MBA- PROJECT MANAGEMENT

BUSINESS PLAN FOR THE ESTABLISHMENT OF UT

COLLEGE OF BUSINESS & FINANCE

APRIL, 2014

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DECLARATION

I Jedidia Kwame Fosu the author of this study - ‘business plan’ hereby declare that except

for the reference to other people`s work which I have duly acknowledged ‘the work

presented here was carried out by me ‘management of Business Administration’.

I also declare that the work has never been submitted either partially or wholly to the

Institution for award of a certificate.

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DEDICATION

This work is dedicated to the Most High God and my Family

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ACKNOWLEDGEMENT

I could not have gotten this far without the help of the Most High God.

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TABLE OF CONTENT

Content Page

Declaration …. …. …. …. …. …. …. …. …. i

Dedication …. …. …. …. …. …. …. …. …. ii

Acknowledgement …. …. …. …. …. …. …. …. iii

Table of Content …. …. …. …. …. …. …. …. iv

List of Tables …. …. …. …. …. …. …. …. …. viii

List of Figures …. …. …. …. …. …. …. …. ix

Executive Summary …. …. …. …. …. …. …. …. x

CHAPTER ONE: Introduction …. …. …. …. …. …. 1

1.0 Introduction …. …. …. …. …. …. …. …. …. 1

1.1 Introduction to the Study …. …. …. …. …. …. …. 1

1.2 Overview of UT Bank Limited Ghana …. …. …. …. …. 2

1.3 Problem Statement …. …. …. …. …. …. …. 3

CHAPTER TWO: Literature Review …. …. …. …. …. 5

2.0 Literature Review …. …. …. …. …. …. …. 5

2.1 The Establishment of Private Tertiary Education in Ghana …. …. 5

2.2 Managing Private Tertiary Education in Ghana …. …. …. …. 6

2.3 Achievements of Private Tertiary Education …. …. …. …. 7

2.4 Challenges of Private Tertiary Education …. …. …. …. …. 7

CHAPTER THREE: Vision, Mission, Values and Objectives …. …. 9

3.0 Vision, Mission, Values and Objectives …. …. …. …. …. 9

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3.1 Vision …. …. …. …. …. …. …. …. …. 9

3.2 Mission …. …. …. …. …. …. …. …. …. 9

3.3 Values …. …. …. …. …. …. …. …. …. 9

3.3.1 Learning …. …. …. …. …. …. …. …. 9

3.3.2 Excellence …. …. …. …. …. …. …. …. 9

3.3.3 Integrity …. …. …. …. …. …. …. …. …. 10

3.3.4 Equity …. …. …. …. …. …. …. …. …. 10

3.3.5 Respect …. …. …. …. …. …. …. …. …. 10

3.3.6 Professionalism …. …. …. …. …. …. …. …. 10

3.3.7 Saying “why not” …. …. …. …. …. …. …. 10

3.4 Objectives …. …. …. …. …. …. …. …. …. 10

CHAPTER FOUR: Environmental Analysis …. …. …. …. 12

4.0 Environmental Analysis …. …. …. …. …. …. …. 12

4.1 Political, Economic, Socio-Cultural and Technological, Analysis …. 12

4.1.1 Political Analysis …. …. …. …. …. …. …. 12

4.1.2 Economic Analysis …. …. …. …. …. …. …. 12

4.1.2.1 Interest Rates …. …. …. …. …. …. …. …. 14

4.1.2.2 Exchange Rate …. …. …. …. …. …. …. 15

4.1.3 Socio-Cultural Analysis …. …. …. …. …. …. …. 19

4.1.4 Technological Analysis …. …. …. …. …. …. …. 20

CHAPTER FIVE: SWOT Analysis …. …. …. …. …. …. 22

5.0 SWOT Analysis …. …. …. …. …. …. …. …. 22

5.1 The Strength of UTCBF is as follows …. …. …. …. …. 22

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5.2 The Weakness of UTCBF is as follows …. …. …. …. …. 22

5.3 The Opportunities of UTCBF is as follows …. …. …. …. 23

5.4 The Threats of UTCBF is as follows …. …. …. …. …. 23

5.5 Risk Assessment …. …. …. …. …. …. …. …. 25

5.6 Human Resource Management …. …. …. …. …. …. 26

5.6.1 Human Resource Requirement …. …. …. …. …. …. 26

CHAPTER SIX: Cooperate Plan, Objectives and Strategies ….. …. 29

6.0 Cooperate Plan, Objectives and Strategies …. …. …. …. 29

CHAPTER SEVEN: Marketing Strategy …. …. …. …. …. 32

7.0 Introduction …. …. …. …. …. …. …. …. 32

7.1 Target Marketing …. …. …. …. …. …. …. …. 32

7.2 Competition Level …. …. …. …. …. …. …. 33

7.3 Pricing Strategies …. …. …. …. …. …. …. …. 33

7.4 Advertising and Promotion Strategies …. …. …. …. …. 34

7.5 Cost Analysis …. …. …. …. …. …. …. …. 34

CHAPTER EIGHT: Implementation …. …. …. …. …. 35

8.0 Introduction …. …. …. …. …. …. …. …. 35

8.1 Capital & Operating Cost …. …. …. …. …. …. …. 35

8.2 Price Escalations …. …. …. …. …. …. …. …. 36

8.3 Operating Cost …. …. …. …. …. …. …. …. 36

8.4 Revenue Analysis …. …. …. …. …. …. …. …. 38

8.5 Revenue Projections …. …. …. …. …. …. …. 41

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8.6 Operating Profit Forecast …. …. …. …. …. …. …. 42

8.7 Investment Appraisal …. …. …. …. …. …. …. 43

8.7.1 Net Present Value …. …. …. …. …. …. …. 43

8.7.2 Profitability Index …. …. …. …. …. …. …. 43

8.7.3 Payback Period (PBP) …. …. …. …. …. …. …. 44

8.7.4 Free Cash Flow …. …. …. …. …. …. …. …. 44

8.7.5 Cost of Debt …. …. …. …. …. …. …. …. 44

8.7.6 Cost of Equity …. …. …. …. …. …. …. …. 45

8.7.7 Weighted Average Cost of Capital (WACC) …. …. …. …. 45

8.7.8 Investment Appraisal …. …. …. …. …. …. …. 46

8.7.9 Profitability Index …. …. …. …. …. …. …. 47

8.7.10 Payback Period Analysis …. …. …. …. …. …. 47

8.7.11 Net Present Value (NPV) …. …. …. …. …. …. 48

8.8 Investment Appraisal …. …. …. …. …. …. …. 48

8.8.1 Sensitivity Analysis …. …. …. …. …. …. …. 48

8.8.2 Scenario-Based Cash Flows …. …. …. …. …. …. 54

REFERENCES …. …. …. …. …. …. …. …. 56

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LIST OF TABLES

Table Page

Table 4.1 Monthly End of Period Exchange Rate for GH¢ 2013 …. …. 16

Table 4.2 Ghana’s Principal Foreign Exchange Earnings (Imports) …. …. 18

Table 4.3 Ghana’s Principal Foreign Exchange Earnings (Exports) …. …. 18

Table 5.1 Risk Assessment …. …. …. …. …. …. …. 25

Table 8.1 Summary of Investment Cost …. …. …. …. …. 36

Table 8.2 Operating Cost …. …. …. …. …. …. …. 37

Table 8.3 Student Enrolment …. …. …. …. …. …. …. 39

Table 8.4 Yearly fees per Course / Student …. …. …. …. …. 40

Table 8.5 Revenue Projections …. …. …. …. …. …. 41

Table 8.6 Operating Profit Forecast …. …. …. …. …. …. 42

Table 8.6 Results …. …. …. …. …. …. …. …. 46

Table 8.7 Forecast Student Enrolment …. …. …. …. …. 49

Table 8.8 Project Cash Flow …. …. …. …. …. …. …. 50

Table 8.9 Project Cash Flow …. …. …. …. …. …. …. 51

Table 8.10 Projected Cash Flows- Best Case …. …. …. …. …. 52

Table 8.11 Projected Cash Flows- Worse Case …. …. …. …. 53

Table 8.12 Appraisal results summary …. …. …. …. …. 54

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LIST OF FIGURES

Figure Page

Figure 4.1 Agricultural GDP …. …. …. …. …. …. …. 17

Figure 5.1 Porters Five Force Six …. …. …. …. …. …. 24

Figure 5.2 Organogram …. …. …. …. …. …. …. 27

Figure 8.1 Scenario-Based Cash Flows …. …. …. …. …. 54

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EXECUTIVE SUMMARY

For several decades the government of Ghana and other donor agencies have placed great

emphasis on Public Tertiary education, but have neglected private tertiary education as an

added means to improve economic growth and minimize unemployment in Ghana. Recent

survey suggest that students who graduated from private tertiary institutions secure better

jobs with high salaries and perform excellently in their respective fields of the economy.

The public Universities/ Institutions for one reason or the other have not been able to offer

courses that offer the right skills to meet the growing needs in this ever-changing world.

This study develops a business plan for UT Bank Ghana Ltd with the establishment of UT

College of Business and Finance that offers modern courses that will transform students by

making them more employable than ever.

The study was conducted by evaluating the students’ enrolment for a ten year period, fee

per student per program and the annual fees projection for ten years. The plan also

considered the operating costs for the ten year period in order to ascertain the net effect of

the investment. The project cash flows were also subjected to three investment appraisal

models in order to evaluate the viability of the project and these are Net Present Value

(NPV), Profitability Index (PI) and Payback Period. It became clear that the project is

viable since it provided a positive NPV of GH¢2.4 million. Further, profitability Index (PI)

expectation from the project is as high as 5.0, while the payback period obtained from the

project analysis is 5 ½ years months (65).

From the analysis of UTCBF, the establishment of the College will be economically viable.

Sensitivity analysis was also considered under three scenarios as best, most likely and

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worse cases, the assessment of associated cash flows shows that the business will be

worthwhile under all the three scenarios considered, with expected net present values under

the most likely, best case and worst case scenarios as GH¢ 2,454,559, GH¢ 3,079,829 and

GH¢ 1,764,225 respectively. This appears to be highly rewarding and therefore the UT

bank Ghana Ltd will be building on its plans of diversification and this time into Education.

As a result of this, UT College of Business and Finance seeks for funding of Six Hundred

& Sixty Seven Thousand Two Hundred and Twenty Ghana Cedis (GH¢ 667,220.00) to

cover the rent and other operational costs.

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CHAPTER ONE

INTRODUCTION

1.0 INTRODUCTION

1.1 Introduction to the Study

UT College of Business and Finance (UCBF) is a yet to be established tertiary Institution

by UT Bank Ghana Limited which will be located in Accra, the Capital of Ghana with the

aim of providing quality tertiary education. The College will be registered as a limited

liability company under the laws of Ghana.

The College intends to offer Professional programs such as the Association of Chartered

Certified Accountants (ACCA-UK), Institute of Chartered Accountants (ICA-Ghana),

Chartered Institute of Marketing-UK and other business courses including Advanced

Business Certificate Examination (ABCE), and General Business Certificate Examination

(GBCE).

Even though, there are other colleges and institutions offering these same and / similar

courses, UTCBF will distinguish itself within the industry by using the most competent

lecturers and staff, exceptional and quality tuition provision, 21st century resources,

excellent facilities and so on.

The College anticipates admitting in its first admission for all programs a total number of

Three Hundred and Seventy Seven (377) students. As per the students’ in-take, initial

fifteen lecturers will be recruited and tasked to lecture and prepare the students on their

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respective courses. UT College of Business and Finance anticipates aggressive growth in

its student population in the ensuing years.

The College has already secured its rented classrooms (premises) where the courses will be

run with the entire classrooms fully furnished and ready to take off in June 2014.

Meanwhile, a plan to build its own classroom block within a ten year period has been put

in place.

1.2 Overview of UT Bank Limited Ghana

UT Bank Ghana Ltd (formerly UT Financial Services Ltd) commenced business as a

Finance house in 1997 under the name Unique Trust Financial Services Ltd. It has evolved

from a lending institution to a Universal Bank through the acquisition of the former UT

Bank in June 2010 and got listed on the Ghana Stock exchange under the name UT Bank.

UT Financial Started as a privately owned company and became a publicly owned company

in 2008 with shares listed and actively traded on the Ghana Stock Exchange. Unique Trust

Financial Services, the name at inception of the company, was changed to UT Financial

Services in 2008 just before listing on the Ghana Stock Exchange.

With an annual turnover of GHc74 million, over 900 staff and 30 branches nationwide, UT

Bank is one of the fastest growing indigenous banks in Ghana. The Bank has positioned

itself as a lending bank that seeks to redefine banking in Ghana through fast, efficient and

respectful delivery of service. The company has for the past decade committed itself to

serving the needs of Ghanaian traders and businesses not normally catered for by the

traditional banks. The bank has already diversified into other segments like UT properties

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Limited, UT Life Insurance Limited, UT Logistics Limited, UT Private Securities Services

Limited, and UT Collections Limited. Therefore, the decision by the bank to diversify into

providing education and qualification is appropriate.

1.3 Problem Statement

Students who in the quest to attain tertiary education have had to contend with frustration

involved in gaining admission into credible tertiary institutions in Ghana and even qualified

ones who gain admission are given different courses because of the limited business

Institutions in Ghana. Students with first class degree are still unemployed because they

come out with no profession. Tertiary education is a key factor in a nation‘s effort to

develop a highly skilled labour force for competing in the global economy. Higher salaries,

better employment opportunities, increased savings, and upward mobility are some of the

private economic benefits obtained by taking part in tertiary education.

Graduates can also enjoy a better quality of life, improved health, and greater opportunities

for the future. In the interest of fairness, every individual must be given an equal chance to

partake in tertiary education and its benefits irrespective of income and other social

characteristics including gender, ethnicity, and language. Students who are denied entry

represents a loss of human capital for society. The lack of opportunities for access and

success in tertiary education will lead to under-or un-developed human resources.

It is against this background that UT College of Business and Finance will be established.

The College will seek to offer flexible and affordable academic program for both

undergraduate and postgraduate at a reasonable cost at a relatively short time with state of

art facilities in this ever changing world.

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This will help student to come out of tertiary well equipped, fulfilled and ready to contribute

to the success of the nation. UT has put in place measures and strategies that will ensure

that students get the practical aspect of their academic work from our well established

financial and business institutions spread across almost all the regions in Ghana.

Educational transformations over the years and the increasing demand for quality

employable graduates in all sectors of the economy have greatly influenced the emergence

and direction of private universities and education as a whole (Sawyer, 2004; Effah, 2003).

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CHAPTER TWO

LITERATURE REVIEW

2.0 LITERATURE REVIEW

2.1 The Establishment of Private Tertiary Education in Ghana

The growth of the private tertiary institutions has been a dominant feature in the Education

sector in Ghana today. Quddus and Rashid, (2000) noted that this phenomenon is part of a

worldwide movement away from state owned institutions to what they called ‘a new faith

in the efficacy of free market mechanisms to allocate resources most efficiently. In 1987,

the Government of Ghana constituted a University Rationalization Committee (URC) to

develop proposals for reforming the management, academic structure and funding of

tertiary education in Ghana. The Committee undertook its work over the period 1986-88,

and submitted the final report in 1988. The URC undertook a thorough job of reviewing

the current situation of tertiary education in Ghana, and of suggesting a way forward from

the demoralized and depressed state then experienced within the sector. Following the

submission of the Committee’s report, the government issued a White Paper in 1991 on the

reforms to the Tertiary education system. The policy framework recommended by the URC

was subsequently re-formulated as a White Paper, Reforms to the Tertiary Education

System (1991). This served to clarify the Government’s commitment to the new policies

both within Ghana and beyond it.

The reforms fell into four main policy objectives, one of which is the: Significant expansion

of the tertiary education system as a whole, to meet the demands of school leavers and the

needs of employers, and to provide greater opportunity of access to those previously denied

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it. Since higher education reforms were started in the mid-1980s, higher education in.

Ghana has experienced significant transformation.

In the increase number of undergraduates. The number of tertiary education institutions

expanded rapidly in the last decade particularly the private university colleges as a response

to an increase in student enrolment. Ahemba (2006) attributes the emergence of private

universities to the failure of Africa’s once glorious public universities. In Ghana it is very

common to see collapsing facilities and campuses, overcrowded lecture halls and hostels

and depleted libraries. The prospect of better salaries abroad is luring away talented

teaching staff which affecting the quality of academic work in these institutions.

2.2 Managing Private Tertiary Education in Ghana

There are different types of private higher institutions in Ghana – University Colleges,

diploma awarding institutions, theological colleges, professional and specialized

institutions and tutorial colleges. This study will focus be on the private tertiary business

college. These institutions are either self- financing or are supported by religious agencies.

Christians and Islamic organizations are active in providing private higher education in the

Ghana. A large number of institutions of higher education are supported or sponsored by

the Christian organizations. For instance the first accredited private university college -

now Valley View University is established by the 7th Day Adventist Church. Most of the

private institutions operating in the country are for profit institutions. In Ghana, there was

a state monopoly on tertiary education immediately after independence like other African

nations. The government funded all the public universities with the view of training the

manpower needed for the rapid development of the nation. As Balderson (1979) put it the

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period of state monopoly in higher education, especially till the 1970s, was considered to

be the ‘golden period’ in higher education’.

2.3 Achievements of Private Tertiary Education

A detailed research revealed that the private universities have achieved faster growth within

this short time. Among them are uninterrupted educational calendar throughout the year,

discipline and strict ethical values has produced better and quality graduates which every

employer is looking for. Contributions to research have also brought about new ideas which

have helped to improve the management and efficiency in tertiary education.

