Joseph has been retained as a management consultant by Atlantis Inc., a local specialty retailer, to analyse two proposed capital investment projects, Project X and Project Y. Project X is a sophisticated working capital and inventory control system based on a powerful personal computer called a system server and PC software specifically designed for inventory processing and control in the retailing business. Project Y is a similarly sophisticated working capital and inventory control system based upon a powerful personal computer and general PC software. Each project has a cost of R50,000 and the cost of capital for both projects is 10%. Projects expected new cash flows are as follows: Year Estimated net cash flow (R) Project X Project Y 0 (50,000) (50,000) 1 32,500 17,500 2 15,000 17,500 3 15,000 17,500 4 5,000 17,500

QUESTIONS: 2.1 Illustrate different approaches that can be adopted concerning the management of working capital. (15 marks)

2.2 Calculate the Net Present Value for both Projects X and Y, and assist Joseph to suggest which project should be accepted. (10 marks)