The Hyupp Group runs five-star hotels in most major cities. The group is looking to build a six-star luxury resort in South-East Asia on a remote island. The chief financial officer prefers to use the payback method to evaluate the new investment. The senior accountant believes the return on average investment would be a better approach as it uses the accounting records of the firm. The assistant accountant paid attention in her lectures on discounted cash flow during her recent time at university and believes that is the superior method for analysing capital budgeting decisions. The three agree to make notes on their preferred method and then compare the three approaches.

Required

In groups of three, each person takes on the role of one of the friends and writes a page on the pros and cons of the method chosen by that character. Try to convince the other two people in the group that your method would be the most appropriate in this instance.