Private tertiary education has also helped reduced unemployment and enabled the continent

to retain its educated citizens to propel its development, people who would have otherwise

travel out of the country to pursue their dream course and seek greener pastures have all

been able to pursue their dreams and contributing to the economic development of the

country, All the above has helped the governments to reduce expenditure on higher

education and make enough savings to be channeled to other sectors of the economy.

2.4 Challenges of Private Tertiary Education

Several challenges are faced although private institutions show potential in meeting

increasing demand for tertiary education, the issue of tuition and student fees tend to be

higher than those at public universities because of high cost of faculty and staff

development and training. Many private institutions currently serve students from families

with a relatively high income.

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The cost of private education, therefore, limits equitable access to all students who might

have the necessary skills to undertake tertiary studies, to student who lack the financial

resources to attend though they might have the qualification and the necessary skills to

undertake tertiary studies (Banya, 2001).

Secondly, it is also sad to know that many countries have the general perception that private

institutions are of lower quality than their public counterparts. This is because most people

think that it is not easy to gain admission to public when u don’t have good grades however

some students who are unsuccessful in passing their qualifying examinations for public

universities enroll in private institutions as their second choice.

Thirdly Problems with accrediting bodies and low remuneration and welfare packages for

employees has also been a major challenge.

Finally, like public universities, many private institutions face funding difficulties.

Although these challenges may hamper the development of private universities, their

numbers in many countries continue to increase speedily. Also, many of them tend to focus

their programs on areas that are currently underserved by the public institutions (Banya,

2001).

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CHAPTER THREE

VISION, MISSION, VALUES AND OBJECTIVES

3.0 VISION, MISSION, VALUES AND OBJECTIVES

3.1 Vision

To be the leader in the provision of high-quality educational programs that persuade

excellence, promote critical thinking, develop autonomous study skills and foster lifelong

learning for tertiary bound students.

3.2 Mission

UT College of Business and Finance is dedicated to providing professional, career oriented

tertiary education to students from diverse backgrounds. UTCBF proudly offers access and

opportunities to students who desire to enhance their lives in a personalized and supportive

environment.

3.3 Values

3.3.1 Learning

A positive approach to lifelong learning and an understanding that all students have the

capacity to gain appropriate knowledge and skills that help them to enjoy learning.

3.3.2 Excellence

A commitment towards excellence in academic and social achievement by both staff and

students

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3.3.3 Integrity

Greater expectations for staff and student conduct, including honesty and trustworthiness

in all activities.

3.3.4 Equity

A workplace and learning environment that is safe and free of discrimination, abuse and

exploitation. This includes practices to meet the diverse needs of students and to achieve

the best possible outcomes for all.

3.3.5 Respect

Behaviour, language and actions that demonstrate a high regard for self as well as others.

3.3.6 Professionalism

We’re a disciplined educational institution and maintain high standards at all times. We’re

hard working, efficient and responsible.

3.3.7 Saying “why not”

We create new opportunities by constantly pushing boundaries and challenging the status

quo. We are a learning organization.

3.4 Objectives

1. Offering business courses with discipline and strict ethical values that will produce

better and quality graduates.

2. To achieve uninterrupted educational calendar throughout the year.

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3. Offer flexible academic program for both undergraduate and postgraduate at a

reasonable cost within relatively short time.

4. To give every individual equal chance to partake in tertiary education and its

benefits irrespective of religion and other social characteristics including gender,

ethnicity, and language.

5. Ensuring that students get the practical aspect of their academic work from our well

established financial and business institutions spread across all the regions in

Ghana.

6. To help student to come out of tertiary well equipped, fulfilled and ready to

contribute to the success of the nation.

7. Recruit the best lecturers and staff and compared to industry benchmark and offer

the best work environment to both students and workers.

8. The institution has state-of-the-art ultra-modern facilities located at convenient

locations in Accra.

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CHAPTER FOUR

ENVIRONMENTAL ANALYSIS

4.0 ENVIRONMENTAL ANALYSIS

4.1 Political, Economic, Socio-Cultural and Technological, Analysis

4.1.1 Political Analysis

Ghana has continued to consolidate democratic rule, and now enjoys a more open society,

with a vibrant media and strong public dialogue. Ghana`s political environment has been

stable and peaceful since 1992 as opposed to her other neighboring countries within the

sub-region. Over the years, there has been increased in the respect for the rule of law,

human rights and political freedom. This has made her a gateway to Africa, thus attracting

many investors seeking for opportunities in Africa. Ghana is among countries listed and

recommended on the world market for investors to choose to do business with. The present

serene political environment coupled with the numerous investor interests into the country

may therefore trigger the need for human capital development to tap into the growing

opportunities that these investors will present.

4.1.2 Economic Analysis

Ghana has a diverse and rich resources base such as Gold, Timber, Cocoa, Diamond,

Bauxite, Manganese and Oil. With all these rich resources, the country still for a long time

revolved around subsistence agriculture that accounts for 38% of the country`s GDP (2008)

and does employ about 55% of the workforce, mainly small landholders. The trend in

Ghana`s real GDP growth rate from 2006 to 2010 has been one of peaks and troughs. But

on average, it has been on the rise. Real GDP growth peaked at 8:4% in 2008 based on

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revised series of the GDP and declined sharply to 4.7% by the end of 2009, lower than the

government`s projected rate of 5.9%.

The sharp decline could be basically attributable to the global economic crisis that engulf

every economy, and that resulted to a reduction in FDIs, external aid and remittances.

Nonetheless, strong economic performance was registered for the most part of 2011, with

an overall economic growth rate of between 13.9 percent and 14.4 percent, and inflation in

single digits. Non-oil GDP growth is estimated to have been in the range of 8.2 percent and

8.7 percent in 2011, with the oil sector contributing the remainder of the 5.7 percentage

points. There is nonetheless a widespread perception that, on average, poverty is on the

rise.

However, new challenges emerged, from the closing months of 2011 continuing into 2012,

which posed risks to macroeconomic stability. These included rising inflation and

inflationary expectations; and continued depreciation pressure, including speculative

activities of dealers and traders in the domestic foreign exchange markets. Ghana’s

economy has been transformed recently by the commencement of oil production in

December 2010. In 2011, the country recorded one of the highest real GDP growth rates in

the world (14.4%). Ghana has several factors working in its favour, such as low political

risk, successful reform efforts, strong agricultural potential, and access to a potentially large

market. In December 2011, the IMF amended conditions of Ghana’s loan conditions in

such a way that allows the country to make more use of non-concessional borrowing to

fund critical infrastructure investments.

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However, the country's internal and external balances are currently under some stress. Last

year, the fiscal deficit turned out to be significantly wider than an already revised target of

6.7% of GDP. In fact, the fiscal shortfall widened to above 12% of GDP last year. Fiscal

slippages in election years are not uncommon for Ghana, but the extent of the slippage was

enormous even by the country's own standards. The main culprits were substantial

increases in wages, utility and fuel subsidies, and interest costs, while revenues also

underperformed. Moreover, the government plans to narrow to deficit to 9% of GDP this

year - not a very ambitious target.

Meanwhile, the current account deficit also widened to above 12% of GDP last year, mainly

due to higher imports of services and a sharp increase in interest payments. As a result of

these developments, foreign exchange reserves are currently under pressure, with import

cover falling below three months. In addition, the cedi exchange rate has been under

pressure this year, depreciating by around 3.2% year -to-date against the US dollar, and

bringing it to a level that is 8% weaker than during the same period last year.

Ghana is heavily reliant on commodities, making it vulnerable to fluctuations in global

demand. There have also been delays in establishing key legislation meant to support the

growing oil industry, as well as delays in ramping up oil production, and in creating the

infrastructure necessary to capture natural gas from the Jubilee field.

4.1.2.1 Interest Rates

The weighted average interbank rate, as quoted by the Bank of Ghana (BoG) stands at

approximately 18%. Conversely, the base rates (on Ghana Cedis Loans) for commercial

banks in Ghana ranges between 25.6% to 31% as a result of recent BoG`s policy rate.

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The implication of these high rates is that the cost of obtaining funds or borrowing to

facilitate business will be high.

4.1.2.2 Exchange Rate

Historically, the Ghanaian cedi has consistently depreciated against the major foreign

currencies; US Dollar, British Pounds and Euro.

In the second half of 2012 however, the cedi was relatively stable and appreciated in some

instances against the US Dollars, British Pound and Euro. Currently, the exchange rate of

the cedi to the US dollar ranges between GH¢1.98 to GH¢ 2.31.

The cedi exchange rates to major trading currencies have been declining in the past year. It

is expected that the declining nature of the cedi will continue into the future. Even though

the Central bank has put in certain stringent measures to restore the declined cedi but it is

not clear whether or not these measures can overturn the situation.

The table below shows the exchange rates in 2013 between the Ghana cedi and Ghana`s

major trading currencies.

