Option 1. The recycling production option requires an upfront investment in plant and equipment of $20 million, which will be depreciated to a zero book value on a straight-line basis over 5 years. The plant will provide sufficient capacity to meet the company's forecast plastic packaging needs over the period of its life. After this, it is expected that the plant will have no salvage value and will be updated using new and better technology. Financing for the plant and equipment will be via a new 5 year debt issue, resulting in interest costs of $1.4 million payable at the end of each year. Producing recycled plastic has several financial benefits for the company. First, sales revenue of the company's existing products, which will be packaged in the recycled plastic, is predicted to increase due to consumer demand for environmentally responsible products. Excluding this benefit, the company's forecast sales revenue for the coming year is $200 million and this is expected to grow by 4% each year after that. The benefit of recycled packaging is expected to increase these sales forecasts 2% during the 5 year life of the project. The second benefit is that the cost of plastic packaging for the company's existing products will decrease. The recycled plastic will be cheaper than buying virgin plastic due to lower energy costs and avoiding a supplier margin. The reduced energy costs will shave 15% off total variable packaging costs, currently (without recycling) estimated at $22 million for the coming year and expected to grow by 3 per year after that. Avoiding a supplier margin will reduce total variable packaging costs by 10%. However, the benefits of avoiding the current supplier margin will be offset by the need to pay a new partner, Clean World Ltd, who will set up a plastic waste collection system to supply sufficient raw material for the recycling plant. Apart from these changes, it is expected that variable costs and net working capital will be equivalent to existing forecasts. However, an additional $2 million annually in selling, administrative and general expenses directly related to the project (excluding depreciation) will be incurred