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Construct Co . signed a contract with a private school to build an addition to its main building within two months. The contract stipulated that
Construct Co signed a contract with a private school to build an addition to its main building within two months. The contract stipulated that Construct co would receive $ after completing the project. In addition, to encourage Construct Co to be more efficient and finish the construction earlier, the school offered a percent bonus if the addition was constructed in days, a percent bonus if the construction was completed in days, and a percent bonus if a month was enough to finalize the construction. The probability of finishing the construction in days is and the probability of finishing in days is However, Construct Co believes that there is no chance they can finish the construction in one month. Determine the expected transaction price after taking into consideration the variable consideration estimated using the expected value approach?
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