
G. Public Safety 5
H. Availability of professionals 2
Figure 13: Criteria scoring Matrix (district)
In the following table 4.4 shows the analysis matrix for district selection in Riyadh city.
The process of selection is similar to the previous one, taking into consideration that a
different criterion is provided to complete the selection. The final score shows that the best
district to locate our business is in Ar Rahmaniyyah Riyadh city.
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Analysis Matrix (District)
Criteria E F G H
Weight 9.00 4.00 5.00 2.00
Alternatives: Score W.S Score W.S Score W.S Score W.S Total
1 Al Olaya 1.50 13.50 2.50 10.00 3.50 17.50 5.00 10.00 51.00
2 Al Malaz 2.00 18.00 3.00 12.00 3.00 15.00 5.00 10.00 55.00
3 Ar Rahmaniyyah 5.00 45.00 4.00 16.00 4.50 22.50 5.00 10.00 93.50
4 Al Murabba 3.50 31.50 2.00 8.00 4.00 20.00 5.00 10.00 69.50
Figure 14:Analysis Matrix (district)
4.8 Advantages:
The following final stage was proposed to summarize the advantages of the selected
location Ar Rahmaniyyah, Riyadh city. The following advantages are:
1. More work opportunities for the company and for unemployed people
2. Most head offices of governmental/private sectors are located in the capital of the
kingdom
3. More likely to expand
4. Better relations with companies such as vendors and suppliers
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5. Less noise pollution
6. Easily accessed location
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: ECONOMIC FEASIBILITY
5.1 Investment cost
Throughout this paragraph, investment cost will be discussed in which it is related to the
expenditures for the acquisition of capital assets, and will be predestined in the upcoming.
It was estimated upon a comparable venture concerning the construction price, office
furnishing, equipment and machineries, and design costs. This cost is subjected to vary due
to several factors as the decreased demand caused by the COVID-19 crisis, so the cost is
expected to change -25%.
5.1.1 Design cost
As per previous experience with consultants and engineering offices, the estimated design
cost is to be 65,000 SAR
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5.1.2 Construction cost
Construction cost is estimated by applying the unit price method as the price is rated per
meter based on contractor prices in Saudi Arabia. We estimated the total construction cost
to be 4,878,620 SAR.
The total facility area to be constructed is 4,300 square meters.
1100 SAR/SM * 4300 SM =4,730,000 SAR
5.1.2.1 Technologies:
• 2-desktop computers
• Assuming an excellent performance PC, the cost of an Apple iMac, 9300 SAR for
each. Total=9300*2=18,600 SAR
• 24-laptops Lenovo IdeaPad 320
• Assuming each will cost 2600 SAR, total cost of 62,400 SAR
• 10-CCTV Cameras
• Assuming each will cost 450 SAR, total cost of 4500 SAR
• 6-Printers
• Assuming each will cost 650 SAR, total cost of 3,900 SAR
• 5-Multi- functional printers to be Epson EcoTank M3170
• Assuming each will cost 1164 SAR, total cost of 5,820 SAR
• 15-Telephones
• Assuming each will cost 200 SAR, Total cost of 3,000 SAR
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• 5-WiFi Routers
Assuming each will cost 800 SAR, total cost of 4,000 SAR
● 1-Projector
Assuming each will cost 750, total cost of 750 SAR
● 2-55 Inch Screen each will cost 2,000 SAR
Assuming each will cost 2000 SAR, total cost of 4,000 SAR.
● 1-Fridge
Assuming each will cost 800 SAR, total cost of 800 SAR
● 2-Coffee maker
Assuming each will cost 300 SAR, total cost of 600 SAR
● 1-Microwave
Assuming each will cost 400 SAR, total cost of 400 SAR
● 1-Electric oven
Assuming each will cost 500 SAR, total cost of 500 SAR
● 1-Microwave
Assuming each will cost 400 SAR, total cost of 400 SAR
5.1.2.2 Office Furniture:
● 27-office desks
Assuming each will cost 350 SAR, total cost of 9,450 SAR
● 40-Seats
Assuming each will cost 200 SAR, total cost of 8,000 SAR
● 1-Meeting room table
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Assuming each will cost 7,000 SAR, total cost of 7,000 SAR
● 18-Curtains
Assuming each will cost 250 SAR, total cost of 4,500 SAR
● 1-Reciption furnished
Assuming each will cost 10,000 SAR, total cost of 10,000 SAR
5.1.3 Equipment cost
The total equipment cost is 98,500 SAR
● 1-Four Wavelength SM MM Fiber OTDR 850/1300+1310/1550nm 21/19/30/28dB
OTDR.
