When Purchasing Software or Developing In-House Software

question 114

Multiple Choice

When purchasing software or developing in-house software,

• A) cost should be the only factor.
• B) extensive testing of the software is generally not required.
• C) a team of both IT and non-IT personnel should be involved in the decision process.
• D) the librarian and the IT manager should be the only ones involved in the decision process.

---

Definitions:

Constant Growth DCF Model

A method of valuing a company using the theory that its stock is worth the sum of all its future cash flows, discounted back to their present value at a constant growth rate.

Perpetual Preferred Stock

A type of preferred stock with no fixed maturity date, where dividends must be paid by the company before dividends are paid to common stockholders.

Expected Return

The weighted average of all possible returns for an investment, with weights representing the probabilities of each outcome.

Required Return

The minimum gain investors expect from an investment, considering its risk level; synonymous with required rate of return.