3. The Swink Company expects to have sales of $20million this year under the current policies. Its variable cost ratio is 80% and its cost of funds for receivables is 8%. Currently, the firm's credit policy is net 25. However, its average collection period is 30 days, indicating that some customers are paying late, and its bad debt losses are 3% of sales. There are two alternative credit policies: Policy1: Lenghten the credit period to net 40. If this were done, it is estimated that sales would increase to $20 500 000, ACP to 45 days and the bad debt losses on the incremental sales would be 5%. Policy2: Shorten the credit period to net 20. Under these terms, sales would be expected to decrease to $18 million, ACP to 22 days and bad debt losses to 1% of the new sales level. Please evaluate each proposal as their net effect on after tax profits. Which alternative is to be adopted?