Assuming each will cost 13,700 SAR, total cost of 13,700 SAR
● 2-Splicing machine He-Fujikura 70S
Assuming each will cost 9,500 SAR, total cost of 19,000 SAR
● 1-Condux Fiber Optic Cable Puller and the Fiber Optic Cable Blower. Power source
is a 9 HP (6.7 kW) Honda (gas), or a 16 HP (11.9 kW) Briggs & Stratton V-Twin
Vanguard (gas) engine
Assuming each will cost 22,500 SAR, total cost of 22,500 SAR
● 2-Fiber optic cable tester meter
Assuming each will cost 400 SAR, total cost of 800 SAR
● 1-Underground fiber cable locator
Assuming each will cost 20,000SAR, total cost of 20,000 SAR
● 1-Underground utilities and cables locator
Assuming each will cost 12,500 SAR, total cost of 12,500 SAR
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● 2-Total Station
Assuming each will cost 5,000 SAR, total cost of 10,000 SAR
5.1.4 Machineries cost
The total machineries cost is 1,444,000 SAR
● 1-Labor bus (20 passenger)
Assuming each will cost 160,000 SAR, total cost of 160,000 SAR
● 2-Micro trenching fiber machine
Assuming each will cost 180,000 SAR, total cost of 360,000 SAR
● 2-Backhoe
Assuming each will cost 112,000 SAR, total cost of 224,000 SAR
● 5-Trucks
Assuming each will cost 140,000 SAR, total cost of 700,000 SAR
5.2 Operating cost
Operational Cost Estimation involves two main parts:
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5.2.1 Cost of goods sold:
o Civil work.
o Micro-ducts supply and installation.
o Splicing, tagging, and termination.
o As built drawings.
5.2.2 Operational expenses:
o Rental.
o Equipment.
o Salaries.
o Accounting.
o Offices.
o Utilities.
By taking an example of a 100 km^2 project, its cost would be around 35 million.
Assuming a 40% cost of goods sales, 40% operational expenses, and a 20% project markup.
This leads to a unit cost of 280 $/m that is for the operational cost as a whole. This estimate
is built on the normal operational cost/revenues percentage that is between 60-80% of the
total price of the project.
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The price of such projects is estimated by studying various prices of previous projects to
come up with an approximate unit price. Also, an 80% operational cost is reasonable
especially at the beginning of such project where we lack the experience. By the time,
hopefully, this percentage would drop to 60% of the total revenues.
5.3 Revenues
In our project, the main source of revenues is the number of fiber-optic projects installed
per year. According to the previous sections, the total operating cost our company endure
per meter is approximately 280 SR, and the total investment cost is 6,486,120 SR. Based
on this information in addition to the following factors:
The market price for each meter of fiber-optic installed (450 SR/m)
Overhead cost (12% of the price unit cost)
Desired profit (8% of the price unit cost)
Required payback period (3-4 years)
We decided that our unit cost for each meter of fiber-optic installed by our company is 350
SR. Which means there will be an overhead of 42 SR/m and a profit of 28 SR/m.
Also, based on the market demand, we assumed that the company will have at the
beginning two projects each two years with an average of 45,000 meters per project.
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5.4 Simulating cash flow
A cash flow for the incoming 30 years is simulated based on the previous and following
information:
• The total investment cost is 6,486,120 SR
• For the first two years the annual revenue is 1,260,000 SR,
Then it will increase 5% each year until reaching the fifth year, where the company
is assumed to be the dominant is its field.
• Operational and overhead costs is equal to 92% of the total revenues, then it will
decrease 3% each year until reaching the fifth year (80%).
• Profit equals to 8% of the total revenues, then it will increase 3% each year until
reaching the fifth year (20%).
• Each year, machines will be maintained with a cost of 25% of the profit.
• Advertisement cost equals 150,000 SR per year, increasing 5% each year.
• The compounded interest factor is 5%.
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Resulted simulation:
Figure 15: Cash flow simulation for 350 SR/m
The net present value for the incoming 30 years equals 21,726,228.41 SR
Implementing this this policy will satisfy the following:
• Enabling the investors to return their money back within almost (3-4) years.
• Having a competitive price would impose the company on the market by
outclassing other competitors (market unit price is 450 SR/m).
-$20,000,000.00
$0.00
$20,000,000.00
$40,000,000.00
$60,000,000.00
$80,000,000.00
$100,000,000.00
$120,000,000.00
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5.5 Sensitivity analysis
The most important factor that the company can control and change is the unit price, which
is assumed to be 350 SR/m.
Reducing the unit price to 300 SR/m would result the following cash flow:
Figure 16:Cash flow simulation for 300 SR/m
The net present value for the incoming 30 years equals 18,051,598.93 SR.
This price would attract more clients to the company but would reduce the overall net
present value by 3,674,629.48 SR.
-$20,000,000.00
$0.00
$20,000,000.00
$40,000,000.00
$60,000,000.00
$80,000,000.00
$100,000,000.00
$120,000,000.00
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48
Increasing the unit price to 400 SR/m would result the following cash flow:
Figure 17:Cash flow simulation for 400 SR/m
The net present value for the incoming 30 years equals 25,400,857.89 SR.
This price would reduce the number of clients to the company but would increase the
overall net present value by 3,674,629.48 SR.
As a result, we believe that the best price that would satisfy both the investor and the client
is 350 SR/m.
-$20,000,000.00
$0.00
$20,000,000.00
$40,000,000.00
$60,000,000.00
$80,000,000.00
$100,000,000.00
$120,000,000.00
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