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Table 4.1 Monthly End of Period Exchange Rate for GH¢ 2013

Monthly End of Period Exchange Rate for GH¢ 2013

Months Jan Feb Mar Apr May Jun Jul Aug Sept Oct Nov Dec

USD 1.98 1.98 2.01 2.04 2.06 2.09 2.14 2.19 2.21 2.25 2.28 2.31

GBP 2.8 2.8 2.95 2.95 3 3 3.01 3.07 3.08 3.1 3.1 3.11

EURO 2.33 2.38 2.41 2.44 2.54 2.68 2.87 2.99 3.03 3.12 3.31 3.38

In Conclusion, the rate of growth of the Ghanaian economy is high. In the coming years, the educational and health sectors are expected to

contribute significantly to manpower development with its multiplier effect on other sectors of the economy. Moreover, the rising demand in the

educational and health sectors coupled with the stable political environment of the economy is expected to develop to its man-power to meet the

growing demand for skill set and health needs. It is believed that this will trigger appropriate increase in demand for tertiary Education and therefore

presents a viable investment opportunity. Therefore, UT College of Business and Finance will position itself strategically to meet the forecast

increase in demand for tertiary educations.

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Figure 4.1 Agricultural GDP

Ghana is the world’s second largest cocoa grower, the African continent’s second largest

producer of gold, and over the medium-term should become one of sub-Saharan Africa’s

largest oil producers. Agriculture has long been an important sector of the economy,

employing nearly 60% of the labour force and contributing an estimated 23.7% to GDP in

2012. The services sector is, however, expanding at a rapid pace and is well diversified,

becoming increasingly important to the Ghanaian economy with a contribution of

approximately 49% to GDP in 2012.

The Ghana Statistical Service (GSS) revised the annual real GDP growth rate to 7.9% for

last year from an earlier estimate of 7.1%. A government statistician, Philomena Nyarko,

stressed that the figure was still provisional and will probably be revised again. Real GDP

expanded by 6% y-o-y in the fourth quarter of last year, compared to an upwardly revised

7% y-o-y in Q3 (from an earlier estimate of only 1.7% y-o-y). Higher than expected oil

production is believed to have contributed to an increase in the growth estimate. Ghana is

attracting huge amounts of FDI inflows owing to the country's abundant mining resources

and burgeoning oil industry, although investment is also increasingly being targeted at the

services sector.

Agriculture

/ GDP

24%

Industry/

GDP

27%

Service/

GDP

49%

18

Table 4.2 Ghana’s Principal Foreign Exchange Earnings (Imports)

Main Imports: % share of total 2012E 2013F 2014F

Crude oil, gas, and products 19.33 18.71 18.27

Machinery, nuclear reactors, boilers 11.73 12.22 12.8

Vehicles other than railway,

tramway

9.5 9.49 9.64

Electrical, electronic equipment 6.36 6.19 6.02

Table 4.3 Ghana’s Principal Foreign Exchange Earnings (Exports)

Main Exports: % share of total 2012E 2013F 2014F

Gold 38.03 35.81 34.71

Cocoa 22.18 20.97 20.45

Oil 21.06 21.94 22.73

Timber products 0.99 0.94 0.95

Ghana’s principal foreign exchange earning products are gold, oil, and cocoa. Gold

maintained the lead as Ghana’s top export earner in 2012, and is expected to keep this

position over the 2013-14 periods as well. Oil is expected to overtake cocoa as the second

largest export this year. Ghana's cocoa production is expected to decline this year due to

unfavourable weather conditions. The effect on export earnings will, however, be offset by

an increase in global cocoa prices. Ghana's principal imports are fuels, manufactured

19

products, and capital goods. The trade account is expected to remain in deficit territory over

the medium-term due to the growing demand for imports.

Ghana's current account deficit is expected to narrow as a percentage of GDP to 11.1% of

GDP this year from close to 13% of GDP last year. A further narrowing to 8.6% of GDP is

projected for 2014.

4.1.3 Socio-Cultural Analysis

In socio-cultural analysis, one need to access the impact of indicators such as cultural

changes, income distribution, levels of education, attitudes to work and leisure,

demographics, social mobility, changing consumer behavior, and others. Shifting in these

indicators are more likely to trigger changes in demand and tastes and so provides both

opportunities and threats for organizations.

Ghana is divided into ten (10) administrative regions and with 170 districts. According to

the 2010 Housing and Population Census of Ghana, the total population is 24, 658, 82. Out

of this 97.6 percent is Ghanaian while 2.4 percent is Non-residence foreign nationals.

Majority of the population is Ghanaian by birth (93.7%). persons with dual nationality

constitute 2.9 percent while Ghanaians by naturalization make up one percent. There are

nine (9) major ethnic groups in the country with the Akans being the predominant group in

Ghana (47.5%), followed by the Mole Dagbani (16.6%), the Ewe (13.9%) and Ga-Dangme

(7.4%). The official national language is however English (GSS, 2012).

20

On education, majority (74.1%) of the population 11 years and older is literate. A large

proportion (67.1%) of the population can read and write in English and other language(s),

and about one-fifth (20.1%) can read and write in the English language only.

4.1.4 Technological Analysis

The proportion currently attending school and those who have attended school before are

39.5 percent and 37.1 percent respectively. There is also a marked difference between

males (9.1%) and females (14.3%) who have never attended school (GSS 2012).

Technology is an enabler. Technology has brought efficiency in many business operations

and has helped many organizations to increase productivity greatly. Some of the major

changes taking place in the general environment that are impacting the competitive

environment are technological. Technological advances also include the use of software,

genetic engineering and technology, among others. The internet is arguably the biggest

technological invention so far, and has significantly affected the operations of virtually

every organization. The effect of the internet on education cannot be underestimated.

Information now abounds due to the internet, and communication has also been enhanced

greatly (Kavajecz and Odders-White 2004).

There are now online libraries which millions of people can access via the internet. Perhaps,

the internet has post more challenge to educational and training institutions like than any

other organization. Some of the issues to be looked at when dealing with technological

factors are; the rates of obsolescence, that is, the speed with which new technological

discoveries supersede established technologies; levels of innovations; government

spending on research and development; and other technological advances (Internet).

21

Internet penetration in Ghana has increased from 5.2 per cent in 2010 to about 10 per cent

in 2011, representing an increase of about five per cent in just one year (Ghanaweb 2012).

It is also reported that there exist a good working relationship among all stakeholders in the

sector, a situation that gives a positive indication of an improved service and continuous

increase in the penetration rate. Telecom activities are also increased greatly in the country

with the entrance of the sixth Telecom operator this year. A number of facilities in the

capital are offering video conferencing services which can be a major tool to be used to

enhance delivering of lectures and for other training purposes (Lui and Mole 1998).

22

CHAPTER FIVE

SWOT ANALYSIS

5.0 SWOT ANALYSIS

The College possesses the following key strengths and weaknesses and describes the

opportunities and threats the college is likely to face.

5.1 The Strength of UTCBF is as follows:

Effective attachment and work experience from our well established institution

which exposes students and inculcate into them the requisite professional skills.

Quality education from lecturers with commendable teaching and academic

credentials which would increase their chances of getting a job after completion of

their course.

The use of state of arts facilities including a well-resourced libraries, computer

centres and training rooms as a result of its strong financial background.

With good location the option to choose their dream course and pursue their future

carrier.

Non-denominational / it is not a religious based institution.

5.2 The Weakness of UTCBF is as follows:

The education sector is saturated.

Limited course offered, that is the absence of certain programs such as science and

engineering.

No scholarship schemes to aid needy students.

23

5.3 The Opportunities of UTCBF is as follows:

Perception of the general public of business and financial institution is an

opportunity for pronounced growth

The demand of higher education

Parents willingness to pay even higher fees for their wards to have a tertiary

education

Location of UT College will give good flow of students

5.4 The Threats of UTCBF is as follows:

Establishment of other private universities pose a threat

Other Private Universities offering similar courses

Porter’s five forces model is actually a business strategy tool that helps in analyzing the

intense competition and attractiveness of an industry structure. The model identifies and

analyzes 5 competitive forces that shape every industry. Porter`s model assumes that there

are five competitive forces that identifies the competitive power in a business situation.

These five forces are however applied below to assess the Educational sector within which

the University will find itself.

24

Porter (1980)

Bargaining Power of

Suppliers: Low Generally, there are several

tertiary educational

Institutions in the country

therefore the suppliers

power is expected to be Low

Competitive Rivalry: Medium There are already seven public

Universities and more than

fifteen private Universities

across the country and ten

Polytechnics, making the

competition slightly intense but

UTCBF will position itself

strategically.

Bargaining Power of

Customers: Medium

Students in Ghana generally

choose tertiary Institution

based on quality of

programs offered, proximity

and fees. Should they be

dissatisfied with the level of

service quality of the

Institution, then there is a

likelihood that the public is

made aware and possess a

reputational risk, thereby

deterring prospective

students to consider

competitors.

