DEPARTMENT OF ECONOMICS

UNIVERSITY OF GHANA LEGON

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

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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 (10109918)

............................................. Dr. D.K. Twerefou (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
Chapter One (Introduction)……………………………………………………

Page
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 pick- up, 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 •Analyzing

an appraisal of the project.

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=

 (1  r )
i 0

n

Bi

i

 Ci

Where: n = lifetime of the project r = discount rate Bί = benefits for ίth year Cί = costs for ίth year i = year

1.7

STRUCTURE OF THE STUDY

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Table 1.01 Contents of project work

Chapter One Two Three Four Five

Content Introduction( Proposal) Elements of project appraisals (Technical, social, economic, institutional, financial) Elements of Costs and Benefits Calculating the investment criteria and analysis of results 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: 18

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

Time

Duration of activity (months) 1–3 4–5

Activity
Redesign and of cages Renovation of offices Renovation of washrooms

Year One 6

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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Time

Duration of Activity (months) 7

Activity
Providing entertainment

Year One

8

facilities 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

Time
Year One

Duration (months) 11 – 12

of

Activity

Activity
Restocking of the zoo

1–2

Restocking of the zoo

Year Two

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

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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. 23

PROJECT Reconstruction of cages Renovation of offices Renovation of washrooms Provision of entertainment facilities Provision of resting places Landscaping and pavement Restocking of the zoo

COST ( ¢) 1,872,769,324 254,880,970 53,100,000 101,500,000 19,500,000 272,000,000 291,373,920 COST (¢) 13,662,285 1,326,373,874 4,205,160,313 420,516,031.3 4,625,676,344

PROJECT

Creation of website Purchase of vehicles Sub Total Contingencies (10%) Grand Total

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 Government NGOs & Organizations Companies Individuals Total AMOUNT (¢) 693,851,451.6 2,312,838,172 1,387,702,903 231,283,817.2 4,625,676,344 % 15 50 30 5 100

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

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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.

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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.

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Table 3.01 Breakdown of cost involved in redesigning a primate cage Breakdown Substructure Superstructure Chain link fencing Sub total 5% Preliminaries Total 10% Contingencies cost ($) 2780.50 2713.45 4789.80 10283.75 514.19 10797.94 1079.79 11877.73 25,325,322.3 24,714,618.16 43,626,408.46 93,666,348.91 4,683,340.216 98,349,689.13 9,834,932.48 108,184,621.6 cost (¢) 9108.19

Grand total

Table 3.02 Breakdown of cost involved for all cages Animal Group Primate Herbivore Carnivores Reptiles Cost per cage ( ¢ ) 108,184,621.6 108,184,621.6 108,184,621.6 108,184,621.6 No. of Cages 1 4 4 2 Total Cost ( ¢ ) 108,184,621.6 432,738,486.4 432,738,486.4 216,369,243.2

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Rodents Birds Labour Total

108,184,621.6 108,184,621.6

1 3

108,184,621.6 324,553,864.8 250,000,000

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1,872,769,324

3.32 Renovation of offices Table 3.03 Breakdown of cost involved in office renovation Item Painting * Brushes Scrapers Cement Louvres Floor carpet Curtains Furniture (chairs & desks) Computers Printers Labour 10 10 100 bags 160 pcs 100 yards 100 yards 10 6 2 150,000 50,000 55,000 10,000 127,500 100,000 635,897 11,112,000 3,821,000 No. Unit Cost ( ¢ ) Total Cost ( ¢ ) 100,000,000 1,500,000 500,000 5,500,000 1,600,000 12,750,000 10,000,000 6,358,970 66,672,000 7,642,000 42,358,000

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Total

254,880,970

* Table 3.04 Painting breakdown Item Oil paint wood primer No. 100 gallons 50 gallons 50 gallons Emulsion paint Labour Total 150 gallons Unit cost ( ¢ ) 100,000 50,000 50,000 50,000 Total cost ( ¢ ) 10,000,000 2,500,000 2,500,000 75,000,000 10,000,000 100,000,000

