cost and benefit analysis of upgrading the accra zoo

DEPARTMENT OF ECONOMICS

UNIVERSITY OF GHANALEGON

TOPIC: A COST AND BENEFIT ANALYSIS OF UPGRADING THE ACCRA ZOO

PRESENTED BY:

BOATENG FOSTER (10109723)BROWN JEMIMA (10109918)OKAI YANKSON JOSEPH (10113104)

MAY, 2006

1

Declaration and approval

We, the authors of this work, do hereby declare that with the exception of references to

other people’s work and data used, which have been duly acknowledged, the work

presented here was done by us as students of the Department of Economics, University of

Ghana, Legon, during the 2005/2006 academic year.

Also, this work has never been submitted in whole or in part for any degree from this or

any other university.

………………………………..

Boateng Foster

(10109723)

………………………………. .............................................

Brown Jemima Dr. D.K. Twerefou

(10109918) (Supervisor)

…………………………….

Okai Yankson Joseph

(10113104)

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Acknowledgement

We wish to express our heartfelt gratitude to the following persons and groups for their

support and assistance:

Dr. D. K Twerefou, our supervisor, for his patience and wisdom in guiding this project;

The acting director of the Accra Zoo, Mr. Festus Courage Agya – yao, and the entire staff

of the zoo, especially Mr. Opoku for their immense contribution to our work.

Our gratitude also goes to our families and friends for their strong support,

encouragement and ideas.

Finally, our heartfelt thanks go to God Almighty for seeing us through and enabling us to

finish this project.

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CONTENTS

Chapter Page

Chapter One (Introduction)…………………………………………………… 1

1.1 Background……………………………………………………………………..1

1.11 Historical Perspective………………………………………………………. 1

1.12 The Existing System…………………………………………………………1

1.2 Statement of Problem……………………………………………………………2

1.3 The Proposed System……………………………………………………………4

1.4 Study Objectives………………………………………………………………...5

1.5 Justification of the Project………………………………………………………6

1.6 Methodology……………………………………………………………………7

1.61 Source of Data ………………………………………………………………7

1.62 Investment Criteria…………………………………………………………..8

1.7 Structure of the Study………………………………………………………… 9

1.8 Expected Problems…………………………………………………………… 9

Chapter Two (Elements of Project Appraisal) ………………………………… 10

2.1 Introduction……………………………………………………………………..10

2.2 Technical Appraisal……………………………………………………………..10

2.21 Location…………………………………………………………………….. 10

2.22 Technology…………………………………………………………………..10

2.23 Equipment……………………………………………………………………11

2.24 Services………………………………………………………………………11

4

2.25 Project Schedule…………………………………………………………… 11

2.3 Institutional Appraisal………………………………………………………… 13

2.4 Economic Appraisal…………………………………………………………… 14

2.41 Employment…………………………………………………………………14

2.42 Revenue…………………………………………………………………….. 14

2.5 Financial Appraisal……………………………………………………………. 15

2.6 Social Appraisal……………………………………………………………….. 17

Chapter Three (Elements of Costs and Benefits) ………………………………18

3.1 Introduction……………………………………………………………………. 18

3.2 Analysis of Cost Structure of the Project ………………………………………19

3.3 Capital Outlays………………………………………………………………….

19

3.31 Redesigning of Cages………………………………………………………. 19

3.32 Renovation of Offices ………………………………………………………21

3.33 Renovation of Washrooms………………………………………………… 22

3.34 Provision of Entertainment Facilities……………………………………… 23

3.35 Provision of Resting Places………………………………………………… 23

3.36 Redesigning of Landscape………………………………………………… 24

3.37 Restocking the Zoo………………………………………………………… 24

3.38 Creation of Website………………………………………………………… 25

3.39 Provision of Vehicles……………………………………………………… 26

3.4 Maintenance and Operational Costs…………………………………………… 27

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3.5 Analysis of Benefits of the Project…………………………………………… 29

3.6 Direct Tangible Benefits……………………………………………………… 29

3.61 Increased Revenue………………………………………………………… 29

3.62 Rent from Restaurant ………………………………………………………31

3.7 Direct Intangible Benefits……………………………………………………… 31

3.71 Opportunity for Research……………………………………………………31

3.72 Welfare of the Animals…………………………………………………… 32

3.8 Indirect Tangible Benefits………………………………………………………32

3.81 Brain Drain and Change of Profession………………………………………32

3.9 Indirect Intangible Benefits…………………………………………………… 33

3.91 Improvement in Standard of Living…………………………………………33

Chapter Four (Methodology and Analysis) ……………………………………. 35

4.1 Introduction …………………………………………………………………… 35

4.2 Methodology……………………………………………………………………35

4.3 Net Present Value……………………………………………………………… 35

4.31 Reasons for using the NPV………………………………………………… 35

4.32 Decision Rule for NPV…………………………………………………….. 37

4.33 Choice of Discount Rate…………………………………………………… 37

4.34 Formula for NPV…………………………………………………………… 37

4.35 Decision based on result……………………………………………………. 39

4.4 Benefit – Cost Ratio…………………………………………………………… 39

4.41 Decision Rule for Benefit – Cost Ratio…………………………………….. 39

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4.42 Formula for Benefit – Cost Ratio……………………………………………

39

4.43 Calculation of Benefit – Cost Ratio………………………………………… 40

4.44 Decision based on result…………………………………………………… 40

4.5 Payback Period…………………………………………………………. ……..

40

4.51 Decision based on result…………………………………………………… 41

4.6 Sensitivity Analysis…………………………………………………………… 41

4.61 Using Discount Rate of 15.5%………………………………………………

42

4.62 Using Discount Rate of 17.5%………………………………………………

45

4.7 Final Analysis…………………………………………………………………. 48

Chapter Five (Conclusion and Recommendation) ………………………………49

5.1 Introduction……………………………………………………………………. 49

5.2 Summary………………………………………………………………………. 49

5.3 Limitations of the Study……………………………………………………….. 50

5.4 Investment Decision…………………………………………………………… 50

5.5 Recommendations……………………………………………………………. 51

5.6 Conclusion …………………………………………………………………… 52

5.7 References …………………………………………………………………… 53

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CHAPTER ONE

INTRODUCTION

1.1 BACKGROUND

1.11 HISTORICAL PERSPECTIVE

The Accra Zoo was established by the first president of Ghana, Dr. Kwame Nkrumah, in

1961. The idea for establishing the zoo was motivated after a prominent businessman

presented the former president with a few animals. Temporal structures were put up in

the Flagstaff House yard by Messrs Abbey and Welback. The idea for expansion came

later and in 1962, zoo experts from Israel and Kenya were invited to plan the site and

build it. The zoo was originally termed private, but was given public access in July, 1967.

The zoo was basically established for the purposes of conservation, education and

recreation.

1.12 EXISTING SYSTEM

Currently, the Accra Zoo is an urban zoo – a department under the Wildlife Division of

the Forestry Commission, Ministry of Lands, Forestry and Mines. It spans an area of

approximately 1.2 hectares and has over 50 species, including representatives of six

animal groups such as the primates, carnivores, reptiles, rodents, herbivores and birds.