Threat of New Entrants: Low

In Ghana setting up a tertiary

Institution is capital intensive

apart from this, the industry

regulator, National

Accreditation Board requires a

stringent compliance with

complex and ever evolving

regulations and this imposes a

huge barrier to potential

investors.

Threat of Substitutes: Low

The only feasible alternative

to professional programs are

academic courses However,

UTCBF has a long term

objectives of pursuing these

courses in the near future.

Bargaining Power of

Suppliers

Threat of New

Entrants Bargaining Power

of Customers

Competitive

Rivalry

Figure 5.1 Porters Five Force Six

25

5.5 Risk Assessment

The table below presents information on the major categories of risk to which private tertiary Institutions in Ghana are exposed to.

Table 5.1 Risk Assessment

Nature of Risk Explanation of Risk Risk Response

Liquidity Risk This is the risk that the College will not be able to meet its financial

obligations as and when they fall due. This can threaten the ongoing

concern status of the College and even subsequent liquidation.

Therefore, management will put in place stringent measures to prevent

this kind of risk from happening.

Develop a strategy for attracting students. Increase investment

in existing students and programs. Attracting competence and

qualified Lecturers. Rigorous processes to deal. Strengthening of

the internal controls to improve transparency and accountability

Periodic and random financial compliance audits with allegations

of irregularities

Reputational

Risk

This is the risk that the College will lose potential students, staff,

Lecturers, etc. because its character or quality has been called into

question. For example, if it is revealed that the College has been

maltreating its students and /or staff, students cheating in examinations,

poor delivery of tuition, low pass rate, etc. this risk would become a

stronger possibility due to the College’s tarnished reputation.

Clearly communicate disciplinary actions to all students.

Document all complaints that could impact on the Institution.

Formal procedure for reporting and dealing with. Use results-

based monitoring and reporting. Incorporate management of

reputational risk into academic programs. Use of a credible third

party in reputation crisis situations. Weigh the risks associated

with the operation, the tenor of the.

Regulatory Risk This is the risk that the College may fail to comply with the Government

legislations governing the Educational sector which has come in as a

result of political leaderships. The National Accreditation Board has the

mandate in Ghana to enact laws that regulate the operations and

activities of the Tertiary Institutions in Ghana. So the College will have

to comply with all the relevant regulations to the later.

Consistent review of the existing rule and regulations. Keeping

a list of all the rules and regulations. Continuous documentation on

any breach or deviations if there are any

26

It`s however well noting that the College `s level of exposure to these risks will be

minimal.

5.6 Human Resource Management

5.6.1 Human Resource Requirement

UT College of Business and Finance will have to its advantage a team of competent staff

(individuals) who will be entrusted with the management and operations of the College.

UTCBF however proposes to adopt a simple organogram as displayed below:

27

Figure 5.2 Organogram

LIBRARIAN

ASSIST LIBRARIAN

LIBRARY OFFICER

BOARD OF DIRECTORS

ACADEMIC BOARD

PRINCIPAL

COUNSELLING UNIT ASSIST PRINCIPAL

INTERNAL AUDITOR

ASSIST INT. AUDITOR

INTERNAL AUDIT OFFICERS

FINANCE OFFICER

ASSIST. FINANCE OFFICER

ACCOUNTS OFFICERS

ADMINISTRATOR

ASSIST. ADMINISTRATOR

ADMINISTRATIVE OFFICER

SYSTEM`S ADMINISTRATOR

ASSIST SYSTEMS

ADMINISTRATOR

SENIOR & JUNIOR IT STAFF

ACADEMIC REGISTRY

28

In conclusion, the result of the competitive nature of this sector UT College of Business

and Finance will put in place dynamic, experienced and competent professionals with

deeper industry knowledge to manage the operations and the activities of the College. Some

of these individuals have more than twenty (20) years of industry experience. They were

however chosen based on their qualifications, experiences, competence, excellent personal

attributes.

29

CHAPTER SIX

COOPERATE PLAN, OBJECTIVES AND STRATEGIES

6.0 COOPERATE PLAN, OBJECTIVES AND STRATEGIES

The College has a long term plan to build its own lecture halls and other infrastructural

developments. In additions to its professional program, the College will also enroll degree

programs to help minimize the increasing demand for tertiary education in the country. The

business courses on offer will be to provide the students the needed skills, training and

competence to make them much more employable and competed for. Our students will be

instilled with discipline and strict ethical values that will make them better and quality

graduates than other graduates. The College intends to achieve uninterrupted educational

calendar throughout the year by allowing students the flexibility in their chosen course.

There will be no discrimination emanating from religious, gender, ethnicity, language, and

any other social characteristics. The College intends to recruite the most competent

lecturers and staff and be charged with the responsibility of ensuring the students get the

best of these lecturers. The continuous utilization of state-of-the-art ultra-modern facilities

will be one of our priorities.

The College’s corporate strategy has been summarized as follows:

Research

To undertake research of the highest quality within an intellectually challenging

and inspiring environment in order to establish the market requirements.

To extend the frontiers of knowledge within and beyond existing programs

/disciplines

30

To bring together research expertise within and beyond the College to address

educational challenges of today and the future

Education

To identify, attract and develop students of the highest ability who are most able

to benefit from our education programs

To provide a research-led education of the highest quality within an

intellectually challenging and inspiring environment

To provide an educational experience that empowers students to be leaders in

their chosen careers and contribute to the long-term needs of society

Translation

To engage with the community to understand, identify and lead emerging

educational challenges and solutions

To maximize the social and economic value of our education through the

transfer of knowledge, talent and technology

To find innovative ways to extend the reach and impact of all our program

Organization

To maintain excellence by being efficient, effective, adaptable and integrated

To build mutually beneficial relationships with appropriate organizations in the

country

To achieve high standards of health, safety and environmental practice

Resources

31

To attract, develop, reward and retain a diverse community of staff of the

highest caliber

To invest in our facilities and estate and be financially sustainable with diverse

sources of income

To develop and increase our endowment assets

To transform information and data into insight and intelligence that guides our

thinking

Influence

To anticipate, understand and shape the thinking of stakeholders and policy

makers worldwide, including those in government, academia and industry

To be a first -class source of independent business college

To help create a wide awareness in society of the benefits of first- class

education in business.

32

CHAPTER SEVEN

MARKETING STRATEGY

7.0 Introduction

This chapter explains the marketing strategies the College intends to adopt in attracting as

many students as possible. It is important to understand that the targeted students would

have innumerable career needs and as a consequence require effective and efficient

planning and strategies to attract and retain them. In recent times, there has been a

considerable increase in the demand for tertiary education/ qualification. This is generally

so because it will give these students the competitive edge in securing the most lucrative

employment offers and /or setting up their business. Even though there are many tertiary

educational Institutions in the country with the sole aim of competing for students.

Nonetheless, UTCBF will adopt both low cost and differentiation marketing strategy in

attracting students.

It is significant to note that the UTCBF will be distinctive in their nature. As a consequence,

the College seeks to adopt the following marketing strategies:

Target marketing

Competition level

Pricing strategies

Advertising and promotion strategies

7.1 Target Marketing

UT College of Business and Finance looks forward to targeting students such as those who

have completed either Senior Secondary School Certificate Examination (SSSCE) or West

Africa Senior Secondary Certificate Examination (WASSCE), Diploma holders, first and

33

even second degrees holders and any other qualifying qualifications. There is a growing

and continuous demand for tertiary education considering the number of students leaving

the second cycle institutions according to a survey conducted by Ministry of Education.

7.2 Competition Level

It is without doubt that there is some level of competition within the educational sector.

However, UT College of Business and Finance like others will have to compete for

students. The College seeks to embark on differentiation as well as low cost strategies to

penetrate into the sector, even though Michael Porter believes that it is not possible for an

organization to pursue the two strategies simultaneously. Nevertheless, UT College of

Business and Finance will adopt since that is the most likely aggressive means to enter into

the market which is already in existence. The higher and the intensity the competition may

be, the more aggressive and dynamic strategies the College will also adopt in order to

survive the competition.

7.3 Pricing Strategies

One of the essential element of achieving the College`s financial objectives both within the

short and long term is by pricing. Appropriate pricing has the potential to attract and build

students loyalty that is central to long term survival of the College. Pricing will be based

on the nature of the course, the duration, the resources utilization, and sometimes the caliber

of the lecturers to be used. The College will deploy market penetration pricing strategy

under its low cost strategy. In view of this the College will be guided by the need to

establish a strong and successful students` base at the start of the programs. The College

will also ensure that charges are enough to recover the operating cost and satisfy the

expectations of its investors.

34

7.4 Advertising and Promotion Strategies

The promotional tools that the College seeks to employ will include advertisement on the

television, in newspapers, on the internet, bill boards, radio announcements, designed and

distribution of flyers, etc. The essence of the advertisement will be to inform and persuade

potential students to patronize in any of the programs offered by the College. The College

intends to lunch its programs on the social media networks such as the twitter, face book,

tagged, tango, etc. The College`s website yet to be designed and lunched will also be used

to advertise the courses.

