The Alpha Corporation is considering investing in a riskless project costing $100. The project receives $107 in one year and has no other cash flows. The discount rate on riskless investments is 2 percent. The NPV of the project can easily be calculated as:

From Chapter 4, we know that the project should be accepted because its NPV is positive. This is true because the project generates $107 of future cash flows from a $100 investment, whereas comparable investments only generate $102, as we will show below.

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$4.90 $100+ $107 1.02