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What is the transaction price for the contract

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Wayne Industries Inc. and Gotham Excavation & Construction Co. sign an agreement in which Gotham Excavation & Construction Co. will excavate and construct a secret, underground garage beneath the home of Wayne Industries's CEO. Gotham Excavation & Construction Co. estimates that construction will take either 20 months with a 40% probability or two years with a 60% probability. Wayne Industries Inc. agrees to pay Gotham Excavation & Construction Co. $71 at the beginning of construction, $57 at the completion of construction, and a bonus of $30 if construction is completed in 20 months.

Problem 1: Assuming that Gotham Excavation & Construction Co. uses the most-likely approach, what is the transaction price for this contract?

Reference no: EM132968574

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