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$\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ FM Foods, Inc.
$\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ Facts and assumptions as of Dec. 31, 2011
$\begin{array}{lr}\hline \text { Yield to maturity on long-term government bonds } & 4.4 \% \\\text { Yield to maturity on company long-term bonds } & 6.3 \% \\\text { Coupon rate on company long-term bonds } & 7.0 \% \\\text { Historical excess return on common stocks } & 6.5 \% \\\text { Company equity beta } & 1.20 \\\text { Stock price } & \$ 40.00 \\\text { Number of shares outstanding (millions) } & 240 \\\text { Book value of equity (millions) } & \$ 5,240 \\\text { Book value of interest-bearing debt (millions) } & \$ 1,250 \\\text { Tax rate } & 35.0 \% \\\hline\end{array}$
-Please refer to the information for FM Foods above.FM is contemplating an average-risk investment costing $100 million and promising an annual after-tax cash flow of $15 million in perpetuity.Which of the following statements is/are correct?
i.FM should reject the project because the IRR is greater than the firm's WACC.
II.FM should accept the project because the IRR is greater than the firm's WACC.
III.FM should accept the project because the NPV is greater than zero.
IV.FM should reject the project because the NPV is less than zero.

A) I only
B) II only
C) IV only
D) I and IV only
E) II and III only