Pharoah Construction Company enters into a contract with a customer to build a warehouse for $211,000, with a performancebonus of $105,500 that will be paid based on the timing of completion. The amount of the performance bonus decreases by 10% perweek for every week beyond the agreed-on completion date. The contract requirements are similar to contracts that Pharoah hasperformed previously, and management believes that such experience is predictive for this contract. Management estimates thatthere is a 60% probability that the contract will be completed by the agreed-on completion date, a 30% probability that it will becompleted one week late, and a 10% probability that it will be completed two weeks late. whats the tranction price.
Pharoah Construction Company enters into a contract with a customer to build a warehouse for $211,000, with a performance
bonus of $105,500 that will be paid based on the timing of completion. The amount of the performance bonus decreases by 10% per
week for every week beyond the agreed-on completion date. The contract requirements are similar to contracts that Pharoah has
performed previously, and management believes that such experience is predictive for this contract. Management estimates that
there is a 60% probability that the contract will be completed by the agreed-on completion date, a 30% probability that it will be
completed one week late, and a 10% probability that it will be completed two weeks late.
whats the tranction price.
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