**INVESTMENT MODELS LESSON PLAN**

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Teaching Materials**

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Lesson Activity**

- Review concept of NPV
- NPV > 0 is desirable
- advantages of using NPV

- Introduce Payback method
- Define - # of years to earn a return on the investment
- Work through example to illustrate
- Ask class for advantages and disadvantages of this method
- Discuss and present conclusions

- Introduce Discounted Payback
- Look at formula - ask class why this method was derived
- work through example
- talk about advantages and disadvantages

- Introduce Average Return Of Book Value
- look at formula / work through example
- talk about advantages and disadvantages

- Introduce Internal Rate of Return (Discounted Cash Flow)
- look at formula / work through example
- talk about advantages and disadvantages

- Introduce Profitability Index
- look at formula / work through example
- talk about advantages and disadvantages

- End with a discussion of which is the best method
- typically class will agree that NPV is best

Assessment/Evaluation
Have students complete worksheet. A passing grade is 70% or greater.

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Lesson Printable Materials -
Worksheets**

Print out the teaching lesson pages and
exercise worksheets for
use with this lesson: