SEO penalization for duplicate content

I have a website; let's call it mysite.com, and a related site; let's call it mysite.com/special-project/. Both sites run perfectly fine.

Now my client wants me to add another related site; let's call it mysite.com/another-project/ which is to be a minor variation of mysite.com/special-project/

mysite.com/special-project/ has 10 content pages. Of those:

5 pages are to be exactly the same on mysite.com/another-project/
4 pages are to be about 80% the same
1 page is to be significantly different
and then each site will have its own registration page

My client wants this setup, despite the great duplication, because each site is to target a different audience.

From a technical viewpoint, I believe I know how to implement this. My question is regarding penalization by search engines like google for duplicate content. I spent a few minutes researching the matter, and I'm getting mixed messages. Some sites seem to say that google isn't crazy about it but there will be no penalty, and some sites seem to say that there indeed is a penalty for this.

I believe I can avoid the duplication by using noindex on mysite.com/another-project/ -- but wouldn't that mean that that site won't be indexed by google?

Should I advise my client that this whole setup is problematic from an SEO point of view? If so, can anyone recommend a different approach?

Solution

Answer: rel="canonical" link element