Trillium Industries

Trillium Industries is a mid-level high tech firm residing in New Haven, Connecticut which specializes in the development, manufacture, and distribution of a tablet computer called Majestic. Its main competitor is Apple Inc. which would initially seem ludicrous in terms of a business plan; however, the U.S. Federal Trade Commission has opened an antitrust case against Apple. As such, unbeknownst to anyone, Apple has decided it wants to help support Trillium Enterprises financially and operationally to maintain a viable competitor and hence keep the antitrust cops off its back. Trillium has a mole in Apples operations who discovered the companys plans with respect to Trillium.

With this information (most valuable commodity in the world) Trillium decided to incur $3,246,000 in research and development to bolster its new product called Tpad and make it generically compatible with its cloud based operating strategy for the next several years. In conjunction with this, Trillium decided to spend $1,577,000 to hire a market research firm named FMP and Associates. This market research firm conducted studies in 27 rapidly developing areas of the U.S and 6 similar areas in Europe to determine the most likely future sales level in units and dollars that Trillium could expect to realize.

The cost of the equipment to develop the new Tpad is approximately $63,155,000 which will be depreciated on a five-year MACRS schedule. At the end of five years it is expected that the reasonable salvage value of the investment will be 12 percent of its original cost. Trillium can manufacture the Tpad for which the variable costs per unit are expected to come in at $299 while overall fixed costs would be $8,495,000 per year. At this point FMP estimates that sales of the Tpad will be 112,000, 127,000, 148,000, 129,000, and 92,000 units respectively for the next five years with a sales price of $696 per unit.

Sales of Majestic are expected to come in at 116,000, and 95,000 units respectively over the next two years if the Tpad is NOT developed. Of course, erosion is expected if the Tpad is developed as it would likely cannibalize the original Majestic product. It is expected that the new Tpad would reduce Majestic sales by 21,750 units per year for the next two years and market pressure would force the Majestic product to be discounted from its original price of $435/unit to $295/unit. Variable cost/unit of Majestic is $189 and fixed costs currently are $3,137,000.

Working capital to support the Tpad will be 17.5% of yearly sales for the life of the product which is expected to end after five years for which net working capital will be released back to Trillium. The timing of the working capital will be exactly the same as the cash inflows which will be at the end of each year.

Lastly, the marginal corporate Income tax rate is 35% and management dictates that the required rate of return for this project will be 14.5%. You are to determine the NPV and the IRR of the project and give your recommendation to management as to whether or not the company should proceed with the project. In addition, you are to take the initiative and make a recommendation as to what you would reasonably change with respect to the project to make it more lucrative for Trillium.

SOMEONE PLEASE HELP ASAP!!!!!