Accounting · Year 12

Active learning ideas

Capital Investment Decisions

Capital investment decisions involve committing large sums of money to long-term projects, such as buying new machinery, expanding to a new location, or investing in new technology. Students learn to evaluate these projects using methods like the Payback Period and Net Present Value (NPV). This topic is a critical part of VCE and QCE Unit 4, as it requires students to consider the 'time value of money', the idea that a dollar today is worth more than a dollar in the future.

• ACARA Content Descriptions
• VCE-ACC-U4-O2: Evaluate capital investment options
• QCE-ACC-U4-S9: Apply capital budgeting techniques

• 20–60 min
• Pairs → Whole Class
• 3 activities

Activity 01

• Simulation Game
• 60 min · Small Groups

Simulation Game: The Boardroom Pitch

Small groups are given two competing investment proposals (e.g., a solar farm vs. a traditional factory expansion). They must calculate the NPV and Payback Period for both and then 'pitch' their recommended choice to the 'Board' (the rest of the class), considering both profit and sustainability.

Why is the time value of money important in investment decisions?

• Apply
• Analyze
• Evaluate
• Create
• Social Awareness
• Decision-Making

Activity 02

• Think-Pair-Share
• 20 min · Pairs

Think-Pair-Share: The Time Value of Money

Ask students: 'Would you rather have $1,000 today or $1,100 in two years?' Students individually decide, pair up to discuss how inflation and interest rates influence their choice, and share their reasoning with the class to introduce the concept of 'discounting'.

How does the NPV method evaluate project viability?

• Understand
• Apply
• Analyze
• Self-Awareness
• Relationship Skills

Activity 03

• Inquiry Circle
• 40 min · Small Groups

Inquiry Circle: Payback vs. NPV

Groups are given a project with a fast payback but a negative NPV, and another with a slow payback but a high positive NPV. They must investigate why the two methods give different signals and decide which project is better for the company's long-term future.

What are the limitations of the Payback Period method?

• Analyze
• Evaluate
• Create
• Self-Management
• Self-Awareness

A few notes on teaching this unit

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Watch Out for These Misconceptions

• The project with the fastest Payback Period is always the best.

  Students often focus only on getting their money back quickly. Use a collaborative investigation to show that the Payback method ignores all cash flows *after* the payback point, whereas NPV considers the total profitability of the project over its entire life.

• A positive NPV means the project will definitely be successful.

  Students may forget that NPV is based on *estimates* of future cash flows. Peer discussion can help them understand that if the estimates for sales or costs are wrong, the actual NPV could be very different, highlighting the importance of 'sensitivity analysis'.

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Methods used in this brief

• Simulation Game
• Think-Pair-Share
• Inquiry Circle