Lesson Plan

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Lesson Plan
Grade: Date: 17/01/2026
Subject: Business
Lesson Topic: the meaning, calculation and interpretation of payback as an investment appraisal method
Learning Objective/s:
  • Describe the concept of the payback period and its purpose in investment appraisal.
  • Calculate the payback period using cumulative cash‑flow tables.
  • Analyse the liquidity, risk and decision implications of a calculated payback period and recognise its limitations.
  • Compare the payback method with the accounting rate of return (ARR) to understand complementary appraisal techniques.
Materials Needed:
  • Projector or interactive whiteboard
  • Printed worksheet with cash‑flow table
  • Calculator or spreadsheet software
  • Whiteboard and markers
  • Example case‑study handout
  • Exit‑ticket slips
 Introduction:
Begin with a quick poll: “What factors do businesses consider before spending large sums of money?” Connect responses to the need for simple appraisal tools. Remind learners that they have previously worked with cash‑flow statements. State that by the end of the lesson they will be able to calculate and interpret the payback period and use it to make informed decisions.
Lesson Structure:
  1. Do‑now (5'): Students answer a short question on why cash recovery matters; responses shared.
  2. Mini‑lecture (10'): Define payback period, show formula, and explain its role in liquidity and risk assessment.
  3. Guided practice (15'): Work through the provided £120,000 example, filling a cumulative cash‑flow table together.
  4. Pair activity (10'): Each pair receives a new cash‑flow scenario and calculates the payback period.
  5. Whole‑class discussion (10'): Groups present results; teacher highlights interpretation, decision rule, and limitations.
  6. Contrast with ARR (5'): Brief overview of the accounting rate of return and how it complements payback.
  7. Exit ticket (5'): Write one sentence summarising what a payback period tells a manager about a project.
Conclusion:
Recap the steps for calculating payback and the key insights it provides for liquidity and risk. Collect exit tickets to gauge understanding, and assign homework: complete a worksheet that requires calculating payback for two additional investment proposals and briefly compare each with the ARR method.