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The zoo is managed by a working force of 34 people – namely keepers, administrative

staff, technical men and veterinary officers, with only two of them being professionals.

The main source of funding is by government subvention. This is augmented by supports

through Friends of the National Zoo (FONZ) and a little direct assistance by some

individuals and organizations.

Since the establishment of the zoo, it has seen only two upgrading projects. The first was

the construction of the Education Center, with a wildlife reference library, which was

finished in 1999, and started functioning in 2000. The second was the creation of a center

for endangered primates – a project by the West African Primate Conservation Action

(WAPCA). This was inaugurated in April, 2005.

1.2 STATEMENT OF PROBLEM

The zoo currently spans an area of 1.2 hectares, but this is woefully inadequate to

accommodate the expansion project the zoo has in mind to undertake.

The cages the animals occupy are archaic, obsolete and totally uninhabitable. In some

cases, it has led to the death of the animal who may need more room to live comfortably.

Investigation confirmed that the suspected cause of the death of the last elephant was the

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improper cage design. Coupled with this is the fact that most of the cages are in a very

poor state, with rusted metal, iron bars that are bending and paint peeling off.

Although the zoo has representatives of the six animal groupings- primates, carnivores,

reptiles, rodents, herbivores and birds, their numbers are very small. There are also many

other kinds of animals that people expect to see at the zoo. However, most visitors leave

the zoo with disappointment because their expectations are not met. These people

invariably do not return to the zoo and also rob the zoo of potential visitors by way of

negative publicity. To further complicate matters, the zoo has difficulty in maintaining

the few animals they have because the cost of feeding is just too high.

The size of the staff managing the zoo is totally insufficient in comparison with its size.

The zoo has a total staff strength of 34 workers, made up of 2 skilled/ professionals and

32 unskilled workers. Out of the 32 unskilled workers, 2 are currently on leave, 2 are on

retirement and 5 people have vacated their posts. This has led to increasing workload for

the workers, with a person managing a job for three people. The number of workers

continues to diminish daily. This is partly due to the very low salaries these workers

receive. This is not enough to compensate for the unfavorable working conditions, not to

mention the risk involved. The workers do not even have a first aid box at their disposal.

This is a very serious situation considering the fact that workers stand a very high chance

of being attacked by the animals they care for.

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Both administrative and non – administrative staffs lack the needed facilities to enhance

the quality of their work. Offices are insufficient and in need of renovation. The

Education Center is well equipped, but other facilities are woefully inadequate. The zoo

lacks a field, i.e. departments for the various animal groups, where workers can keep

records of the animals they care for. The veterinary clinic also needs a little renovation.

The administrative offices cannot even boast of a single computer. The one currently in

use is for the WAPCA project.

There is no efficient transportation system to pick up workers from home and drop them

off at work and vice versa, making it difficult for workers to get to work on time,

especially those living as far as Kasoa. The zoo also has only one battered pickup,

which is on the verge of collapse. This is inadequate to cater for the emergencies and

various errands that come up.

The facilities for visitors are in a very poor condition. This is especially so with regards

to the toilet facilities. Toilet seats, wall tiles and hand wash basins are all cracked and in

need of replacement. In addition to this, the facilities are not kept in a clean and hygienic

condition and are most unusable for visitors. These visitors to the zoo do not have a

reception area. There is no designated place for workers/staff to assist visitors with their

enquiries.

Information about the zoo is not readily available. In this era of information technology

advancement, the zoo is lagging far behind because it does not have a website. All

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information about the zoo must be obtained directly from that place after a long and

bureaucratic process. Prospective tourists/foreigners are totally cut off because there is no

way they can get access to any information about the zoo.

1.3 THE PROPOSED SYSTEM

This project proposes the upgrading of the Accra Zoo to an ultra- modern zoological

garden, capable of meeting international standards. This upgrading would entail the

restructuring of the cages in such a way as to maximize the limited land size, and an

attempt to reproduce the natural habitat of the animals in conformity with international

standards. In addition, the proposed system would see to the restocking of the zoo in

order to meet visitors' expectations. Both local and more exotic species would be brought

in to fill the newly designed cages.

Basically, restocking would require more hands for the upkeep of the animals. Both

skilled and unskilled workers would be employed to meet the demands of the expanded

zoo. This would involve providing attractive remuneration to entice and maintain

workers.

The proposed system would house a renovated clinic and refurbished offices that would

have basic equipment like air- conditioners, computers with Internet connection, as well

as modern medical equipment for the clinic. The upgraded zoo would also have a newly

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established field and renovated toilet facilities for both workers and visitors. In addition

to this, a proper and efficient transportation system would be put in place to reduce the

hustle and bustle the workers go through in commuting to and from work.

Finally, the proposed zoological garden would have a website in order to make

information about the zoo readily available to the public, both nationally and

internationally. This would also serve as a means of publicity.

1.4 STUDY OBJECTIVES

The main objective of this study is to basically assess the viability of upgrading the Accra

Zoo. Specifically, the study seeks to conduct a Cost – Benefit Analysis of the project to

ascertain its viability by:

· Undertaking an appraisal of the project.

· Analyzing the economic and social prospects of the project by collecting data on the

views of the zoo workers and the general public using interviews as the main survey

method.

· Analyzing the results and value policy recommendations

1.5 JUSTIFICATION OF THE PROJECT

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The main objective of the Accra zoo is to be a unit of excellence in conservation,

education, and recreation. Our project proved necessary after a considerable study of the

zoo revealed that its set objectives have not been fully met since its establishment. This

study is important, therefore, to bring to light the deplorable nature of the Accra Zoo and

to analyze the viability of upgrading it in order for it to meet its objectives.

A study of this kind is long overdue, primarily because the Accra Zoo lags behind its

western counterparts in modern modes of service delivery. This situation should not be

allowed to persist for too long. A timely cost – benefit analysis should give a good idea of

the cost of redressing this imbalance.

With tourism as a major source of foreign exchange, the Accra Zoo lacks the required

facilities to meet the demands of tourists/ the public, thereby, falling short of their

expected contribution. This study is necessary to create an avenue for the zoo to generate

more income and raise its contribution to national development.

Furthermore, the study will try to establish the link between the conditions of work (in

this case, the environment of work and the materials, tools and equipment to work with

other than salaries and benefits), job satisfaction and efficiency. By so doing, this study

will try to establish the link between the small and inadequate number of workers and the

conditions of work as explained above. In this way, the study will be trying to provide

some solutions to the shortage of zoo workers.

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Finally, what the group hopes to achieve in this direction is to bring to the attention of all

stakeholders, NGOs, individuals, donors, etc the urgent need to come to the aid of the

Accra Zoo and to help save it and raise its image, as the government alone cannot do

much.

1.6 METHODOLOGY

1.61 SOURCE OF DATA

Basically, the study will apply both the primary and secondary source of data. For the

primary data, the group will collect the needed data and information by way of

interviews, which will be conducted at the Accra Zoo and where necessary, the Ministry

of Lands, Forestry and Mines. If the need arises for other institutions to be contacted, the

proponents of the study will not hesitate to do so.

