Dunn Trading Stamp Company records stamp service revenue and provides for the cost of redemptions in the year stamps are sold to licensees. Dunn's past experience indicates that only 80% of the stamps sold to licensees will be redeemed. Dunn's liability for stamp redemptions was $6 million at December 31, Year 3. Additional information for Year 4 is as follows: Stamp service revenue from stamps sold to licensees $4,000,000 Cost of redemptions (stamps sold prior to 1/1/Yr 4) 2,750,000 If all the stamps sold in Year 4 were presented for redemption in Year 5, the redemption cost would be $2,250,000. What amount should Dunn report as a liability for stamp redemptions at December 31, Year 42