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Unformatted text preview: similar goods already in the market? If the new product is genuinely unique, will the firm producing this good be able to erect some kind of entry barrier that will prevent other firms from producing their own nearly identical versions of the product, thereby competing away any pure economic profits? Competitive advantages of this sort can come in many forms. The main point is that if any project is to have a positive NPV, advocates of that project ought to be able to articulate the projects competitive advantage even before running the numbers. No matter how positive the projects NPV appears to be on paper, if no one can explain its main competitive advantage in the market, the firm should probably think twice about investing. Similarly, when an investment proposal has a compelling story explaining its competitive edge but the NPV numbers come out negative, it may be worth sending the financial analysts back to their desks to take a second look at their assumptions....
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- Spring '11