Among the people who will be interviewed will be the director and other workers of the

zoo, and possibly, the general public and visitors to the zoo.

With regards to the secondary data, the needed information will be gathered from the

Internet, the media and various literature.

1.62 INVESTMENT CRITERIA

For the analysis of data, investment criteria will be used to ascertain the costs and

benefits of the project. The investment criteria that will be employed in the analysis of the

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project's viability is basically the discounted cash flow method – Net Present

Value( NPV) and the Benefit Cost Ratio approach , and where possible, the payback

method. The group will also make use of a sensitivity analysis to check the sensitivity of

the project to economic trends / changes.

The discounted cash flow method has been favored because it takes into consideration the

time value of money and also the relative size of the project. Among these, the NPV

criteria is to be the main tool for decision making since it is the most technically superior

criteria and relatively simpler to calculate as far as investment decisions are concerned

In order to make all future values comparable with the present, all future benefits will be

discounted using a discount rate of 16.5%. This is the current annual interest rates on the

Government of Ghana 1 – year note quoted by the Central Bank in the dailies after a

competitive bidding by commercial banks.

NPV=

Where:n = lifetime of the projectr = discount rateBί = benefits for ίth yearCί = costs for ίth yeari = year

1.7 STRUCTURE OF THE STUDY

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Table 1.01 Contents of project work

Chapter Content

One Introduction( Proposal)

Two Elements of project appraisals (Technical, social, economic, institutional, financial)

Three Elements of Costs and Benefits

Four Calculating the investment criteria and analysis of results

Five Sensitivity analysis, summary, recommendations and conclusion

1.8 EXPECTED PROBLEMS

The first and most significant problem we envisage is finding relevant literature on how a

modern zoo should look like to meet international standards.

In CBA, issues about costs and benefits travel beyond the financial implications. In most

cases, the advantages, disadvantages, as well as, the opportunity cost of a project are

rather analyzed. In measuring the benefits and costs, therefore, two main problems are

usually encountered: externalities and pricing.

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CHAPTER TWO

ELEMENTS OF PROJECT APPRAISAL

2.1 INTRODUCTION

This chapter seeks to provide a comprehensive preview of all aspects of the project, thus

laying the foundation for the implementation of the project. Five major aspects of this

phase include:

a. Technical appraisal

b. Institutional appraisal

c. Economic appraisal

d. Financial appraisal

e. Social appraisal

2.2 TECHNICAL APPRAISAL

Under this, we are concerned with five issues:

2.21 Location

The refurbished zoo will be located on the same 1.2-hectare area it currently occupies.

2.22 Technology

There are basically two types of technology involved in such a project:

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· Labor – intensive, where the main input is the human capital with a

lesser percentage of capital.

· Capital – intensive, where the ratio of capital to labor is relatively high, i.e. more

capital, less labor.

For our project, we would use the labor – intensive method since labor in Ghana is

abundant and this method is cheaper compared to the capital – intensive method, which

would require a lot of investment, and technology, which is unavailable to us.

2.23 Equipment

Here we include all items needed under the new system:

· Air conditioners

· Computers

· Security cameras

· Executive chairs and desks

· Printers

2.24 Services

The services of experts will be needed in the upgrading of this zoo. There will be the

need for quantity surveyors, engineers, architects, contractors, and zoologists. This

project will give preference to local companies, entrepreneurs and individuals as much as

possible. Since the zoo is already in operation, availability of utility services will not be a

problem.

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2.25 Project schedule

The project will be completed in a period of sixteen months. The last two months are to

take care of any unexpected delays. If there are no such delays then the project will be

completed in fourteen months and commissioned thereafter. This schedule is based on the

assumption that 90% of all funds needed are available by the commencement of the

project.

Phase One

This involves the redesigning of the cages, and the renovation of the offices and the

washrooms.

Table 2.01 Project timetable phase one

TimeDuration of activity

(months)Activity

Year One

1 – 3 Redesign and of cages

4 – 5 Renovation of offices

6 Renovation of washrooms

Phase Two

This stage involves providing entertainment facilities and resting places for visitors and

landscaping the zoo’s environs.

Table 2.02 Project time table phase two

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TimeDuration of Activity

(months)Activity

Year One

7 Providing entertainment

facilities

8 Providing visitor resting places

9 – 10 Landscaping the environment

Phase Three

This will include the restocking of the zoo, the creation of a website for the zoo and the

purchase of vehicles.

Table 2.03 Project time table phase three

TimeDuration of Activity

(months)Activity

Year One 11 – 12 Restocking of the zoo

Year Two

1 – 2 Restocking of the zoo

3 Creation of website

4 Purchase of vehicles

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2.3 INSTITUTIONAL APPRAISAL

To ensure the effective implementation of the project, the Ministry of Lands, Forestry

and Mines and the Wildlife Division should work as a unit in mobilizing funds and

supervising the implementation of the project.

Before the project can be implemented, the authorities of the zoo have to approve of

the project. This will be done if the project is deemed necessary and feasible and flow

of funds is assured. However, since the zoo will still be in operation, the

implementation of the project should not in any way undermine or act as an obstacle

to the smooth and effective running of the zoo.

Before the approval and implementation of the project, the authorities of the zoo must

therefore put in place measures to ensure that the implementation of the project does

not seriously interfere with the daily activities of the zoo.

The government and the Ministry of Lands, Forestry and Mines can also ensure

effective implementation of the project by acting as advisors to the zoo and providing

the zoo with some of the funds and expenses needed for the project.

2.4 ECONOMIC APPRAISAL

22

Under this appraisal, we are interested in assessing the contribution of the project to

the developmental objectives of the nation as a whole. We would also look at the

sectorial setting of the project and its contribution to that sector.

2.41 Employment

Both during and after the implementation of the project, it is expected to provide employment to a section of the Ghanaian labor force (both skilled and unskilled), especially those around the Accra zoo area e.g. laborers, carpenters, painters, veterinary officers, zoologists, etc. This would help reduce unemployment, which is one of the major problems the government seeks to address.

2.42 Revenue

On the average the zoo receives about 214,555 visitors annually, with the gate fees

providing about 306,667,000. With the implementation of the project, it is expected

that the zoo would receive 50% more visitors than it is doing now. This will increase

the amount of money generated, a percentage of which can be used for the expansion

or maintenance of the place.

2.5 FINANCIAL APPRAISAL

Here the group is concerned with ensuring the financial viability of the project, i.e. to

find out the cost involved in implementing the project and to ensure that there are

sufficient funds to cover the entire project. The project in question is not an existing

one; hence, the costs were all estimated with the help of Mr. Festus Courage Agya –

yao, the acting director of the Accra zoo.

Table 2.04 Breakdown of cost structure of the project.

