A project requires an initial investment of $1.265 million. It expects to generate a perpetual cash flow. The first year cash flow is expected at $95,000. The cash flows are then expected to grow at 2.5% forever. The appropriate cost of capital for this project is 12%. What is the project's IRR and should it be accepted based on the IRR rule?

IRR is 10.5%; project should not be accepted

IRR is 10.0%; project should be accepted

IRR is 10.5%; project should be accepted

IRR is 11.0%; project should be accepted

IRR is 11.0%; project should not be accepted

IRR is 10.0%; project should not be accepted