A company projected unit sales of lamps to be 50000 in the first year, with a growth of 15% each year for the next 5 years. Total fixed costs are US$ 750000 per year, variable production costs are US$ 200 per unit, and the units are priced at US$ 450 each. The equipment needed to begin production will cost US$ 600000. The equipment will be depreciated 20% per year using the straight-line method over a 5-year life and is not expected to have a salvage value. The tax rate is 34% and the required rate of return is 25%. The operating cash flow (OCF) is defined as (Net Income + Non-Cash Expense). The cost of equipment is considered the initial investment for the project.

(a) Calculate the sales revenue and variable costs each year and prepare the pro forma income statements and operating cash flow for each year.

(b) Find the net present value of the project and give your recommendation on whether the project is accepted or rejected? Explain your reasons.