Seth Morrison is considering alternative proposals that involve different amounts of investments.To compare different size investment proposals,it may be helpful for Sarah to prepare a relative ranking of the proposals by using a(n):

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A present value index (also known as profitability index) compares the present value of the cash inflows to the present value of the cash outflows for each investment proposal. This method is useful for comparing proposals of different sizes because it gives a ratio of the expected return per dollar invested. The higher the present value index, the more attractive the proposal. Therefore, using a present value index can help Seth Morrison make an informed decision about the most profitable investment proposal.

Seth Morrison Is Considering Alternative Proposals That Involve Different Amounts