When several alternative investment proposals of the same amount are being considered, the one with the largest net present value is the most desirable. If the alternative proposals involve different amounts of investment, it is useful to prepare a relative ranking of the proposals by using a (n)

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When alternative investment proposals involve different amounts of investment, it is appropriate to use a present value index. This index is computed by dividing the present value of each investment proposal by its initial investment amount. The investment proposal with the highest present value index is the most desirable. The average rate of return index is used for evaluating projects with equal initial investments and equal projected net cash inflows. Consumer price index and price-level index are used to measure changes in the general price level.

When Several Alternative Investment Proposals of the Same Amount Are