An Investment Analysis of Private Hostel Business in Ghana Tertiary Institutions: A Case of Knust Campus

Abstract

The various educational reform programmes in recent times has led to an increase in enrolment of students in the major public and private tertiary institutions in the country with its resultant accommodation difficulties. Statistically, over 60 percent of students in most of the tertiary institutions are “non-resident. In responding to the accommodation problem and students demand for places of residence led to the springing up of hostels on and off the University campus. The establishment of the private hostels, though very useful, requires huge amount of investment, hence investors need to have a fair idea of the returns to generate before committing their resources. The task before these researchers aims at undertaking the financial analysis of the private hostels in terms of: their financial viability; how sensitive these projects are to changes in the cost and benefit streams as well as project sustainability. Using a case study approach, both probability and non-probability sampling designs were employed. From the financial analysis, it was found out that using a discounting factor of 20 percent which is the going interest rate on loans by banks, none of the hostels under study was viable within a period of 30 years as their Benefit Cost Ratio’s(BCR’s) were less than one and their Net Present Value’s(NPV’s) were also negative. With regards to how sensitive the projects were, there was a further increase of 12 percent on their cost and benefit streams but not at the same time. On the issue of sustainability, the managers of the sampled private hostels revealed that, all the hostels had available funds to finance operational and daily expenses.q