A firm is considering changing its terms of sale for a particular product. The product has a three-year life. Last years sales were $1 million. The current terms are net 30 days; 99 percent of customers pay promptly and the remainder default. Under the current terms, expected sales for the upcoming year are $1.1 million. If these terms are continued, the firm will make a fixed asset purchase in the amount of $30,000 in the second year. The salvage value for this asset is $10,000. The proposed terms are net 60 days. If these terms are instituted, next years sales are expected to be $1.15 million, and it is expected that 97 percent of all customers will pay promptly, and the remaining 3 percent will default. Under the proposed terms, a fixed asset purchase in the amount of $40,000 will be required in the first year; the salvage value of this asset will be $15,000. Whether or not the terms change is instituted, sales are expected to grow at 10 percent per year after the first year. Costs of goods are 80 percent of sales. Inventory levels are kept at 10 percent of sales. The firms cost of capital is 12 percent, and corporate income taxes are 40 percent of earnings before taxes. The firm depreciates assets using the straight-line method from the initial purchase price to the expected salvage value. a) Compute the net present value of the product under the present terms of sale. b) Compute the net present value of the product under the proposed terms of sale. c) Indicate whether the proposed terms change should be instituted. Give a rationale for your answer.