Finance Simulation

Simulation Overview

Capital constraints limit financial resources and force learners to carefully consider which projects to fund. The participants 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, the participants develop a capital budgeting strategy and choose projects with the greatest impact on the company’s value.

The Story

In this asynchronous single player simulation, learners take on the role of CEO and evaluate capital investment proposals across the company’s three divisions. Over a simulated five-year period, learners 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

This simulation comes with a Teaching Guidebook for the facilitator along with 1:1 training sessions, free trials, videos and more.

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This simulation is by Timothy A. Luehrman, Harvard Business School Publishing, and Forio