Ans:
The performance bonus decreases by $10,000 per week for every week beyond the agreed-upon completion date. |
|||
Competition of contract |
Bonus |
Multiply: Probability |
Expected bonus |
On Time |
$ 40,000 |
55% |
$ 22,000 |
Delay 1 week |
$ 30,000 |
30% |
$ 9,000 |
Delay 2 week |
$ 20,000 |
15% |
$ 3,000 |
Expected value of bonus received |
$ 34,000 |
||
Contract price |
$ 200,000 |
||
Expected value of bonus received |
$ 34,000 |
||
Transaction Price (Answer 1) |
$ 234,000 |
||
Competition of contract |
Bonus |
Multiply: Probability |
Expected bonus |
On Time |
$ 40,000 |
90% |
$ 36,000 |
Delay 1 week |
$ 30,000 |
10% |
$ 3000 |
Expected value of bonus received |
$ 39000 |
||
Contract price |
$ 200,000 |
||
Expected value of bonus received |
$ 39000 |
||
Transaction Price (Answer 2) |
$ 239,000 |
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