Finance Simulation: Capital Budgeting

by Harvard Business School Publishing and Forio

$150 / seat
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Simulation Overview

Capital constraints limit financial resources and force students to carefully consider which projects to fund. Students examine cash outlays and flow patterns and analyze common metrics such as net present value (NPV), internal rate of return (IRR), payback, and profitability index. Ultimately, students develop a capital budgeting strategy and choose projects with the greatest impact on the company’s value.

The Story

Students take on the role of CEO and evaluate capital investment proposals across the company’s three divisions. Over a simulated five-year period, students review 27 proposals ranging from relatively small tactical projects, such as replacing old equipment, to major strategic projects, such as an acquisition.

Learning Focus

  • Explore resource allocation within a corporation
  • Understand different tools of investment analysis (NPV, IRR, payback, profitability index, risk-adjusted discount rates)
  • Investigate how capital budgeting and capital rationing influence company performance and market position
Topics Covered

  • Capital Budgeting
  • Risk-adjusted Discount Rates
  • Capital Rationing
  • NPV, IRR, Payback
  • Profitability Index
See How the Simulation is Played

Additional Information
Duration

1 to 3 hours including introduction and debrief

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