A feasibility study concerning the development of a student hostel in Malta

Abstract

The aim of this study was to assess the financial feasibility of developing a student hostel in Malta. The foreign and Gozitan student population in Malta requires housing that is suitable to its needs. Therefore a student hostel may be a new option. For the purpose of this study, a student hostel was designed to meet the requirements of the above-mentioned students. The capital expenditure, operational expenditure and operational revenue relating to the project were estimated. Questionnaires were sent to the students and interviews were held with the competitors and the officials of the schools of English to establish the demand and prices. The sources of finance required to cover the expenditure were identified and the Weighted Average Cost of Capital was calculated. The latter was used to carry out the financial appraisal using traditional and discounted cash flow techniques. After conducting the financial appraisal the results obtained were interpreted to determine whether the project was feasible or not. Although the results obtained from this study indicate that the Net Present Value is positive, the Average Rate of Return is less than the required return by the shareholders and also that the project is very sensitive to several important elements such as revenue.