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PROJECT COST ( ¢)

Reconstruction of cages 1,872,769,324

Renovation of offices 254,880,970

Renovation of washrooms 53,100,000

Provision of entertainment facilities 101,500,000

Provision of resting places 19,500,000

Landscaping and pavement 272,000,000

Restocking of the zoo 291,373,920

PROJECT COST (¢)

Creation of website 13,662,285

Purchase of vehicles 1,326,373,874

Sub Total 4,205,160,313

Contingencies (10%) 420,516,031.3

Grand Total 4,625,676,344

The table below gives a summary of the sources of funding for this project.

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Table 2.05 Sources of funding for project

SOURCE AMOUNT (¢) %

Government 693,851,451.6 15

NGOs & Organizations 2,312,838,172 50

Companies 1,387,702,903 30

Individuals 231,283,817.2 5

Total 4,625,676,344 100

2.6 SOCIAL APPRAISAL

This appraisal is concerned with the social impact of the project. Here, we are

concerned mainly with the issue of equity in the distribution of benefits both during

the lifetime of the project and afterwards. With respect to equity in the distribution of

benefits, the project is expected to be highly equitable, cutting across gender,

ethnicity, religion and even location. Since the project is a public one every member

of the public can benefit from it. All residents of Ghana, Ghanaian and non –

Ghanaian alike can benefit from the project without any restrictions.

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CHAPTER 3

ELEMENTS OF COSTS AND BENEFITS

3.1 INTRODUCTION

Evaluating the feasibility of this project requires the assessment of the costs to be

incurred and benefits to be accrued from the project. The objective of this chapter is

26

to outline all these benefits and costs; real and pecuniary, direct and indirect, tangible

and intangible.

Real benefits and costs are what we use to measure the allocative effect of a project.

They reflect the addition to the community welfare as against the real costs measured

in terms of resource withdrawal from the project.

Pecuniary Benefits and Costs are concerned with the distributional effects of a given

project. As a result of implementing a project, there will be a redistribution of income

such that as one group of the society benefits, the other group loses. The net benefit is

normally zero. Hence, in calculating the net profitability of the project, the pecuniary

benefits and costs are usually excluded.

Direct Benefits and Costs are those benefits and costs that are closely related to the

main objective of the project.

Indirect Benefits and Costs are those benefits and costs that are by nature by –

products of the main objective of the project, i.e. they arise as a spin – off of a given

project.

Tangible Benefits and Costs are those that can be valued at market prices, whereas

intangible benefits and costs cannot be properly evaluated at market prices.

27

3.2 ANALYSIS OF COST STRUCTURE OF THE PROJECT

The cost structure of upgrading the Accra zoo can be classified into two:

The initial capital outlay, i.e., the costs of renovation and refurbishment.

The maintenance and operational costs

3.3 CAPITAL OUTLAY

This includes the initial cost of upgrading the whole zoo. This will include the

following:

1. Redesigning of the cages in such a way as to maximize the limited land size and to

reproduce the natural habitat of the animals.

2. Renovation of offices in order to make working conditions pleasant.

3. Renovation of washrooms.

4. Provision of entertainment facilities

5. Provision of proper resting places.

6. Redesigning the landscape.

7. Restocking of the zoo in order to meet visitors' expectations.

8. Provision of a website.

9. Provision of vehicles for efficient transportation system.

3.31 Redesigning of cages

The cost of redesigning a cage differs in relation to the animal groups. However, in this

analysis, we will use the cost of redesigning a cage for a primate as the yardstick for our

estimation.

28

Table 3.01 Breakdown of cost involved in redesigning a primate cage

Breakdown cost ($) cost (¢) 9108.19

Substructure 2780.50 25,325,322.3

Superstructure 2713.45 24,714,618.16

Chain link fencing 4789.80 43,626,408.46

Sub total 10283.75 93,666,348.91

5% Preliminaries 514.19 4,683,340.216

Total 10797.94 98,349,689.13

10% Contingencies 1079.79 9,834,932.48

Grand total11877.73 108,184,621.6

Table 3.02 Breakdown of cost involved for all cages

Animal Group Cost per cage ( ¢ ) No. of Cages

Total Cost ( ¢ )

Primate 108,184,621.6 1 108,184,621.6

Herbivore 108,184,621.6 4 432,738,486.4

Carnivores 108,184,621.6 4 432,738,486.4

Reptiles 108,184,621.6 2 216,369,243.2

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Rodents 108,184,621.6 1 108,184,621.6

Birds 108,184,621.6 3 324,553,864.8

Labour 250,000,000

Total 15 1,872,769,324

3.32 Renovation of offices

Table 3.03 Breakdown of cost involved in office renovation

Item No. Unit Cost ( ¢ ) Total Cost ( ¢ )

Painting * 100,000,000

Brushes 10 150,000 1,500,000

Scrapers 10 50,000 500,000

Cement 100 bags 55,000 5,500,000

Louvres 160 pcs 10,000 1,600,000

Floor carpet 100 yards 127,500 12,750,000

Curtains 100 yards 100,000 10,000,000

Furniture (chairs & desks) 10 635,897 6,358,970

Computers 6 11,112,000 66,672,000

Printers 2 3,821,000 7,642,000

Labour 42,358,000

30

Total 254,880,970

* Table 3.04 Painting breakdown

Item No. Unit cost ( ¢ ) Total cost ( ¢ )

Oil paint 100 gallons 100,000 10,000,000

wood primer 50 gallons 50,000 2,500,000

Turpentine 50 gallons 50,000 2,500,000

Emulsion paint 150 gallons 50,000 75,000,000

Labour 10,000,000

Total 100,000,000

3.33 Renovation of washrooms

Table 3.05 Breakdown of renovation cost of washrooms

Items No. Unit Cost ( ¢ ) Total Cost (

¢ )Water closet 10 1,000,000 20,000,000

Wash hand basin 5 500,000 2,500,000

Wall and floor tiles 2 rooms 10,000,000 per room 20,000,000

Louvres 20 100,000 200,000

Doors 2 200,000 400,000

Labour 10,000,000

31

Total 53,100,000

3.34 Provision of entertainment facilities

Table 3.06 Breakdown of cost of entertainment facilities


Merry-go-round 3 8,500,000 25,500,000

Swing 3 5,500,000 16,500,000

See saw3

4,000,000 12,000,000

Slides 3 7,500,000 22,500,000

Hunt house 2 10,000,000 20,000,000

Labour 5,000,000

Total 101,500,000

3.35 Provision of resting places

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Table 3.07 Breakdown of cost of resting places


Seats 25 700,000 17,500,000

Labour 2,000,000

Total 19,500,000

3.36 Redesigning of landscape

Table 3.08 Breakdown of cost of landscape


Grass and seedlings 75,000,000

Black soil 1000 bags 10,000 10,000,000

Manure 500 bags 8000 4,000,000

Watering can 3 5000 150,000

Shears 3 50000 150,000

Ladder 2 100,000 200,000

Sprinklers 2 100,000 200,000

Pavement blocks 55766 3000 167,300,000

Labour 15,000,000

33

Total 272,000,000

3.37 Restocking the zoo

Table 3.09 Breakdown of restocking cost

Animal No. Unit cost ( ¢ ) Total costs ( ¢ )