3.33 Renovation of washrooms Table 3.05 Breakdown of renovation cost of washrooms

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Items Water closet Wash hand basin Wall and floor tiles Louvres Doors Labour Total

No. 10 5 2 rooms 20 2

Unit Cost ( ¢ ) 1,000,000 500,000 10,000,000 per room 100,000 200,000

Total Cost ( ¢ ) 20,000,000 2,500,000 20,000,000 200,000 400,000 10,000,000 53,100,000

3.34 Provision of entertainment facilities Table 3.06 Breakdown of cost of entertainment facilities Item Merry-go-round Swing See saw 3 Slides Hunt house Labour Total 3 2 7,500,000 10,000,000 22,500,000 20,000,000 5,000,000 101,500,000 No. 3 3 Unit cost ( ¢ ) 8,500,000 5,500,000 4,000,000 Total cost ( ¢ ) 25,500,000 16,500,000 12,000,000

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3.35 Provision of resting places Table 3.07 Breakdown of cost of resting places Item Seats Labour Total No. 25 Unit cost ( ¢ ) 700,000 Total cost ( ¢ ) 17,500,000 2,000,000 19,500,000

3.36 Redesigning of landscape

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Table 3.08 Breakdown of cost of landscape Item Grass and seedlings Black soil Manure Watering can Shears Ladder Sprinklers Pavement blocks Labour Total 1000 bags 500 bags 3 3 2 2 55766 10,000 8000 5000 50000 100,000 100,000 3000 No. Unit cost ( ¢ ) Total cost ( ¢ ) 75,000,000 10,000,000 4,000,000 150,000 150,000 200,000 200,000 167,300,000 15,000,000 272,000,000

3.37 Restocking the zoo Table 3.09 Breakdown of restocking cost

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Animal Giraffe Warthog Buffalo Elephant Roam antelope Heart beast Bongo Birds Pigmy hippo Snakes Sub total Shipping costs Labour Grand Total

No. 2 2 2 2 2 2 2 4 2 10

Unit cost ( ¢ ) 13,662,000 9,105,000 9,105,000 75,000,000 4,554,000 8,015,040 910,000 455,400 4,918,320 400,000

Total costs ( ¢ ) 27,324,000 18,216,000 18,216,000 150,000,000 9,108,000 16,030,080 1,821,600 1,821,600 9,836,640 4,000,000 256,373,920 25,000,000 10,000,000 291,373,920

3.38 Creation of website Item 3 page starter website Cost ( $ ) 1500 Cost ( ¢ ) 13,662,285 35

3.39 Provision of vehicles Table 3.11 Breakdown of cost involved in purchasing vehicles

Item Rodeo Denver pickup Chevrolet express van Chevrolet S SR Truck Compact truck Total

No. 2 2 1 5

Unit cost ( ¢ ) 224,405,186 262,078,996 357,405,451

Total cost ( ¢ ) 444,810,371 524,157,992 357,405,451 1,326,373,814

TOTAL COST Table 3.12 Breakdown of total cost

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Project Cages

Cost ( ¢ )

1,872,769,324 Offices 254,880,970 Washrooms Entertainment Resting place Landscape Restocking Website Vehicles Total 10% Contingencies Grand total 53,100,000 101,500,000 19,500,000 272,000,000 291,373,920 13,662,285, 1,326,373,814 4,205,160,313 420,516,031.3 4,625,676,344

3.4 MAINTENANCE AND OPERATIONAL COSTS

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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:

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Table 3.13 Maintenance and operational cost

39

No. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

Year 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027

Cost ( ¢ ) 925,135,268.8 1,017,648,796 1,119,413,676 1,231,355,044 1,354,490,548 1,489,939,603 1,638,933,563 1,802,826,919 1,983,109,611 2,181,420,572 2,399,562,629 2,639,518,892 2,903,470,781 3,193,817,859 3,513,199,645 3,864,519,609 4,250,971,570 4,676,068,727 5,143,675,600 5,658,043,160

