- Hobby Hole is trying to decide whether to install a motion detector system in its warehouse to reduce the probability of a catastrophic theft.
- A catastrophic theft could result in losses of $800,000.
- Local crime statistics suggest that the probability of a catastrophic theft at Hobby Hole is 12%.
- Companies with motion detectors only have about a 0.5% probability of catastrophic theft.
- The present value of purchasing and installing a motion detector system and paying future security costs is estimated to be about $43,000.
- Should Hobby Hole install the motion detectors?