Slumber Company is considering two mutually exclusive investment alternatives.Its estimated weighted-average cost of capital, used as the discount rate for capital budgeting purposes, is 10%.Following is information regarding each of the two projects: 
Required:
1.Compute the estimated net present value of each project and determine which alternative, based on NPV, is more desirable.(The PV annuity factor for 10%, 5 years, is 3.7908.)
2.Compute the profitability index (PI) for each alternative and state which alternative, based on PI, is more desirable.
3.Why do the project rankings differ under the two methods of analysis? Which alternative would you recommend, and why?
Definitions:
Geometric Average
A method of calculating the average rate of return that considers the compounding effect of returns over time.
Risk-Free Security
An investment that is assumed to be free from any risk of financial loss, typically represented by government bonds.
Arithmetic Return
The simple average of a set of returns over a period.
Q22: Precision Instruments, Inc. is a national firm
Q31: Burmer Co. has accumulated data to use
Q38: The Wentworth Company manufactures modular furniture for
Q49: The net present value (NPV) model of
Q60: Home Remodeling Inc. recently obtained a short-term
Q82: Felinas Inc. produces floor mats for cars
Q97: Which one of the following is a
Q98: Which one the following is a variable
Q103: Which of the following statements regarding cost
Q118: An accounting statement that presents predicted amounts