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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 2002 2003 2004 2005

67,699 64,667 82,621 85,441 214,555

59,768,000 72,202,900 117,137,200 197,475,900 306,667,000

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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 * Adults -

¢ 5000 ¢ 10000

2. Non-national: * Children * Adults -

¢ 10000 ¢ 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 107,277 Gate fee/ visitor (¢) 15000 Total revenue (¢) 1,609,155,000

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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 ( ¢ ) 5,000,000

No. of months 12

Total revenue ( ¢ ) 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

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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 zoo as a result of the implementation of the upgrading project. they stay on at the

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Table 3.17 Amount of money saved on training professionals Professional Cost of train. ( ¢) No of years of Total Cost ( ¢) training 4 7 56,000,000 105,000,000 161,000,000

Zoologist Veterinary doctor Total

14,000,000 15,000,000

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 Rent from restaurant

1,609,155,000 60,000,000

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Brain drain Total

161,000,000 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. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 Year 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 Benefit (¢ ) 1,830,155,000 2,013,170,500 2,214,487,550 2,679,529,936 2,947,482,929 3,242,231,222 3,566,454,344 3,923,099,779 4,315,409,756 4,746,950,732 5,221,645,805 5,743,810,386 6,318,191,424 6,950,010,567 7,645,011,624 8,409,512,786

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17 18 19 20

2024 2025 2026 2027

9,250,464,064 10,175,510,470 11,193,061,520 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.

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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.

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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.

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4.34 FORMULA F0R NPV

Bi  (1  r )i  Ci i 0
Where: n = lifetime of the project r = discount rate

n

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 2008 2009 2010 2011 2012 2013 2014 2015 2016 Benefit (A) 1,830,155,000 2,013,170,500 2,214,487,550 2,435,936,305 2,679,529,936 2,947,482,930 3,242,231,223 3,566,454,345 3,923,099,780 M & O cost (B) 925,135,268.8 1,017,648,796 1,119,413,676 1,231,355,044 1,354,490,548 1,489,939,603 1,638,933,563 1,802,826,919 1,983,109,611 A–B (C) 905,019,731.2 995,521,704 1,095,073,874 1,204,581,261 1,325,039,388 1,457,543,327 1,603,297,660 1,763,627,426 1,939,990,169 Discount rate(D) 0.8584 0.7368 0.6324 0.5429 0.4660 0.4000 0.3433 0.2947 0.2530 C x D = NPV 776,868,937.3 733,500,391.5 692,524,717.9 653,967,166.6 617,468,354.8 583,017,330.8 550,412,086.7 519,741,002.4 490,817,512.8

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2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 TOTAL

4,315,409,758 4,746,950,734 5,221,645,807 5,743,810,388 6,318,191,427 6,950,010,570 7,645,011,627 8,409,512,790 9,250,464,069

2,181,420,592 2,399,562,629 2,639,518,892 2,903,470,781 3,193,817,859 3,513,199,645 3,864,519,609 4,250,971,570 4,676,068,727

2,133,989,166 2,347,388,105 2,582,126,915 2,840,339,607 3,124,373,568 3,436,810,925 3,780,492,018 4,158,541,220 4,574,395,342 5,031,834,880 5,535,018,370

0.2171 0.1864 0.1600 0.1373 0.1179 0.1011 0.0869 0.0746 0.0640 0.0549 0.0471

463,289,047.9 437,553,142.8 413,140,306.4 389,978,628 368,363,643.7 347,461,584.5 328,524,756.4 310,227,175 292,761,301.9 276,247,734.9 260,699,365.2 9,506,564,188

10,175,510,480 5,143,675,600 11,193,061,530 5,658,043,160

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

4.35 DECISION BASED ON RESULT

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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 =
Present value of benefit Present value of cost