Giraffe 2 13,662,000 27,324,000

Warthog 2 9,105,000 18,216,000

Buffalo 2 9,105,000 18,216,000

Elephant 2 75,000,000 150,000,000

Roam antelope 2 4,554,000 9,108,000

Heart beast 2 8,015,040 16,030,080

Bongo 2 910,000 1,821,600

Birds 4 455,400 1,821,600

Pigmy hippo 2 4,918,320 9,836,640

Snakes 10 400,000 4,000,000

Sub total 256,373,920

34

Shipping costs 25,000,000

Labour 10,000,000

Grand Total 291,373,920

Item Cost ( $ ) Cost ( ¢ )

3 page starter website 1500 13,662,285

3.38 Creation of website

3.39 Provision of vehicles

Table 3.11 Breakdown of cost involved in purchasing vehicles

35


Rodeo Denver pickup 2 224,405,186 444,810,371

Chevrolet express van

2 262,078,996 524,157,992

Chevrolet S SR Truck 1 357,405,451 357,405,451

Total 5 1,326,373,814

TOTAL COST

Table 3.12 Breakdown of total cost

Project Cost ( ¢ )

Cages1,872,769,324

Offices254,880,970

Washrooms 53,100,000

Entertainment 101,500,000

Resting place 19,500,000

Landscape 272,000,000

Restocking 291,373,920

Website 13,662,285,

Vehicles 1,326,373,814

Total 4,205,160,313

10% Contingencies 420,516,031.3

Grand total 4,625,676,344

36

3.4 MAINTENANCE AND OPERATIONAL COSTS

The maintenance cost shall be the cost of maintaining the structures and facilities of the

zoo, while the operational cost will be the day to day cost of running the zoo. For

instance, water bill, electricity bill and feeding of the animals are all operational costs.

This should be so in order to make the place always attractive to its visitors. The group,

in consultation with the acting director of the zoo, agreed that the maintenance and

operational cost should be 20 per cent of the total capital outlay.

Therefore, maintenance and operational costs will be:

=20 ∕ 100 x 4,625,676,344

=925,135,268.8

The acting director also informed the group that the zoo has never had any major

upgrading project since its establishment. Thus, following the implementation of this

project, the lifespan will be not less than twenty years. The group has therefore estimated

the lifespan of the project to be twenty years.

The maintenance and operational costs shall be adjusted by 10 percent annually because

of a number of macroeconomic factors such as inflation and exchange rate changes.

The projected maintenance and operational cost from 2008 to 2027 is as follows:

Table 3.13 Maintenance and operational cost

37

No. Year Cost ( ¢ )

1 2008 925,135,268.8

2 2009 1,017,648,796

3 2010 1,119,413,676

4 2011 1,231,355,044

5 2012 1,354,490,548

6 2013 1,489,939,603

7 2014 1,638,933,563

8 2015 1,802,826,919

9 2016 1,983,109,611

10 2017 2,181,420,572

11 2018 2,399,562,629

12 2019 2,639,518,892

13 2020 2,903,470,781

14 2021 3,193,817,859

15 2022 3,513,199,645

16 2023 3,864,519,609

17 2024 4,250,971,570

18 2025 4,676,068,727

19 2026 5,143,675,600

20 2027 5,658,043,160

38

3.5 ANALYSIS OF BENEFITS OF THE PROJECT

This is basically the benefits to be realized after the implementation of the project and is

of different forms – direct, indirect, tangible and intangible.

3.6 DIRECT TANGIBLE BENEFITS

The direct tangible benefits are those benefits related closely to the main objective of the

project.

3.61 Increased Revenue

On the average, the zoo receives about 102,996 visitors annually. The breakdown of the

number of visitors from 2001 to 2005 and the revenue associated with them is as follows:

Table 3.14 Visitors to the zoo from 2001 to 2005

Year No. of visitors Revenue received (¢)

2001 67,699 59,768,000

2002 64,667 72,202,900

2003 82,621 117,137,200

2004 85,441 197,475,900

2005 214,555 306,667,000

39

With the implementation of the project, we expect an increase of 50 percent in the

number of visitors to the zoo. The direct tangible benefit will therefore be the 50%

increment in the number of visitors. We will use the 2005 figure as our base year for this

calculation.

Although the zoo currently charges a flat rate of ¢ 5000 per visitor, after the

implementation of the project, this fee will be increased and will no longer be a flat rate.

The fees to be charged are as follows:

1. Ghanaian:

* Children - ¢ 5000

* Adults - ¢ 10000

2. Non-national:

* Children - ¢ 10000

* Adults - ¢ 20000

Due to the difficulty in determining the exact distribution of the visitors of the zoo into

the above categories, an average of ¢15000 will be used in our calculations.

Table 3.15 Gate proceeds for a year

No. of visitors Gate fee/ visitor (¢) Total revenue (¢)

107,277 15000 1,609,155,000

40

3.62 Rent from restaurant

This is the amount of money accruing to the zoo through the renting out of the restaurant.

Table 3.16 Annual rent received

Monthly rent ( ¢ ) No. of months Total revenue ( ¢ )

5,000,000 12 60,000,000

3.7 DIRECT INTANGIBLE BENEFITS

These are benefits accruing to the project that cannot be properly evaluated at market

prices.

3.71 Opportunity for research

One of the aims of the zoo is to be a centre of excellence in conservation, education,

research and tourism. The implementation of the project will provide better facilities to

enhance this research function.

3.72 Welfare of the animals

Currently, most of the animals at the zoo are restricted in their movement due to the cage

design and this seriously hampers their physical well-being. After the implementation of

41

the project, we expect an increase in their cage sizes and this will go a long way to make

them healthier and happier.

3.8 INDIRECT TANGIBLE BENEFITS

These are benefits not closely linked to the main objectives of the project that can be

valued at market prices.

3.81 Brain drain and change of profession

Our observation and enquiry have revealed that most specialists and skilled workers do

not want to work in the zoo. This is because of the poor and deplorable conditions there

and the low remuneration. Currently, the zoo has only two professional workers out of its

total workforce of thirty four people.

The cost to the government of training a zoologist and a veterinary doctor is about 14 and

15 million cedis a year respectively. It takes four years to train a zoologist and seven to

train a veterinary doctor. Below is a breakdown of the cost involved in training these

workers and this also represents the amount of money saved should they stay on at the

zoo as a result of the implementation of the upgrading project.

42

Table 3.17 Amount of money saved on training professionals

Professional Cost of train. ( ¢) No of years of training

Total Cost ( ¢)

Zoologist 14,000,000 4 56,000,000

Veterinary doctor 15,000,000 7 105,000,000

Total 161,000,000

3.9 INDIRECT INTANGIBLE BENEFITS

These are the benefits that cannot be properly evaluated in the market.

3.91 Improvement in standard of living

After the upgrading, more hands will be needed for the upkeep of the animals as already

stated. Thus more people will be employed and by so doing increasing their standard of

living.

