You are on the management team of Camden Inc. The CFO believes project acceptance should be based on the NPV, but Steve Camden, the president, insists that no project should be accepted unless its IRR exceeds the projects risk-adjusted WACC. Now you must make a recommendation on a project that has a cost of $15,000 and two cash flows: $110,000 at the end of Year 1 and -$100,000 at the end of Year 2. The president and the CFO both agree that the appropriate WACC for this project is 10%. At 10%, the NPV is $2,355.37, but you find two IRRs, one at 6.33% and one at 527.01%, and a MIRR of 11.32%. Which of the following statements best describes your optimal recommendation, i.e., the analysis and recommendation that is best for the company and least likely to get you in trouble with either the CFO or the president?

Group of answer choices

You should recommend that the project be rejected because its IRR is less than the WACC

You should recommend that the project be rejected because, although its NPV is positive, something is strange about the project as is evident with two IRRs.

You should recommend that the project be accepted because (1) its NPV is positive and (2) although it has two IRRs, in this case it would be better to focus on the MIRR, which exceeds the WACC. You should explain this to the president and tell him that that the firms value will increase if the project is accepted.

You should recommend that the project be accepted although the MIRR is less than the companys cost of capital.

You should recommend that the project be accepted because one of the IRRs is greater than the cost of capital indicating that the projects future cash flows will add value to the company.