oseph Taylor, president of Carla Vista Always, agrees to construct a concrete cart path at Vaughn Golf Club. Carla Vista Always enters into a contract with Vaughn to construct the path for $202, 000. In addition, as part of the contract, a performance bonus of $46, 400 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 $11,600 per week for every week beyond the agreed - upon completion date. Joseph has been involved in a number of contracts that had performance bonuses as part of the agreement in the past. As a result, he is fairly confident that he will receive a good portion of the performance bonus. Joseph estimates, given the constraints of his schedule related to other jobs, that there is 50% probability that he will complete the project on time, a 30% probability that he will be 1 week late, and a 20% probability that he will be 2 weeks late. Assume that Joseph Taylor has reviewed his work schedule and decided that it makes sense to complete this project on time. Assuming that he now believes that the probability for completing the project on time is 93% and otherwise it will be finished 1 week late, determine the transaction price.

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter19: Capital Investment

Section: Chapter Questions

Problem 12E: Refer to Exercise 19.11. 1. Compute the payback period for each project. Assume that the manager of...

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Joseph Taylor, president of Carla Vista Always, agrees to construct a concrete cart path at Vaughn Golf Club. Carla Vista Always enters into a contract with Vaughn to construct the path for $202, 000. In addition, as part of the contract, a performance bonus of $46, 400 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 $11,600 per week for every week beyond the agreed - upon completion date. Joseph has been involved in a number of contracts that had performance bonuses as part of the agreement in the past. As a result, he is fairly confident that he will receive a good portion of the performance bonus. Joseph estimates, given the constraints of his schedule related to other jobs, that there is 50% probability that he will complete the project on time, a 30% probability that he will be 1 week late, and a 20% probability that he will be 2 weeks late. Assume that Joseph Taylor has reviewed his work schedule and decided that it makes sense to complete this project on time. Assuming that he now believes that the probability for completing the project on time is 93% and otherwise it will be finished 1 week late, determine the transaction price.

X Your answer is incorrect.
Assume that Joseph Taylor has reviewed his work schedule and decided that it makes sense to complete this project on time.
Assuming that he now believes that the probability for completing the project on time is 93% and otherwise it will be finished 1
week late, determine the transaction price.
Transaction price
$
253888

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