Geoff Huen, president of Concrete Sometimes, agrees to const…
Geoff Huen, president of Concrete Sometimes, agrees to construct a concrete cart path at Nebraska Gold Club. Concrete Sometimes enters in to a contact with Nebraska to construct the path for $500,000. In addition, as part of the contract, a performance bonus of $70,000 will be paid based on the timing of completion. The performance bonus will be paid fully if completed by the agreed-upon date. The performance bonus decreases by $15,000 per week for every week beyond the agreed-upon date. Geoff has been involved in a number of contracts that had performance bonuses as part of the agreement. Geoff estimates, given his experience, that there is a 45% probability of completing the project on time, a 30% probability that he will be one week late, a 20% probability that he will be 2 weeks late and a 5% probability that it will be completed three weeks late. Given this information and assuming Geoff uses the expected value approach, what is the transaction price?