1. Company X sells standard lawn mowers to Biggy Hardware (BH) for $100. BH is Company Xs largest customer. Company X offers BH the following discounts based on purchases in a calendar year:

1 to 999 lawn mowers: 0% discount

1,000 to 1,500 lawn mowers: 3% discount

More than 1,500 lawn mowers: 5% discount

BHs purchasing pattern has been very consistent over its twenty year relationship history with Company X. Company Xs management has assigned a 10% probability to a 0% discount, a 70% probability to a 3% discount and a 20% probability to a 5% discount.

1. What is the estimated transaction price if the most likely amount is used?
2. What is the estimated transaction price if the expected value method is used?