Q$3.$ Ghana's Long$-$Term Development Plan

The $40-$Year Development Planning framework is expected to facilitate Ghana's transition to highincome status. The NDPC has modelled a scenario for the country to achieve per capita income of over USD $60,000$ by $2057$ if the economy is grown by an average of $9\%$ annually.

To this end, investing wisely in infrastructure is critically important. A component of the $40-$Year Plan is the $30-$Year Ghana Infrastructure Plan, whose essence is to change the course of Gross Domestic Product growth, and to ultimately move GDP onto a growth path that is higher and different from the current path. Provision of infrastructure is expected to take the form of projects. We discussed the $30-$Year Plan in class and pointed out the huge infrastructure gap that Africa suffers.

Questions

i$.$ List the different ways by which Africa and Ghana can find money to bridge their infrastructure gap.

ii$.$ Ghana's $2018$ GDP is estimated at nominal USD $50,000$ million. Recall that Briceno$-$Garmendia $(2009)$ estimated that operational inefficiency costs African countries $2\mathrm{.}5\%$ of GDP$.$ In Ghana, this would have translated to GHS $4,878$ million $($nominal$)$ in $2017.$ In this respect, part of the efforts Ghana is making towards financing infrastructure provision includes increasing efficiency in the use of inputs in the economy.

To this end, suppose Ghana could save $0\mathrm{.}1\%$ of projected $2018$ GDP $,$ then $0\mathrm{.}2\%$ of projected $2019$ GDP$,$ then $0\mathrm{.}4\%$ of projected $2020$ GDP$,$ then $0\mathrm{.}6\%$ of projected $2021$ GDP$.$ Do a table that shows the following:

Projected GDP for $2018$ through $2021$; and

Amount of saving to be realized each year, $2018-2021.$

Now, using the $100-$year USD average inflation rate of $3\%$ p$.$a$.,$ what is the sum of the saving to be realized $(2018-2021)$ if the implied efficiency gains are attained?

iii. List clearly some operational inefficiencies that you see around vou which if addressed, would

Q$2.$ In preparation for a project that you wish to undertake, you made an investment in a mutual fund last year of GHS $10,000.$ The risk$-$free rate was $18\%p.$ a$.$ and you expected a risk premium of $6$ percentage points per annum on your investment.

i$.$ What idea is conveyed by underlying "expected" and "risk premium" above?

ii$.$ List $10$ factors that may be responsible for the riskiness of a project.

iii. Classify them into systematic and unsystematic factors.

iv$.$ For the capital asset pricing model what kind of risk is important?

Yet for you as a project management advisor, the other kind of risk too may be important. Why so$?$

vi$.$ Bearing in mind this other category of risk, outline the main steps of a risk management programme.

vii. State the capital asset pricing model precisely and completely. Define clearly any variables or symbols that you use.

viii. Of what use is the capital asset pricing model?

ix$.$ How much do you expect your investment to grow to in four years so that you can use it to start your favourite project if gains on your investment are expected to be compounded monthly?