Question: SellsLotsOfStuff.com, a small online retailer, is considering buying a firewall for its website. The costs of the firewall is $10,000. There is an 85% chance

SellsLotsOfStuff.com, a small online retailer, is considering buying a firewall for its website. The costs of the firewall is $10,000. There is an 85% chance that the site will not be hackerattacked during the life of the firewall, a 10% chance of minor attack occurring resulting in $25,000 in damage, and a 5% chance of a major attack occurring resulting in $125,000 in damage. Construct an excel spreadsheet to do the following for A and B:
A. Compute the expected cost for each decision and select the best one strictly on the basis of expected cost.
B. Discuss the risks involved with basing the decision strictly on expected cost.

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer
Step: 1 Unlock blur-text-image
Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock
Step: 3 Unlock

Students Have Also Explored These Related Finance Questions!