ACD Construction enters into a contract with a customer to build a warehouse for $950,000 on March
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Question:
ACD Construction enters into a contract with a customer to build a warehouse for $950,000 on March 30, 2021 with a performance bonus of $50,000 if the building is completed by July 31, 2021. The bonus is reduced by $10,000 each week that completion is delayed. ACD commonly includes these completion bonuses in its contracts and, based on prior experience, estimates the following completion outcomes:
Completed By | Probability |
July 31, 2021 | 55% |
August 7, 2021 | 25% |
August 14, 2021 | 5% |
August 21, 2021 | 5% |
The transaction price for this transaction is
A. | $995,000 | |
B. | $990,000 | |
C. | $652,500 | |
D. | $685,000 |
Related Book For
Managerial Decision Modeling With Spreadsheets
ISBN: 718
3rd Edition
Authors: Nagraj Balakrishnan, Barry Render, Jr. Ralph M. Stair
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