TOTAL BENEFITS

Table 3.18 Breakdown of total benefits

Item Amount (¢)

Gate proceeds 1,609,155,000

Rent from restaurant 60,000,000

43

Brain drain 161,000,000

Total 1,830,155,000

The benefits are expected to increase by 10% per annum and to have a total project life

span of 20 years. The projected array of benefits from 2008 to 2027 is as follows:

Table 3.19 Total Benefits

No. Year Benefit (¢ )

1 2008 1,830,155,000

2 2009 2,013,170,500

3 2010 2,214,487,550

4 2011 2,679,529,936

5 2012 2,947,482,929

6 2013 3,242,231,222

7 2014 3,566,454,344

8 2015 3,923,099,779

9 2016 4,315,409,756

10 2017 4,746,950,732

11 2018 5,221,645,805

12 2019 5,743,810,386

13 2020 6,318,191,424

14 2021 6,950,010,567

15 2022 7,645,011,624

16 2023 8,409,512,786

44

17 2024 9,250,464,064

18 2025 10,175,510,470

19 2026 11,193,061,520

20 2027 12,312,367,670

CHAPTER FOUR

METHODOLOGY AND ANALYSIS

4.1 INTRODUCTION

The main essence of CBA is to access the viability of a project and its economic

implications and in this chapter all necessary calculations will be done to this effect.

4.2 METHODOLOGY

The investment criteria chosen for this project are the Net Present Value (NPV), the

Benefit – cost ratio (B/C) and the Payback Period (PP). The group will also make use of a

sensitivity analysis.

4.3 THE NET PRESENT VALUE

Net present value (NPV) is the difference between the present value of cash inflows and

the present value of cash outflows. NPV is used in capital budgeting to analyze the

profitability of an investment or project.

45

NPV analysis is sensitive to the reliability of future cash inflows that an investment or

project will yield.

NPV compares the value of a cedi today to the value of that same cedi in the future,

taking inflation and returns into account.

4.31 REASONS FOR USING THE NPV AS MAJOR INVESTMENT CRITERION

The NPV method is the most technically superior criterion for investment decisions.

Time is really important in making decisions about project choice. The idea of NPV is

therefore to try to express all future values in terms of the present. The basic notion of the

NPV approach is that present consumption yields more than the same amount of future

consumption. We must therefore convert all future values into the present by discounting

the future stream of income to give the true future value of the project.

Since there are a number of investment projects available to choose from, it is almost

always difficult to choose from among the lot, the most economically viable. Fortunately,

the NPV method provides simple but effective measure of making such choices as

demonstrated above.

Also, the NPV is quite simple to calculate, unlike other methods, such as the IRR, which

is very cumbersome. Because the lifespan of the project is long, it will be extremely

difficult to calculate the IRR, hence, our preference for the NPV.

46

The NPV criterion takes into consideration the relative size of the project and therefore

dismisses any possibility of making wrong choices. The size of the project in question is

quite big, hence the large NPV, as illustrated below. However, the IRR, unlike the NPV,

is sensitive to the economic life and scale of the project. The IRR tends to overestimate

the value of benefits for short term projects, while projects with longer gestation period

tend to suffer when the IRR is used. Thus, the NPV will assist the zoo to better analyze

the renovation and refurbishment project than other smaller projects.

The NPV is a very simple method for the analysis of data and can be easily understood

by any decision or policy maker with little explanation, as can be seen from the earlier

calculations.

Thus, among all the investment criteria, the NPV method ranks superior.

4.32 DECISION RULE FOR NPV

If the NPV of this project is positive, it should be accepted. However, if NPV is negative,

the project should be rejected because cash flows will also be negative.

4.33 CHOICE OF DISCOUNT RATE

The current market discount rate of 16.5% has been chosen for the project evaluation.

This is because it is an accurate measure of the market’s interest rate. Also given the

relative stability enjoyed in recent times, it can be used as an accurate measure of the

economic situation.

47

4.34 FORMULA F0R NPV

Where:

n = lifetime of the project

r = discount rate

Bί = benefits for ίth year

Cί = costs for ίth year

i = year

Table 4.01 below shows the calculation of the NPV for a period of twenty years

Year Benefit

(A)

M & O cost

(B)

A – B

(C)

Discount

rate(D)

C x D = NPV

2008 1,830,155,000 925,135,268.8 905,019,731.2 0.8584 776,868,937.3

2009 2,013,170,500 1,017,648,796 995,521,704 0.7368 733,500,391.5

2010 2,214,487,550 1,119,413,676 1,095,073,874 0.6324 692,524,717.9

2011 2,435,936,305 1,231,355,044 1,204,581,261 0.5429 653,967,166.6

2012 2,679,529,936 1,354,490,548 1,325,039,388 0.4660 617,468,354.8

2013 2,947,482,930 1,489,939,603 1,457,543,327 0.4000 583,017,330.8

2014 3,242,231,223 1,638,933,563 1,603,297,660 0.3433 550,412,086.7

48

2015 3,566,454,345 1,802,826,919 1,763,627,426 0.2947 519,741,002.4

2016 3,923,099,780 1,983,109,611 1,939,990,169 0.2530 490,817,512.8

2017 4,315,409,758 2,181,420,592 2,133,989,166 0.2171 463,289,047.9

2018 4,746,950,734 2,399,562,629 2,347,388,105 0.1864 437,553,142.8

2019 5,221,645,807 2,639,518,892 2,582,126,915 0.1600 413,140,306.4

2020 5,743,810,388 2,903,470,781 2,840,339,607 0.1373 389,978,628

2021 6,318,191,427 3,193,817,859 3,124,373,568 0.1179 368,363,643.7

2022 6,950,010,570 3,513,199,645 3,436,810,925 0.1011 347,461,584.5

2023 7,645,011,627 3,864,519,609 3,780,492,018 0.0869 328,524,756.4

2024 8,409,512,790 4,250,971,570 4,158,541,220 0.0746 310,227,175

2025 9,250,464,069 4,676,068,727 4,574,395,342 0.0640 292,761,301.9

2026 10,175,510,480 5,143,675,600 5,031,834,880 0.0549 276,247,734.9

2027 11,193,061,530 5,658,043,160 5,535,018,370 0.0471 260,699,365.2

TOTAL 9,506,564,188

NPV = BPV – CPV

Where

NPV = Net Present Value

BPV = Present Value of Benefits

CPV = Present Value of Cost

NPV = 9,506,564,188 – 4,625,676,344

= ¢4,880,887,844

49

4.35 DECISION BASED ON RESULT

Using the NPV method with a discount rate of 16.5% the project will yield an NPV of

¢4,880,887,844. This positive NPV would be achieved within twenty years period of the

project. From the above analysis it is clear that the project is highly beneficial and will

contribute to the welfare of all Ghanaian citizens.

4.4 BENEFIT – COST RATIO (B/C)

This is the ratio of future array of benefit to that of the cost.

4.41 DECISION RULE FOR BENEFIT -COST RATIO

If the ratio is less than one, we will not accept the project but if it is greater than one, then

the project is profitable and ought to be implemented.

