By Kardi Teknomo, PhD .

Tutorial on Feasibility Study

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The Problem

Your city local government wants to introduce a new bus system for elderly people. As a consultant, you are hired to perform the economic feasibility analysis of the new system. You did simple survey to the bus dealer and the bus companies and the elderly people and got information of the existing bus system, and preference of bus users. The local government insists that the maximum fare should be one dollar per trip flat fare. Two types of buses are being proposed with characteristic given in the table below:


Mini Van Type

Mini Bus Type

Purchasing price



Usage Year

3 years

5 years

Vehicle Capacity

10 passengers

20 passengers

Operating speed

20 km/hour

20 km/hour

Unit gasoline

9 km/liter

5 km/liter

Unit Engine Oil

5000 km/can

2000 km/can

Number of Tires



Tire price

87.5 per tire

$100 per tire

Unit tire

25000 km

20000 km

Salvage Value

10% of Purchasing price

5% of Purchasing price

Driver salary



Load Factor



The usage year is set based on the company guarantee that the vehicle does not need any repair. We also assume zero accident.

They also want to know the answer of the following problems:

  1. Among two types of proposed buses, which one is the most feasible?
  2. How much subsidy should the local government provide per year? The maximum subsidy is $1000 per bus.
  3. How sensitive is the feasibility from the fluctuation of the demand? What is the threshold boundary of Load Factor?

Other information that you may need including

Gasoline price


Engine oil price


Number of working days

350 days/year

Number of operating hours

12 hours/day

Interest rate

3% per year

Reduce time due to boarding and alighting

1.5 minutes/passenger

Distance from origin to destination

5 km

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This tutorial is copyrighted .

Preferable reference for this tutorial is

Teknomo, Kardi (2006) Tutorial on Feasibility Study.