1 Precision Dyes wants to supply 100,000 bottles of a specialized industrial color to its customer per year, who wants to pay $250 per bottle. The contract will last for 5 years. It will cost Precision $10 million to install the necessary equipment to start production. The equipment can be depreciated using the 5-year MACRS method (20%,32%,19.20%,11.52%,11.52%,5.76%). Precision estimates that in five years, this equipment can be salvaged for $1,000,000. The fixed production costs will be $4 million per year, and the variable production costs should be $150 per bottle. Precision also needs an initial investment in net working capital of $600,000, all of which will be recovered when the project ends. The tax rate is 21 percent and Precision