4.42 FORMULA FOR BENEFIT -COST RATIO

B/C =

4.43 CALCULATION OF BENEFIT-COST RATIO

B/C =

50

=

= 2.06


From above it can be seen that the Benefit-cost ratio is greater one. This implies that the

project is viable and should be implemented.

4.5 PAYBACK PERIOD

Payback period is the length of time required to recover the cost of an investment. All

other things being equal, the better investment is the one with the shorter payback period

Table 4.02 shows the calculation of payback period for eight years []*

Year NPV Ci NPV - Ci

2008 776,868,937.3 4,625,676,344 [3,848,807,407]

2009 733,500,391.5 3,848,807,407 [3,115,307,015]

2010 692,524,717.9 3,115,307,015 [2,422,782,297]

2011 653,967,166.6 2,422,782,297 [1,768,815,131]

2012 617,468,354.8 1,768,815,131 [1,151,346,776]

2013 583,017,330.8 1,151,346,776 [568,329,445.1]

2014 550,412,086.7 568,329,445.1 [17,917,358.4]

51

2015 519,741,002.4 17,917,358.4 501,823,644

* Figures in parenthesis [] represent negative values

Where

Ci = outstanding cost


From the above table, it can be seen that it will take the zoo eight years to recoup its

initial investment. But by the eight year it would have recovered its investment and even

made some gain of ¢501,823,644.

From the analysis it can be seen that the project would be beneficial in the eighth year.

4.6 SENSITIVITY ANALYSIS

Most projects are influenced by economic trends. A sensitivity analysis seeks to

determine how sensitive a project is to these changes in economic indicators, which affect

the discount rate. To do this, we will assume a change in economic indicators that shift

the discount rate either upwards or downwards and recalculate our investment criteria. A

timely sensitivity analysis is needed to access the viability of this project even when

market trends change.

52

4.61 SENSITIVITY ANALYSIS USING A DISCOUNT RATE OF 15.5%

Here, with a discount rate of 15.5%, we will analyze the three investment criteria, i.e. net

present value, benefit-cost ratio, payback period.

CALCULATION OF NEW NPV

Year Benefit

(A)

M & O cost

(B)

A – B

(C)

Discount

rate(D)

C x D = NPV

2008 1,830,155,000 925,135,268.80 905,019,731.2 0.865801 783,566,866.8

2009 2,013,170,500 1,017,648,796 995,521,704 0.749611 746,254,158.7

2010 2,214,487,550 1,119,413,676 1,095,073,874 0.649014 710,718,246.1

2011 2,435,936,305 1,231,355,044 1,204,581,261 0.561917 676,874,519.9

2012 2,679,529,936 1,354,490,548 1,325,039,388 0.486508 644,642,400.3

2013 2,947,482,930 1,489,939,603 1,457,543,327 0.421219 613,945,143.2

2014 3,242,231,223 1,638,933,563 1,603,297,660 0.364692 584,709,660.3

2015 3,566,454,345 1,802,826,919 1,763,627,426 0.315751 556,866,343.2

2016 3,923,099,780 1,983,109,611 1,939,990,169 0.273377 530,348,898.4

2017 4,315,409,758 2,181,420,592 2,133,989,166 0.23669 505,094,184.2

2018 4,746,950,734 2,399,562,629 2,347,388,105 0.204927 481,042,084.8

2019 5,221,645,807 2,639,518,892 2,582,126,915 0.177426 458,135,318.8

2020 5,743,810,388 2,903,470,781 2,840,339,607 0.153615 436,319,351.3

2021 6,318,191,427 3,193,817,859 3,124,373,568 0.133 415,542,239.3

2022 6,950,010,570 3,513,199,645 3,436,810,925 0.115152 395,754,513.7

2023 7,645,011,627 3,864,519,609 3,780,492,018 0.099698 376,909,060.7

53

2024 8,409,512,790 4,250,971,570 4,158,541,220 0.086319 358,961,010.2

2025 9,250,464,069 4,676,068,727 4,574,395,342 0.074735 341,867,628.8

2026 10,175,510,480 5,143,675,600 5,031,834,880 0.064706 325,588,218.1

2027 11,193,061,530 5,658,043,160 5,535,018,370 0.056022 310,084,017.4

TOTAL 10,253,223,864

NPV = BPV – CPV

Where




NPV = 10,253,223,864 – 4,625,676,344

= ¢5,627,547,516

ANALYSIS

Using a discount rate of 15.5% also yielded an NPV of ¢5,627,547,516. This implies that

even if there is a reduction in the discount rate our project will still be viable. This NPV

of ¢5,627,547,516 is greater than the initial one.

CALCULATION OF BENEFIT-COST RATIO

B/C =

54

=

= 2.21

ANALYSIS

From above it can be seen that although there is a slight decrease in the discount rate,

Benefit-cost ratio is still greater one. This implies that the project is still viable

irrespective of the decrease in the discount rate.

CALCULATION OF PAYBACK PERIOD


2008 783,566,866.80 4,625,676,344 [3,842,109,477.20]

2009746,254,158.70

3,842,109,477.20 [3,095,855,319]

2010710,718,246.10

3,095,855,319 [2,385,137,072]

2011676,874,519.90

2,385,137,072 [1,708,262,553]

2012644,642,400.30

1,708,262,553 [1,063,620,152]

2013613,945,143.20

1,063,620,152 [449,675,009]

2014584,709,660.30

449,675,009 135,034,651


ANALYSIS

55

From the above table, it can be seen that with a discount rate of 15.5, it will take the zoo

seven years to recoup its initial investment. But even by the eight year it would recover

its investment and even make some gain of ¢135,034,651.


4.62 SENSITIVITY ANALYSIS USING A DISCOUNT RATE OF 17.5%

Here, we will analyze the three investment criteria, namely, net present value, benefit-

cost ratio and payback period with a discount rate of 17.5%.

CALCULATION OF NPV

Year Benefit

(A)

M & O cost

(B)

A – B

(C)

Discount

rate(D)

C x D = NPV

2008 1,830,155,000 925,135,268.80 905,019,731.2 0.851064 770229558.5

2009 2,013,170,500 1,017,648,796 995,521,704 0.72431 721065969.4

2010 2,214,487,550 1,119,413,676 1,095,073,874 0.616434 675040481.7

2011 2,435,936,305 1,231,355,044 1,204,581,261 0.524624 631952791.2

2012 2,679,529,936 1,354,490,548 1,325,039,388 0.446489 591615379.4

2013 2,947,482,930 1,489,939,603 1,457,543,327 0.379991 553852695.7

2014 3,242,231,223 1,638,933,563 1,603,297,660 0.323396 518500396.1

2015 3,566,454,345 1,802,826,919 1,763,627,426 0.275231 485404626.1

2016 3,923,099,780 1,983,109,611 1,939,990,169 0.234239 454421352.2

2017 4,315,409,758 2,181,420,592 2,133,989,166 0.199352 425415730

56

2018 4,746,950,734 2,399,562,629 2,347,388,105 0.169662 398261538.3

2019 5,221,645,807 2,639,518,892 2,582,126,915 0.144393 372840588.9

2020 5,743,810,388 2,903,470,781 2,840,339,607 0.122888 349042253.5

2021 6,318,191,427 3,193,817,859 3,124,373,568 0.104585 326762960.8

2022 6,950,010,570 3,513,199,645 3,436,810,925 0.089009 305905750.5

2023 7,645,011,627 3,864,519,609 3,780,492,018 0.075752 286379851.6

2024 8,409,512,790 4,250,971,570 4,158,541,220 0.06447 268100286.6

2025 9,250,464,069 4,676,068,727 4,574,395,342 0.054868 250987502.4

2026 10,175,510,480 5,143,675,600 5,031,834,880 0.046696 234967023.7

2027 11,193,061,530 5,658,043,160 5,535,018,370 0.039741 219969128.6

TOTAL 8,840,715,865

NPV = BPV – CPV

Where




NPV = 8,840,715,865 – 4,625,676,344

= ¢4,215,039,521

ANALYSIS

57

We have an alternative CBA result based on a slightly higher discount rate of 17.5%.

