Educo - Solution(1)

Educo - Solution(1) Student Nr _________________________________________________________________ Suggested Solution Part (a) Determine the financial feasibility of the new proposed Educo School in George. Marks R’000 0 2018 2019 2020 2021 2022 2023 2024 Rezoning – sunk Land (25 000) 1 Building (32 000) (56 000) 1 Furniture, fixtures and equipment (5 300) 1 School fees revenue (Note 1) 8 490 17 998 28 617 40 445 53 589 68 166 Staff costs (Note 2) (4 931) (8 181) (11 803) (15 831) (20 299) (25 247) Bad debts (1.4% of Fee revenue) (119) (252) (401) (566) (750) (954) 1C Facility costs - operating (Note 3) (1 148) (1 287) (1 441) (1 615) (1 809) (2 027) 1 Facility costs – maintenance (Note 3) (500) (530) (562) (596) (631) (669) 1 Sport and culture (Note 4) (161) (341) (542) (766) (1 015) (1 291) Hostel Marketing Irrelevant 0.5 Head office costs Before tax cash flows (57 000) (61 300) 1 631 7 409 13 869 21 074 29 088 37 982 1C Terminal value (Note 5) NPV 141 922 1C Adjusting COC for specific risk 1C Note 1 Number of learners 180 360 540 720 900 1080 1 School fees per learner – 6% inflation 41 976 44 495 47 164 49 994 52 994 56 173 59 544 63 116 1 Total revenue 8 489 562 1C Note 2 2017 Admin staff (10*39) 390 Total staff 1 956 Educators 1 566 1 Learner numbers 31 320 Educator to learner ratio Or learner to educator 0.05 20.00 1 Total staff costs 506 001 Less admin staff costs (*390) (74 412) Thus total educator costs 431 589 Cost per educator 275 600 ……………………………………………………..CONTINUED……………………………………………………..