4.43 CALCULATION OF BENEFIT-COST RATIO B/C =

Present value of benefit Present value of cost 9,506,564,188 4,625,676,344

=

= 2.06

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4.44 DECISION BASED ON RESULT 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 2008 2009 2010 2011 2012 2013 2014 2015 NPV 776,868,937.3 733,500,391.5 692,524,717.9 653,967,166.6 617,468,354.8 583,017,330.8 550,412,086.7 519,741,002.4 Ci 4,625,676,344 3,848,807,407 3,115,307,015 2,422,782,297 1,768,815,131 1,151,346,776 568,329,445.1 17,917,358.4 NPV - Ci [3,848,807,407] [3,115,307,015] [2,422,782,297] [1,768,815,131] [1,151,346,776] [568,329,445.1] [17,917,358.4] 501,823,644

* Figures in parenthesis [] represent negative values Where Ci = outstanding cost

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4.51 DECISION BASED ON RESULT 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.

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

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Year 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 TOTAL

Benefit (A) 1,830,155,000 2,013,170,500 2,214,487,550 2,435,936,305 2,679,529,936 2,947,482,930 3,242,231,223 3,566,454,345 3,923,099,780 4,315,409,758 4,746,950,734 5,221,645,807 5,743,810,388 6,318,191,427 6,950,010,570 7,645,011,627 8,409,512,790 9,250,464,069

M & O cost

A–B

Discount rate(D) 0.865801 0.749611 0.649014 0.561917 0.486508 0.421219 0.364692 0.315751 0.273377 0.23669 0.204927 0.177426 0.153615 0.133 0.115152 0.099698 0.086319 0.074735 0.064706 0.056022

C x D = NPV

(B) (C) 925,135,268.80 905,019,731.2 1,017,648,796 1,119,413,676 1,231,355,044 1,354,490,548 1,489,939,603 1,638,933,563 1,802,826,919 1,983,109,611 2,181,420,592 2,399,562,629 2,639,518,892 2,903,470,781 3,193,817,859 3,513,199,645 3,864,519,609 4,250,971,570 4,676,068,727 995,521,704 1,095,073,874 1,204,581,261 1,325,039,388 1,457,543,327 1,603,297,660 1,763,627,426 1,939,990,169 2,133,989,166 2,347,388,105 2,582,126,915 2,840,339,607 3,124,373,568 3,436,810,925 3,780,492,018 4,158,541,220 4,574,395,342 5,031,834,880 5,535,018,370

783,566,866.8 746,254,158.7 710,718,246.1 676,874,519.9 644,642,400.3 613,945,143.2 584,709,660.3 556,866,343.2 530,348,898.4 505,094,184.2 481,042,084.8 458,135,318.8 436,319,351.3 415,542,239.3 395,754,513.7 376,909,060.7 358,961,010.2 341,867,628.8 325,588,218.1 310,084,017.4 10,253,223,864

10,175,510,480 5,143,675,600 11,193,061,530 5,658,043,160

NPV = BPV – CPV Where NPV = Net Present Value BPV = Present Value of Benefits 55

CPV = Present Value of Cost 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 =

Present value of benefit Present value of cost
10,253,223,864 4,625,676,344

=

= 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

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Year
2008

NPV
783,566,866.80

Ci
4,625,676,344 3,842,109,477.20

NPV - Ci
[3,842,109,477.20] [3,095,855,319] [2,385,137,072] [1,708,262,553] [1,063,620,152] [449,675,009] 135,034,651

2009 746,254,158.70 2010 710,718,246.10 2011 676,874,519.90 2012 644,642,400.30 2013 613,945,143.20 2014 584,709,660.30

3,095,855,319 2,385,137,072 1,708,262,553 1,063,620,152 449,675,009

* Figures in parenthesis [] represent negative values

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

4.62 SENSITIVITY ANALYSIS USING A DISCOUNT RATE OF 17.5% Here, we will analyze the three investment criteria, namely, net present value, benefitcost ratio and payback period with a discount rate of 17.5%.

