Reference no: EM131715599

Question: Rockie II. PaperDyne is a high-tech company that installs its own firewall system called "The Rock" for its clients. A new version of the Rock-"Rockie II"- was in development. Last year, company sales were $10 million with a profit margin of 15 percent. Prior to Rockie II's launch, there was a cyberattack on the company resulting in the destruction of files and documents related to the new version of the firewall. Sean Gannon, the President of PaperDyne, does not want the attack or its effect revealed to anyone outside the tech group working on the project, if possible. PaperDyne's network has been hardened, at a cost of $75,000, to prevent another attack. Sean has told clients of a "technical delay" in the project, but he has promised them the new version of the firewall will be available in three months. In order to meet the deadline for the reconstructing of Rockie II, programming staff overtime charges will be incurred. Currently, IT project staff are paid at $38 per hour with benefits and time and a half for overtime. It is estimated the IT project staff will have to work a 55 hour work week for the next three months in order to reconstruct the loss data.

Tim McCagbe, who is project director of Rockie II, is upset about the loss of the project's data. He has decided that he will put in ghosted hours to help meet the three-month deadline, i.e., Tim will work without asking for any overtime pay. Not counting Tim, there will be 10 workers reconstructing the Rockie II project. PaperDyne charges overhead at the rate of 80 percent per direct labor dollar, and it is expected the reconstruction will require 6,600 hours of IT staff time. In addition, another project will have to be abandoned in order to meet Rockie II's three-month release date. The new project was estimated to have a profit of $700,000. After two months have passed, the project is going well, but there are concerns about meeting the project deadline. In the final month, Sean contracted with an outside IT firm, Breakers, to bring in additional programming assistance on the reconstruction. The one-month contract was for $15,000. Breakers was largely responsible for checking codes. Paper Dyne wants to calculate the cost of the cyberattack. Paper Dyne estimated that the original cost of developing the Rockie II firewall was $300,000.

a. Determine the loss to Paper Dyne from the cyberattack.

b. Evaluate Sean's decision to keep the cyberattack a secret. How would a valuation be placed on the additional loss the company would sustain if the Paper Dyne's clients became aware of this successful cyberattack?

c. Evaluate Tim's decision to ghost his work hours in the reconstruction phrase of the project.