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3. On April 1st, Bob the Bullder entered into a contract of one month duration to build a barn for Nolan Bob is guaranteed to
3. On April 1st, Bob the Bullder entered into a contract of one month duration to build a barn for Nolan Bob is guaranteed to receive a base fee of $10,000 for his services in addition to a bonus depending on when the project is completed. Nolan created incentives for Bob to finish the barn as soon as he can without jeopardizing the structural integrity of the barn. Nolan offered to pay an additional 5% of the base fee for each week the project completion is early. In addition, Bob the Builder will incur a penalty of 2% of the base fee for each week the project completion is late. Bob the Builder's management provided the following probability distribution for each possible completion week. Weeks Early (Late) 2 1 0 (this is the week the project is due) (1) (2) Probability 10% 30% 40% 10% 10% Assuming the estimated variable consideration is not subject to a significant reversal, what is the amount of the bonus/penalty that Bob the Builder should include in the transaction price using the expected value approach? (1.5 points)
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