Question
On April 1, Bill's Builders LLC entered into a contract of one-month duration to build a barn for Nolan. Bill's is guaranteed to receive a
On April 1, Bill's Builders LLC entered into a contract of one-month duration to build a barn for Nolan. Bill's is guaranteed to receive a base fee of $5,000 for his services in addition to a bonus depending on when the project is completed. Nolan created incentives for Bill's to finish the barn as soon as it can without jeopardizing the structural integrity of the barn. Nolan offered to pay an additional 30% of the base fee if the project finished two weeks early and 10% if the project finished a week early. The probability of finishing two weeks early is 30% and the probability of finishing a week early is 60%. What's the expected transaction price with variable consideration estimated as the expected value? A. $4,750 B. $5,750 C. $5,500 D. $5,000
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