The flight instructor reported that while on a downwind leg of the airport traffic pattern, abeam the runway numbers, he simulated an engine failure for the student pilot. The student pilot performed checklist items, but the airplane was getting too low and far from the runway. The flight instructor then told him to turn directly toward the runway, which he did. The student pilot stated that he wanted to go-around, but the flight instructor said to keep going. By the time the flight instructor realized the airplane was not going to reach the runway threshold, he increased power, but the tail struck a runway light. The airplane subsequently landed uneventfully. The flight instructor stated that there were no preimpact mechanical malfunctions or failures of the airplane that would have precluded normal operation. Postaccident examination of the airplane confirmed that the empennage had been substantially damaged.