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:
Self-Serving Ethical Principles
Moral rules or guidelines that individuals adopt, primarily to benefit themselves, often at the expense of others.
Distribution Of Power
The way power is allocated or spread among various parties or individuals within an organization, society, or group, affecting how decisions are made.
Effectiveness
The degree to which something is successful in producing a desired result; efficiency.
Tactics
Specific actions or strategies designed to achieve a short-term goal.
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