This new NPV of ¢4,215,039,521 is lesser than what the actual discount rate of 16.5%

yielded, i.e. ¢4,880,887,844 by ¢665,848,323.

However, the positive NPV implies that project is still viable.

CALCULATION OF BENEFIT-COST RATIO

B/C =

=

= 1.91

ANALYSIS

From above it can be seen that although there is a slight increase in the discount rate,

Benefit-cost ratio is still greater than one. This implies that the project is still viable

irrespective of the increase in the discount rate

CALCULATION OF PAYBACK PERIOD


2008 770229558.5 4,625,676,344 [3,855,446,785.50]

2009 721065969.4 3,855,446,785.50 [3,134,380,816]

2010 675040481.7 3,134,380,816 [2,459,340,334]

58

2011 631952791.2 2,422,782,297 [1,827,387,543]

2012 591615379.4 1,827,387,543 [1,235,772,164]

2013 553852695.7 1,235,772,164 [681,919,468]

2014 518500396.1 681,919,468 [163,419,072]

2015 485404626.1 163,419,072 321,985,554


From the above table, with a discount rate of 17.5% it will still take the zoo eight years to

recoup its initial investment. By the eighth year, it would have recovered its initial

investment and made a gain of ¢321,985,554.


4.7 FINAL ANALYSIS

From all the result of the CBA investment criteria and analysis above, we can conclude

that this project is highly viable.

A summary of results and analysis is as follows:

1) Using a discount rate of 16.5%:

* NPV = ¢4,880,887,844

* B/C = 2.06

* PP = ¢501,823,644 in the eighth year


59

* NPV = ¢5,627,547,516

* B/C = 2.21

* PP = ¢135,034,651 in the seventh year


* NPV = ¢4,215,039,521

* B/C = 1.91

* PP = ¢321,985,554 in the eighth year

We can conclude that our project is not very sensitive to economic changes. Thus, in a

country like ours where market trends are more often than not erratic, this will not affect

the viability of the project. Barring major changes in economic indicators which will

significantly alter the discount rate, the project will be viable even when market trends

differ.

CHAPTER FIVE

CONCLUSION AND RECOMMENDATION

5.1 INTRODUCTION

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This chapter summarizes the entire project, highlighting the major findings. It also seeks

to make the necessary recommendations as to the needed changes that should be effected

in order to realise a successful and beneficial implementation.

5.2 SUMMARY

The result of the project analysis indicated that there are different categories of visitors to

the zoo, such as, families, school children, groups, churches, holiday makers and different

types of workers. There are differences in the levels and trends of both yearly and

monthly visits to t the zoo. However, the monthly visits are better since they provide the

zoo with insight into the general pattern of visitors to the zoo. As an inference from the

project therefore, the following facts should be established:

· Majority of the zoo visitors are Ghanaians, most of whom reside in the Greater Accra

region.

· The visits by school children outnumber those by adults due to the increasing

population and emphasis placed on environmental education and studies in natural

resources in schools.

· Visitors are often disappointed with the absence of big game such as the elephant,

giraffe, buffalo and waterbuck.

· The majority of the visits to the zoo are for educational and entertainment purposes.

To solve these and many other problems, the renovation of the Accra zoo has been

proposed. This renovated zoo is to house restructured and restocked cages; renovated and

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refurbished offices and wash rooms; redesigned landscape. It would also have the benefit

of a website for information purposes and several new vehicles to facilitate work.

The proposed project is a massive one and in order to help finance it, funds are to be

sourced from the government, NGOs and organizations, companies and individuals. After

completion, the project id expected to be self – supporting with revenue generated

internally. Sources of revenue include monies to be realised from gate fees and renting of

the restaurant.

The project was thoroughly appraised and costs and benefits were clearly outlined and

analysed.

5.3 LIMITATIONS OF THE STUDY

The group faced several difficulties in the analysis of this project. These are briefly

outlined below:

· The inability to quantify all the benefits and costs affects their accurate estimation.

· Difficulty in data collection. Costs and benefit values were not very easy to come by.

· The choice of an appropriate interest rate was also difficult.

5.4 INVESTMENT DECISION

Based on appropriate investment criteria; the NPV, the benefit – cost ratio and the

payback period, the project was assessed and an investment decision made.

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Using a discount rate of 16.5%, the NPV was ¢4,880,887,844, the benefit – cost ratio was

2.06, and the initial investment was recouped by the eighth year with a gain of

¢501,823,644.

Therefore the proposed project should be implemented without delay as it will be useful

for educational and entertainment purposes. In addition the zoo will generate enough

revenue to support itself and also serve as a source of revenue for the nation.

5.5 RECOMMENDATIONS

On the basis of the results and conclusion drawn from the project, it is being

recommended that:

· Management of the zoo should regard visitor flow on occasion as quite unique and

must put in place an effective system to cater for the influx of both groups and

individuals.

· During peak periods there should be more than one attendant at the entrance in order to

speed up the issuing of tickets and a mechanism should be used such as the use of an

adding machine and a computer.

· There should be regular refresher courses for zoo attendants to equip them with the

needed knowledge and experience.

· The plan to bring game such as elephants should be hastened since this will bring more

visitors to the zoo.

· With all urgency a website should be created for the Accra zoo to serve the purpose of

education and advertisement. This will help to ensure that information about the zoo is

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made readily available to the general public.

· A record of visitors and the zoo in general should be computerized for easy access to

researchers, management and for updating of records.

5.6 CONCLUSION

Through intense research and dealings with consultants, and based on the analysis of this

entire project, it has been concluded that the renovation of the Accra zoo is most

appropriate in addressing the problems the zoo currently faces.

This is the most viable way to achieve the objective of the zoo to be a unit of excellence

in conservation, education and recreation.

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5.7 References

Mr. Festus Courage Agya – yao Acting Director Accra Zoo

Mr. Opoku Staff Accra Zoo

Mr. William Bekoe (lecture notes) Lecturer Economics Department

Dr. D.K. Twerefou Lecturer Economics Department

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cost and benefit analysis of upgrading the accra zoo

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