(E) is incorrect because it's not an assumption that the argument REQUIRES. If we negate (E) and the argument still stands, then we know that it's not a required assumption. The negation of (E) is that material well-being DOES increase one's sense of approval of one's character and projects. Even if this is true, however, it doesn't affect the stimulus in any way. The happy life can still be the good (and morally virtuous) life, and genuine happiness can consist in one's sense of approval of one's character and projects. Hope this helps!