Wilkes, Inc., must invest in a pollution-control program in order to meet federal regulations to stay in business. There are two programs available to Wilkes: an all-at-once program that will be immediately funded and implemented, and a gradual program that will be phased in over the next three years.
The immediate program costs $5 million, whereas the phasein program will cost $1 million today and $2 million per year for the following three years.
If the cost of capital for Wilkes is 15 percent, which pollution-control program should Wilkes select?