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Can someone pleaee help? David Heun, president of Concrete Always, agrees to construct a concrete cart path at Dakota Golf Club. Concrete Always enters into
Can someone pleaee help?
David Heun, president of Concrete Always, agrees to construct a concrete cart path at Dakota Golf Club. Concrete Always enters into a contract with Dakota to construct the path for $180,000. In addition, as part of the contract, a performance bonus of $36,000 will be paid based on the timing of completion. The performance bonus will be paid fully if completed by the agreed-upon date. The performance bonus decreases by $9,000 per week for every week beyond the agreed-upon completion date. David has been involved in a number of contracts that had performance bonuses as part of the agreement in the past. As a result, he is fairly confident that he will receive a good portion of the performance bonus. David estimates, given the constraints of his schedule related to other jobs, that there is 55% probability that he will complete the project on time, a 30% probability that he will be 1 week late, and a 15% probability that he will be 2 weeks late. (a) Determine the transaction price that Concrete Always should compute for this agreement. Assume that David Heun has reviewed his woik schedule and decided that it makes sense to completethis project on time. Assuming that he now believes that the probability for completing the project on time is 90% and otherwise it will be finished 1 weeklate, determine the transaction price. Transaction price Step by Step Solution
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