On March 3, 2008, about 0840 mountain standard time, a Piper PA-28-161, N8400A, impacted the terrain during a go-around from a simulated engine-out landing about 11 miles south of Chandler Municipal Airport, Chandler, Arizona. The certified flight instructor and his student were not injured, but the airplane, which is owned and operated by Chandler Air Service, sustained substantial damage. The local 14 CFR Part 91 instructional flight, which departed Chandler Municipal Airport about 50 minutes prior to the accident, was being operated in visual meteorological conditions. No flight plan had been filed. According to the flight instructor, his student was practicing a simulated engine-out landing, with the intention of executing a go-around during the last part of the final approach. According to telephone conversations with both the instructor and the student, the go-around was initiated when the airplane was about 100 feet above ground level (agl). To initiate the go-around, the student pushed the throttle to the full-forward position, whereupon the engine momentarily coughed/chocked, and the airplane continued to sink. Just as the engine accelerated to full power, the airplane struck the ground on rough/uneven terrain. The accident sequence resulted in both external and internal damage to both wings. After the accident, the engine was started and run at various power settings, and no anomalies were found that would have kept it from correctly responding to a full-throttle power application. During the investigation it was determined that the operator's procedure for all simulated engine-out activity is for the flight instructor pilot to call for the initiation of a go-around no lower than 300 feet agl.