Teal Corp. enters into a contract with a customer to build an apartment building

Question

Teal Corp. enters into a contract with a customer to build an apartment building for $979,400. The customer hopes to rent apartments at the beginning of the school year and provides a performance bonus of $144,300 to be paid if the building is ready for rental beginning August 1, 2018. The bonus is reduced by $48,100 each week that completion is delayed. Teal commonly includes these completion bonuses in its contracts and, based on prior experience, estimates the following completion outcomes: Completed by Probability August 1, 2018 70 % August 8, 2018 20 August 15, 2018 5 After August 15, 2018 5

Explanation / Answer

Date of Completion Performance Bonus Probability Bonus August 1, 2018 1,44,300 70% 1,01,010 August 8, 2018 96,200 20%      19,240 August 15, 2018 48,100 5%         2,405 After August 15, 2018 -   5% -   Probable performance Bonus 1,22,655

Related Questions

Navigate

• Browse (All)
• Browse T
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.