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What transaction price will leo estimate for the contract

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Question: Leo Consulting enters into a contract with Highgate University to restructure Highgate's processes for purchasing goods from suppliers. The contract states that Leo will earn a fixed fee of $25,000 and earn an additional $10,000 if Highgate achieves $100,000 of cost savings. Leo estimates a 50% chance that Highgate will achieve $100,000 of cost savings.

Assuming that Leo determines the transaction price as the expected value of expected consideration, what transaction price will Leo estimate for this contract?

Possible amounts * Probabilities (%) = expected amounts

Reference no: EM132722872

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