Payback Simulation Simulation

In the simulation, participants will:

• Analyze detailed project briefs containing financial forecasts and strategic data.

• Calculate and interpret payback period, NPV, IRR, and other appraisal metrics.

• Rank competing projects under capital rationing and strategic constraints.

• Debate and justify project selections based on financial and non-financial factors.

• Respond to dynamic changes in company strategy, cost of capital, or market conditions.

• Present and defend their final capital budget recommendation to the board.

• Calculate and interpret key investment appraisal metrics, including payback period and NPV.

• Apply capital budgeting techniques to evaluate and select value-adding projects.

• Make sound financial decisions under constraints like limited capital and time.

• Critically evaluate the strengths and limitations of the payback method.

• Balance quantitative financial analysis with qualitative strategic considerations.

• Communicate investment recommendations clearly and persuasively.

• Develop confidence in applying corporate finance theory to practical business problems.

1. Receive the Capital Budget Teams are given a set budget and a portfolio of potential investment projects with varying details.

** 2. Analyze Project Proposals** Teams review project data, forecast cash flows, and perform financial calculations.

3. Make Investment Decisions Teams decide which projects to fund, creating a balanced portfolio that fits their budget and strategy.

4. Review Outcomes and New Data After submitting choices, teams receive results and feedback. New information or changed conditions are introduced in subsequent rounds.

5. Adapt Strategy Teams use insights from previous rounds to refine their appraisal approach and decisions.

6. Final Presentation and Debrief Teams present their final capital allocation strategy, followed by a guided debrief linking the experience to core finance principles.

• Who is the Payback Simulation designed for? It is ideal for undergraduate and graduate students in finance, accounting, and business, as well as professionals in corporate finance, project management, or entrepreneurial roles seeking to sharpen their capital allocation skills.

• Do participants need advanced Excel or finance experience? No. The simulation is designed to be accessible. All necessary financial data is provided, and the focus is on interpretation and decision-making rather than complex modeling from scratch. Basic numeracy is sufficient.

• How long does the simulation take to complete? The core simulation runs typically 2-3 hours. It can be condensed into a single intensive session or extended with deeper analysis and presentation components.

• Is this a solo or team-based activity? It is primarily designed as a collaborative team exercise, reflecting real-world corporate decision-making committees. Team discussion and debate are key learning components.

• What financial metrics are the main focus? While the simulation covers NPV, IRR, and PI, it places particular emphasis on understanding and critically applying the payback period and discounted payback period methods.

• Are the project scenarios based on real industries? Yes. Project proposals are grounded in realistic industry contexts (e.g., manufacturing, tech, energy) to provide authentic strategic and financial challenges.

• Can the instructor customize the simulation parameters? Absolutely. Instructors can adjust the company's cost of capital, budget size, project mix, and strategic focus to align perfectly with specific course learning objectives.

• How is performance assessed? Performance is multi-faceted, evaluated based on the financial robustness of the selected project portfolio, the strategic coherence of decisions, and the quality of the team's final justification and presentation.

• Correct calculation and application of investment appraisal metrics.

• The financial and strategic soundness of the final project portfolio selected.

• How well the team incorporates feedback and new information in subsequent rounds.

• The effectiveness of team discussions in reaching a decision.

• The clarity and persuasiveness of the final investment recommendation.