7.5 Cost Analysis

A total Amount of Six Hundred & Sixty Seven Thousand Two Hundred and Twenty Ghana

Cedis (GH¢ 667,220.00) will be required to establish the University.

35

CHAPTER EIGHT

IMPLEMENTATION

8.0 Introduction

This part of the plan presents analysis of the costs and revenues associated with the

operations of the University within its first ten years.

The cost analysis relates to the investment that will have to be incurred in order to establish

the University. This will also include the operational cost. These investment costs were

determined based on discussions with some experts and technical advisors both within and

outside the industry. These individual advisors have several years of industry experience in

infrastructural development.

The investment costs have been broken down as follows:

Furniture and fittings

Setting up fully stocked library

Setting up a fully –furnished science laboratory

Purchase of office equipment

Setting up a fully –furnished computer library

Purchase of motor vehicles

8.1 Capital & Operating Cost

It is important to know that the above expenditure will be incurred prior to the

commencement of the program. An amount of Six Hundred & Sixty Seven Thousand Two

Hundred and Twenty Ghana Cedis (GH¢ 667, 220.00) will be required to set up the

College.

36

Below presents a summary of the investment cost needed.

Table 8.1 Summary of Investment Cost

Description GH¢

Renting Lecture Hall for Ten years 500,000

Computer Laboratory 45,200

Furniture and fittings 33,200

Library 12,420

Office Equipment 35,800

Motor Vehicles 35,200

Price Escalations 5,400

Total 667,220

8.2 Price Escalations

As a result of the price movements on the market, there is the tendency that prices used in

this document for the planning and the analysis may be increased in the course of the

construction. As a consequence, management has therefore taken into account and factored

in these price increases in the cost analysis.

8.3 Operating Cost

After the initial investment costs and infrastructural development, there will be continuous

operating cost in order to run the College as shown in the table below. These different kinds

of costs are anticipated to be incurred over the ten year period.

The table below presents the Projected Operating Cost.

37

Table 8.2 Operating Cost

Projected Operating Cost 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024

GH¢ GH¢ GH¢ GH¢ GH¢ GH¢ GH¢ GH¢ GH¢ GH¢

Staff Salaries 444,261 897,407 1,260,864 1,370,197 1,465,768 1,594,263 1,745,268 1,892,459 2,029,203 2,211,831

Lecturers Salaries 70,125 73,631 76,208 81,543 85,620 89,901 97,992 106,811 118,561 129,231

Utilities 2,600 3,068 4,755 6,420 8,282 10,600 12,720 15,137 18,316 23,994

Rent 1,200 1,416 1,600 2,160 2,787 3,567 4,280 5,093 6,163 8,073

Stationery 1,350 1,593 2,071 2,796 3,606 4,616 5,540 6,592 7,976 10,449

Sanitation and Cleaning 1,210 1,428 1,885 2,544 3,282 4,201 5,041 5,999 7,259 9,510

Fees & Charges 4,000 4,720 5,900 7,965 10,275 13,152 15,782 18,781 22,725 29,769

Library Expenditure 950 1,121 1,569 2,119 2,733 3,498 4,198 4,996 6,045 7,919

Admissions / Exams & Graduation Exp. 4,498 5,307 7,165 9,672 12,477 15,971 19,165 22,807 27,596 36,151

Publicity & Advertisements 2,750 3,245 4,381 5,914 7,629 9,765 11,718 13,945 16,873 22,104

Office Consumables 1150 1,357 1,832 2,473 3,190 4,084 4,900 5,831 7,056 9,243

Repairs & Maint. of Motor vehicle 400 472 637 860 1,110 1,420 1,704 2,028 2,454 3,215

General Adm. & Miscellaneous Exp. 4,150 4,896 6,267 8,461 10,915 13,971 16,765 19,950 24,140 31,623

Repairs & Maint. of Office Equipment 0 1,416 1,982 2,676 3,452 4,419 5,303 6,310 7,636 10,003

Repairs & Maintenance of Furniture 0 732 1,024 1,383 1,784 2,283 2,740 3,260 3,945 5,168

Repairs & Maint. of Plant & machinery 0 1,844 2,581 3,485 4,495 5,754 6,905 8,217 9,942 13,024

Repairs & Maint. of Computers/ accessories 0 1,573 2,202 2,973 3,836 4,910 5,891 7,011 8,483 11,113

Repairs & Maint. of Fixtures and fittings 0 354 637 860 1,110 1,420 1,704 2,028 2,454 3,215

Total 538,643 1,005,580 1,383,562 1,514,501 1,632,351 1,787,796 1,967,619 2,147,256 2,326,827 2,575,636

38

8.4 Revenue Analysis

Revenue projections are driven by number of students and the fees charged.

Revenue estimates are computed with guidance from prevailing enrolment levels and

current market rates derived from our market survey conducted on similar institutions in

Ghana. The market survey indicated that there is a considerable need for dermatological

education. It was also revealed that a substantial number of WASSCE leavers have

challenges in securing admission to the country’s Universities. This is largely due to the

rising number of WASSCE leavers as opposed to available tertiary institutions in the

country. A large number of qualified students therefore end their education after emerging

out of Secondary/ high school. The establishment of this College is a strategic move to

provide the opportunity for individuals with interest in pursuing Business and /or Finance

related programs. It is also another tactical move to assist in bridging the gap between

supply and demand of tertiary education in Ghana.

The main source of revenue to UTCBF is payment of fees. The fee charged will be

dependent on the type of course being undertaken. In addition to the fee charged for each

course, revenue generation will be based on the size of enrolment for each course. This is

shown in the tables below.

39

Table 8.3 Student Enrolment

Student Enrolment

2015 2016 2017 2018 2019 2020 2021 2022 2023 2024

GBCE 80 144 173 233 315 425 574 775 1046 1412

ABCE 110 198 228 262 301 346 398 458 527 606

WASSCE REMEDIALS 85 153 176 202 233 268 308 354 407 468

ICAG 32 58 86 130 168 219 285 370 481 626

ACCA 42 76 121 165 224 304 414 563 765 1,041

CIM 28 53 74 104 146 204 286 401 561 785

Total 377 681 858 1,096 1,387 1,767 2,265 2,920 3,787 4,937

40

Table 8.4 Yearly fees per Course / Student

Yearly Fees per Course/ Student 2,015 2,016 2,017 2,018 2,019 2,020 2021 2022 2023 2024

GH¢ GH¢ GH¢ GH¢ GH¢ GH¢ GH¢ GH¢ GH¢ GH¢

GBCE 1,100 2,442 2,515 2,591 2,668 2,748 2,831 2,916 3,003 3,093

ABCE 1,500 3,330 3,630 3,938 4,371 4,765 5,194 5,646 6,154 6,701

WASSCE REMEDIALS 300 666 726 788 874 953 1,039 1,129 1,231 1,340

ICAG 260 289 315 343 374 407 444 484 528 575

ACCA 340 755 762 827 918 1,001 1,091 1,186 1,292 1,407

CIM 240 533 591 656 729 809 898 997 1,106 1,228

41

8.5 Revenue Projections

Based on the size of expected enrolment and fees, the following estimates represent the revenues that UTCBF will generate in the forecast period.

Table 8.5 Revenue Projections

Revenue Forecast/ program

2015 2016 2017 2018 2019 2020 2021 2022 2023 2024

GH¢ GH¢ GH¢ GH¢ GH¢ GH¢ GH¢ GH¢ GH¢ GH¢

GBCE 88,000 351,648 434,637 604,363 840,366 1,168,529 1,624,840 2,259,340 3,141,612 4,368,412

ABCE 165,000 659,340 826,483 1,031,244 1,316,383 1,650,086 2,068,382 2,585,581 3,241,026 4,058,899

WASSCE 25,500 101,898 127,729 159,374 203,441 255,013 319,659 399,590 500,886 627,284

ICAG 8,320 16,623 27,179 44,438 62,969 89,227 126,434 179,157 253,865 359,727

ACCA 14,280 57,063 92,214 136,070 205,412 304,503 451,395 667,306 989,214 1,465,065

CIM 6,720 28,345 44,048 68,451 106,372 165,303 256,880 399,192 620,345 964,015

Total 307,820 1,214,917 1,552,290 2,043,940 2,734,943 3,632,660 4,847,590 6,490,166 8,746,948 11,843,404

42

8.6 Operating Profit Forecast

Based on the projections of revenue and cost, I have computed forecast operating profit of the College over the cash flow period. This is

however shown below.

