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The net present value of the first project, replicated to have a life of 10 years, is $ 529. This is still higher than the net present value of $478 of the longer life project. The firm will still pick the shorter-life project, though the margin in terms of net present value has shrunk.

This problem is not avoided by using internal rates of return. When the internal rate of return of a short-term project is compared to the internal rate of return of a long term project, there is an implicit assumption that future projects will continue to have similar internal rates of return.

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