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Test-driven development is one of the central techniques of Extreme Programming. However, the impact of test-driven development on the business value of a project has not been studied so far. The paper presents an economic model for the return on investment when using test-driven development instead of the conventional development process. Two factors contribute to the return on investment of test-driven development: the productivity difference between test-driven development, and the conventional process and the ability of test-driven development to deliver higher quality code. Furthermore, one can identify when TDD breaks even with conventional development.
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