Issue link: http://georgiancollege.uberflip.com/i/985337
Investment analysis Investment analysis is the process of evaluating total costs and measuring these against total benefits to determine whether or not a proposed venture will be profitable. If benefits outweigh costs, then the investment is worthwhile. If costs outweigh benefits, then the investment will lose money and is considered unprofitable. This study considers Georgian as an investment from the perspectives of students, society, and taxpayers. The backdrop for the analysis is the entire Ontario economy. STUDENT PERSPECTIVE In FY 2016-17, Georgian served 23,736 credit students and 5,504 non-credit students. In order to attend school, students paid for tuition, fees, books, and supplies. They also gave up money that they would have otherwise earned had they been working instead of attending school. The total investment made by Georgian's students in FY 2016-17 amounted to $275.5 million, equal to $93.4 million in out-of-pocket expenses plus $182.1 million in forgone time and money. In return for their investment, Georgian's students develop the skills required for an increasingly globalized workplace and receive a stream of higher future wages that will continue to grow throughout their working lives. As shown in Figure 2, mean income levels at the midpoint of the average-aged worker's career increase as people achieve higher levels of education. For example, the average diploma graduate from Georgian will see increased earnings of $14,400 per year at their career midpoint in Ontario compared to someone with a high school diploma or equivalent. Over a working lifetime, this increase in earnings amounts to an undiscounted value of approximately $616,320 in higher earnings. The present value of the higher future wages that Georgian's students will receive over their working careers is $1.3 billion. Dividing this value by the $265 million in student costs yields a benefit-cost ratio of 5.1. In other words, for every $1 students invest in Georgian in the form of out-of-pocket expenses and forgone time and money, they will receive a cumulative of $5.10 in higher future wages. The return on investment to students (i.e., the benefit-cost ratio less the cost of the original investment) thus comes to $4.10 in benefits returned over and above every $1 in costs. The average annual rate of return for students is 18.7%. This is a favourable return compared, for example, to the less than 1% return per annum that is generally expected from saving money in today's standard bank savings accounts. FIGURE 2: Average earnings by education level at career midpoint in Ontario Source: Emsi complete employment data. $23,100 $25,700 $32,500 $41,000 $52,700 Less than high school High school Certificate Diploma Bachelor's degree G E O R G I A N C O L L E G E | E X E C U T I V E S U M M A R Y 5