Table 8.6 Operating Profit Forecast

Operating Profit

Forecast 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024

GH¢ GH¢ GH¢ GH¢ GH¢ GH¢ GH¢ GH¢ GH¢ GH¢

Total Income 331,860 1,296,222 1,611,713 2,073,274 2,714,352 3,517,570 4,569,363 5,940,460 7,755,896 10,147,278

Operating Cost -658,577 -1,344,070 -1,437,785 -1,580,811 -1,708,577 -1,877,214 -2,069,353 -2,261,788 -2,454,942 -2,728,572

Operating Profit/ Loss -326,717 -47,848 173,928 492,463 1,005,775 1,640,356 2,500,010 3,678,672 5,300,955 7,418,706

43

8.7 Investment Appraisal

This section presents investment appraisals on the College. Three investment appraisal

models were employed to assess the viability of the project and these are Net Present Value

(NPV), Profitability Index (PI) and Payback Period. The appraisals were conducted with

the following assumptions:

UTCBF will incur all the initial cost in 2015

The College is expected to operate perpetually

The College will have no tax concession

All tax incurred is paid during the year

8.7.1 Net Present Value

NPV is used in capital budgeting to analyze the profitability of an investment or project. It

accesses the difference between the present value of cash inflows and the present value of

cash outflows. NPV analysis is sensitive to the reliability of future cash inflows that an

investment or project will yield. NPV compares the value of a dollar today to the value of

that same dollar in the future, taking inflation and returns into account. If the NPV of a

prospective project is positive, it should be accepted and pursue. However, if NPV is

negative, then the project should be rejected. From the analysis, the College`s investment

is viable and therefore should be undertaken since it has a positive NPV of GH¢2.4 million.

8.7.2 Profitability Index

The profitability index is known as benefit cost ratio. It is primarily used as a tool to rank

projects. The higher the value of profitability index, the more attractiveness of a proposed

project is. For a single project, profitability index value of ‘1’ or greater is acceptable. If a

project has profitability index (>1), then such project should be undertaken. However if a

44

project has profitability index (<1) then it should be rejected. Profitability Index (PI) =

Total present value/Net cash outlay proposal. The profitability Index expectation from the

College is as high as 5.0, meaning that the establishment of the College is economically

viable. The high profitability index is due to the relatively high levels of yearly returns.

8.7.3 Payback Period (PBP)

The payback period is the traditional method of evaluating investment proposals under

capital budgeting? It is the simplest and perhaps the most widely employed quantitative

method for appraising capital expenditure decisions. It is also called payout or pay off

period. Payback period is the time period required to recover the investment made in a

project. Thus, PBP measures the number of years to pay back the initial outlay from cash

inflows generated by an investment proposal. The payback period obtained from the

College analysis is Sixty Five months (65), which is even less than a year. The UT bank

Ghana Ltd should therefore go ahead to establish this College since it`s viable.

8.7.4 Free Cash Flow

This was calculated based on the cash flow available to the shareholders after adding back

depreciation to net profit after tax. An example is seen in table 8.6

8.7.5 Cost of Debt

This is the cost of every dollar received from debt holders. It shows how much the College

is required to pay as interest to debt holders. It should be understood that a total amount of

Six Hundred & Sixty Seven Thousand Two Hundred and Twenty Ghana Cedis (GH¢

667,220.00). This amount will be repaid within 10 years and it is interest free, thus no cost

to the College.

45

8.7.6 Cost of Equity

This like the cost of debt refers to every dollar received from the Equity holders. This

indicates the reward to equity holders for bearing the risk of investing in the College. In

this calculation 22% was employed as cost of capital.

8.7.7 Weighted Average Cost of Capital (WACC)

The concept of WACC is a means of measuring the present cost of equity and debt input

into the College`s project. It represents the average cost of the funds used for the

investment. The College is funded by 100% equity by UT bank Ghana Ltd.

NB: The next page presents the three investment appraisal methods applied and their

respective results.

46

8.7.8 Investment Appraisal

Table 8.6 Results

Projected Cash Flows- Most Likely

2015 2016 2017 2018 2019 2020 2021 2022 2023 2024

GH¢ GH¢ GH¢ GH¢ GH¢ GH¢ GH¢ GH¢ GH¢ GH¢

Total Income 307,820 1,214,917 1,552,290 2,043,940 2,734,943 3,632,660 4,847,590 6,490,166 8,746,948 11,843,404

Operating Cost (538,643) (1,005,580) (1,383,562) (1,514,501) (1,632,351) (1,787,796) (1,967,619) (2,147,256) (2,326,827) (2,575,636)

Operating Profit -230,823 209,337 168,727 529,438 1,102,592 1,844,864 2,879,972 4,342,910 6,420,121 9,267,768

Less Capital Allowance (26,050) (19,538) (14,653) (10,990) (8,242) 6,182) (4,636) (3,477) (2,608)

7,824

Profit Before Tax (256,873) 189,799 154,074 518,449 1,094,350 1,838,683 2,875,336 4,339,432 6,417,513

9,259,944

Tax (25%) -64,218 -47,450 -38,519 -129,612 -273,587 -459,671 -718,834 -1,084,858 -1,604,378 -2,314,986

After Tax Cash Flow - 321,091 142,349 115,556 388,836 820,762 1,379,012 2,156,502 3,254,574 4,813,135 6,944,958

Add Back Capital Allowance 26,050

19,538

14,653 10,990 8,242 6,182 4,636

3,477 2,608

-

7,824

Free Cash Flow - 667,220 -295,041 161,887 130,209 399,826 829,005 1,385,194 2,161,138 3,258,052 4,815,743 6,937,134

Discount Rate 25% 1.0000 0.8000 0.6400 0.5120 0.4100 0.3280 0.2620 0.2100 0.1680 0.1340 0.1070

Present Value -667,220 -236,033 103,608 66,667 163,929 271,914 362,921 453,839 547,353 645,310 742,273

Net Present Value 2,454,559

Profitability Index 5

Payback 65 Months

47

In relation to the discount rate of 25 % employed, it can be observed that the project has a

positive present value of Two Million Four Hundred and Fifty Four Thousand Five Hundred

and Fifty Nine Ghana Cedis (GH¢2,454,559). This means that UT Bank will be able to yield

positive returns from the establishment of the College. Therefore it is viable to undertaken this

investment.

8.7.9 Profitability Index

The profitability index is known as benefit cost ratio. It is primarily used as a tool to rank

projects. The higher the value of profitability index, the more attractiveness of a proposed

project is. For a single project, profitability index value of ‘1’ or greater is acceptable. If a

project has profitability index (>1), then such project should be undertaken. However if a

project has profitability index (<1) then it should be rejected. Profitability Index (PI) = Total

present value/Net cash outlay proposal. The profitability Index from the project I as high as

5.0, meaning that the establishment of the College is economically viable. The high

profitability index is due to the relatively high levels of yearly returns.

8.7.10 Payback Period Analysis

The payback period is the traditional method of evaluating investment proposals under capital

budgeting? It is the simplest and perhaps the most widely employed quantitative method for

appraising capital expenditure decisions. Payback period is the time period required to recover

the investment made in a project. Thus, PBP measures the number of years to pay back the

initial outlay from cash inflows generated by an investment proposal. The payback period

obtained from this project analysis Sixty five months (65) that is Five years and Five Months.

8.7.11 Net Present Value (NPV)

48

NPV is used in capital budgeting to analyze the profitability of an investment or project. It

accesses the difference between the present value of cash inflows and the present value of cash

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

or project will yield. NPV compares the value of a dollar today to the value of that same dollar

in the future, taking inflation and returns into account. If the NPV of a prospective project is

positive, it should be accepted and pursue. However, if NPV is negative, then the project should

be rejected. From the analysis, the establishment of the College project is viable and therefore

should be undertaken since it has a positive NPV of GH¢ 2,454, 599.

8.8 Investment Appraisal

8.8.1 Sensitivity Analysis

Under the sensitivity analysis, the expected students’ enrolment was varied to ascertain the

effect on the appraisal model and more significantly the revenue forecast. By this, a 10%

increase and decrease was applied to the students numbers to access the impact on the College`s

revenue projections. The assessment was performed under two additional scenarios as ‘Best

Case’ and ‘Worst Case’. The table below presents the two case scenarios while the tables

showing expected operating results under each scenario are presented on the next page.

