FINANCE: MAKING CAPITAL INVESTMENT DECISIONS

Finance: Making Capital Investment decisions

Finance: Making Capital Investment decisions

Part 1: Context of the Project Investment

The project was managed by the British Columbian Centre for International Education, funded by Human Resources Development Canada, and undertaken by FuturEd Inc. Project activity included assembling an advisory committee of IE experts, linking the ROI literature to international education, completion of three exploratory case studies, production of this report including ROI tools and advice, and presentation of the work to educators in BC. (Anctil 2006:9-34)

From the case study approach, we concluded that ROI analysis is possible and revealing; however, the sample was far too small to draw conclusions about actual ROI. Much more research is needed to determine ROI for each type of IE activity and to draw comparisons between types and other investment options.

The purpose of this project has been to generate a defensible method of accounting for IE expenditures and policies. On the basis of the case studies, a simple method of ROI analysis has been developed for use by any and all who are interested in demonstrating return on investment. Considerable resources are available to those who wish to explore the concept further.

In December, 2002, the British Columbia Centre for International Education (BCCIE) was awarded a Human Resources Development Canada (HRDC) contribution agreement under the Special Initiatives Program to undertake a project entitled "Return on Investment (ROI) Analysis of International Education". The purpose of this project was to draft, pilot and refine tools and guidelines for utilizing the "Return on Investment" (ROI) methodology for developing cost/benefit analyses of International Education (IE) initiatives. The start date of the project was January 6, 2003 and the completion date was March 31, 2003. The project was managed by BCCIE and the research undertaken by Dr. Kathryn Barker, President of FuturEd Inc. (Anctil 2006:9-34)

The project had the following three objectives:

1. Capacity building within Canadian post-secondary education sector by providing institutions with an example of a new model (ROI) for analyzing the actual costs and returns to IE;

2. Advancing understanding of the tangible and intangible costs and benefits of academic mobility and other IE policies and practices; and

3. Promoting creative and innovative approaches to IE by fostering research and analysis of ROI options and approaches.

The achievement of these objectives is a long-term goal, and this project is viewed as Phase One of an ongoing research and development agenda.

Part 2: Budget for Initial Cost

Return on Investment analysis in the context of learning systems is, strictly speaking, an accounting-based method of comparing the costs and benefits of education/training by converting all costs and benefits to financial measures. Some simple ROI formulae include: (Anderson 2002:42)

for one-time programs Program Returns / Costs X 100 = ROI

for prepared programs Design + development + duplication + delivery + support / # of students over the life of the course

for a range of results ROI = (value of benefits - cost of training) / cost of training For purposes of this study, the first model is ...