CALCULATION OF NPV 57

Year 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 TOTAL

Benefit (A) 1,830,155,000 2,013,170,500 2,214,487,550 2,435,936,305 2,679,529,936 2,947,482,930 3,242,231,223 3,566,454,345 3,923,099,780 4,315,409,758 4,746,950,734 5,221,645,807 5,743,810,388 6,318,191,427 6,950,010,570 7,645,011,627 8,409,512,790 9,250,464,069

M & O cost

A–B

Discount rate(D) 0.851064 0.72431 0.616434 0.524624 0.446489 0.379991 0.323396 0.275231 0.234239 0.199352 0.169662 0.144393 0.122888 0.104585 0.089009 0.075752 0.06447 0.054868 0.046696 0.039741

C x D = NPV

(B) (C) 925,135,268.80 905,019,731.2 1,017,648,796 1,119,413,676 1,231,355,044 1,354,490,548 1,489,939,603 1,638,933,563 1,802,826,919 1,983,109,611 2,181,420,592 2,399,562,629 2,639,518,892 2,903,470,781 3,193,817,859 3,513,199,645 3,864,519,609 4,250,971,570 4,676,068,727 995,521,704 1,095,073,874 1,204,581,261 1,325,039,388 1,457,543,327 1,603,297,660 1,763,627,426 1,939,990,169 2,133,989,166 2,347,388,105 2,582,126,915 2,840,339,607 3,124,373,568 3,436,810,925 3,780,492,018 4,158,541,220 4,574,395,342 5,031,834,880 5,535,018,370

770229558.5 721065969.4 675040481.7 631952791.2 591615379.4 553852695.7 518500396.1 485404626.1 454421352.2 425415730 398261538.3 372840588.9 349042253.5 326762960.8 305905750.5 286379851.6 268100286.6 250987502.4 234967023.7 219969128.6 8,840,715,865

10,175,510,480 5,143,675,600 11,193,061,530 5,658,043,160

NPV = BPV – CPV Where NPV = Net Present Value BPV = Present Value of Benefits 58

CPV = Present Value of Cost NPV = 8,840,715,865 – 4,625,676,344 = ¢4,215,039,521

ANALYSIS

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 =

Present value of benefit Present value of cost

=

8,840,715,865 4,625,676,344

= 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

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Year 2008 2009

NPV 770229558.5 721065969.4

Ci 4,625,676,344 3,855,446,785.50 3,134,380,816

NPV - Ci [3,855,446,785.50] [3,134,380,816] [2,459,340,334] [1,827,387,543] [1,235,772,164] [681,919,468] [163,419,072] 321,985,554

2010 675040481.7 2011 631952791.2 2012 591615379.4 2013 553852695.7 2014 518500396.1 2015

2,422,782,297 1,827,387,543 1,235,772,164 681,919,468

163,419,072 485404626.1 * Figures in parenthesis [] represent negative values

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

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

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* B/C = 2.06 * PP = ¢501,823,644 in the eighth year

2) Using a discount rate of 15.5%: * NPV = ¢5,627,547,516 * B/C = 2.21 * PP = ¢135,034,651 in the seventh year

3) Using a discount rate of 17.5%: * 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

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5.1 INTRODUCTION
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.

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

•Difficulty •The

choice of an appropriate interest rate was also difficult.

5.4

INVESTMENT DECISION

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Based on appropriate investment criteria; the NPV, the benefit – cost ratio and the payback period, the project was assessed and an investment decision made. 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

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education and advertisement. This will help to ensure that information about the zoo is 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 Mr. Opoku Mr. William Bekoe (lecture notes) Dr. D.K. Twerefou The internet: www.georgiacarpet.com www.ext-nodak.edu www.africantrophyhunting.com www.amazon.com www.act.co.uk www.splashdirect.com www.wallsandfloor.uk.com www.euro.dell.com www.officemagic.co.uk

Acting Director Staff Lecturer Lecturer

Accra Zoo Accra Zoo Economics Department Economics Department

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www.edmunds.com

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