49

Table 8.7 Forecast Student Enrolment

Forecast Student Enrolment-(Best Case)

2015 2016 2017 2018 2019 2020 2021 2022 2023 2024

GBCE 88 158 190 257 315 468 631 852 1,151 1,553

ABCE 121 218 250 288 301 381 438 504 579 666

WASSCE 94 168 194 223 233 294 339 389 448 515

ICAG 35 63 95 143 168 241 313 407 529 688

ACCA 46 83 133 181 224 335 455 619 842 1,145

CIM 31 59 82 115 146 225 315 441 617 864

Total 415 750 944 1205 1387 1943 2491 3,212 4,166 5,431

Forecast Student Enrolment (Worse Case)

2015 2016 2017 2018 2019 2020 2021 2022 2023 2024

GBCE 72 130 156 210 283 383 517 697 941 1271

ABCE 99 178 205 236 271 312 358 412 474 545

WASSCE 77 138 158 182 209 241 277 319 366 421

ICAG 29 52 78 117 152 197 256 333 433 563

ACCA 38 68 109 148 201 274 372 506 689 937

CIM 25 48 67 94 131 184 258 361 505 707

Total 339 613 772 986 1248 1590 2038 2628 3408 4444

50

Table 8.8 Project Cash Flow

Project Cash Flow-(Best Case) 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024

GH¢ GH¢ GH¢ GH¢ GH¢ GH¢ GH¢ GH¢ GH¢ GH¢

GBCE 96,800 386,813 478,101 664,799 840,366 1,285,382 1,787,324 2,485,274 3,455,773 4,805,253

ABCE 181,500 725,274 909,131 1,134,368 1,316,383 1,815,094 2,275,221 2,844,140 3,565,129 4,464,789

WASSCE REMEDIALS 28,050 112,088 140,502 175,311 203,441 280,515 351,625 439,549 550,974 690,013

ICAG 9,152 18,286 29,897 48,882 62,969 98,149 139,077 197,073 279,252 395,700

ACCA 15,708 62,769 101,435 149,677 205,412 334,953 496,534 734,036 1,088,135 1,611,572

CIM 7,392 31,179 48,453 75,296 106,372 181,833 282,568 439,111 682,379 1,060,417

Total 338,602 1,336,409 1,707,519 2,248,334 2,734,943 3,995,926 5,332,350 7,139,183 9,621,643 13,027,744

51

Table 8.9 Project Cash Flow

Project Cash Flow- (Worse

Case) 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024

GH¢ GH¢ GH¢ GH¢ GH¢ GH¢ GH¢ GH¢ GH¢ GH¢

GBCE 79,200 316,483 391,173 543,926 756,330 1,051,676 1,462,356 2,033,406 2,827,451 3,931,571

ABCE 148,500 593,406 743,834 928,119 1,184,744 1,485,077 1,861,544 2,327,023 2,916,924 3,653,009

WASSCE REMEDIALS 22,950 91,708 114,956 143,437 183,097 229,512 287,693 359,631 450,797 564,556

ICAG 7,488 14,961 24,461 39,994 56,672 80,304 113,791 161,241 228,479 323,755

ACCA 12,852 51,357 82,992 122,463 184,871 274,052 406,255 600,575 890,293 1,318,559

CIM 6,048 25,510 39,643 61,606 95,735 148,772 231,192 359,273 558,310 867,614

Total 277,038 1,093,425 1,397,061 1,839,546 2,461,449 3,269,394 4,362,831 5,841,149 7,872,254 10,659,063

52

Table 8.10 Projected Cash Flows- Best Case

2015 2016 2017 2018 2019 2020 2021 2022 2023 2024

GH¢ GH¢ GH¢ GH¢ GH¢ GH¢ GH¢ GH¢ GH¢ GH¢

Total Income 338,602 1,336,409 1,707,519 2,248,334 2,734,943 3,995,926 5,332,350 7,139,183 9,621,643 13,027,744

Operating Cost (538,643) (1,005,580) (1,383,562) (1,514,501) (1,632,351) (1,787,796) (1,967,619) (2,147,256) (2,326,827) (2,575,636)

Operating Profit (200,041) 330,829 323,956 733,832 1,102,592 2,208,130 3,364,731 4,991,926 7,294,816 10,452,108

Less Capital Allowance (26,050) (19,538) (14,653) (10,990) (8,242) (6,182) (4,636) (3,477) (2,608) 7,824

Profit Before Tax (226,091) 311,291 309,303 722,843 1,094,350 2,201,949 3,360,095 4,988,449 7,292,208 10,459,932

Tax (25%) (56,523) (77,823) (77,326) (180,711) (273,587) (550,487) (840,024) (1,247,112) (1,823,052) (2,614,983)

After Tax Cash Flow (282,614) 233,468 231,977 542,132 820,762 1,651,462 2,520,071 3,741,337 5,469,156 7,844,949

Add Back Capital

Allowance 26,050 19,538 14,653 10,990 8,242 6,182 4,636 3,477 2,608 (7,824)

Free Cash Flow (667,220) (256,564) 253,006 246,630 553,122 829,005 1,657,643 2,524,707 3,744,814 5,471,764 7,837,125

Discount Rate 25% 1.000 0.800 0.640 0.512 0.410 0.328 0.262 0.210 0.168 0.134 0.107

Present Value (667,220) (205,251) 161,924 126,275 226,780 271,914 434,303 530,189 629,129 733,216 838,572

Net Present Value 3,079,829

Profitability Index 6

Payback 67 Months

53

Table 8.11 Projected Cash Flows- Worse Case

2015 2016 2017 2018 2019 2020 2021 2022 2023 2024

GH¢ GH¢ GH¢ GH¢ GH¢ GH¢ GH¢ GH¢ GH¢ GH¢

Total Income 277,038 1,093,425 1,397,061 1,839,546 2,461,449 3,269,394 4,362,831 5,841,149 7,872,254 10,659,063

Operating Cost (538,643) (1,005,580) (1,383,562) (1,514,501) (1,632,351) (1,787,796) (1,967,619) (2,147,256) (2,326,827) (2,575,636)

Operating Profit (261,605) 87,845 13,498 325,044 829,098 1,481,598 2,395,213 3,693,893 5,545,426 8,083,428

Less Capital Allowance (26,050) (19,538) (14,653) (10,990) (8,242) (6,182) (4,636) (3,477) (2,608) 7,824

Profit Before Tax (287,655) 68,308 (1,155) 314,055 820,855 1,475,417 2,390,577 3,690,416 5,542,818 8,091,252

Tax (25%) (71,914) (17,077) (289) (78,514) (205,214) (368,854) (597,644) (922,604) (1,385,705) (2,022,813)

After Tax Cash Flow (359,569) 51,231 (1,443) 235,541 615,642 1,106,563 1,792,933 2,767,812 4,157,114 6,068,439

Add Back Capital

Allowance 26,050 19,538 14,653 10,990 8,242 6,182 4,636 3,477 2,608 (7,824)

Free Cash Flow (667,220) (333,519) 70,768 13,210 246,531 623,884 1,112,744 1,797,569 2,771,289 4,159,722 6,060,615

Discount Rate 25% 1.000 0.800 0.640 0.512 0.410 0.328 0.262 0.210 0.168 0.134 0.107

Present Value (667,220) (266,815) 45,292 6,763 101,078 204,634 291,539 377,489 465,577 557,403 648,486

Net Present Value 1,764,225

Profitability Index 2

Payback 78 Months

54

8.8.2 Scenario-Based Cash Flows

The College is expected to record impressive gains over the cash flow period

The cash flows expected to be generated from the project under the three scenarios are

presented in the graph below.

Figure 8.1 Scenario-Based Cash Flows

The summary of the results of the appraisal for all three models used are presented below:

Table 8.12 Appraisal results summary

NPV PI Payback

Best Case 3,079,829 6 67 Months

Most Likely 2,454,559 5 65 Months

Worst Case 1,764,225 2 78 Months

In conclusion from the above, the business is worthwhile under all three scenarios.

However, management would endeavor to keep operating cost under control whiles

working hard to improve on student enrolment.

Based on our financial analysis, UTCBF will be viable under the Optimistic, Most likely

and Pessimistic scenarios.

(1,000,000)

-

1,000,000

2,000,000

3,000,000

4,000,000

5,000,000

6,000,000

7,000,000

8,000,000

9,000,000

2015 2016 2017 2018 2019 2020 2021 2022 2023 2024

Best Case

Most Likely

Worse Case

55

Education of Ghanaians has since independence been the interest of successive

governments in the country. To this end, governments in the past contributed their quota in

raising several educational institutions to meet our educational needs. However, there still

remains a substantial gap with supply falling short of demand. This has necessitated the

entry of private operators, who since 2000 have contributed enormously to providing

education at all levels –basic, secondary and tertiary.

Regardless of this development, many high school leavers in the country are still faced with

the challenge of finding admission into tertiary institutions due to the inadequate supply of

tertiary institutions. This is due to the increasing demand pressure on tertiary institutions

leading to the rise in cut-off grades for admissions.

It is against this backdrop that UT College of Business and Finance has to be established

to provide students with the opportunity of acquiring qualification that will make them

much more employable. Whereas management of the College looks to providing first class

facilities for its programs, they also intend to introduce undergraduate programs to help

minimize the increasing demand for tertiary education. From the analysis of UTCBF’s

operations, the establishment of the College will be economically viable.

It is also important to understand that it is a critical need in the country. Assessment of

associated cash flows shows that the business will be worthwhile under all the three

scenarios considered, with expected net present values under the most likely, best case and

worst case scenarios as GH¢ 2,454,559, GH¢ 3,079,829 and GH¢ 1,764,225 respectively.

This appears to be highly rewarding and therefore the UT bank Ghana Ltd will be building

on its plans of diversification and this time into Education.

56

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