Problem:
Nair Corp. enters into a contract with a customer to build an apartment building for $1,000,000. The customer hopes to rent apartments at the beginning of the school year and provides a performance bonus of $150,000 to be paid if the building is ready for rental beginning August 1, 2015. The bonus is reduced by $50,000 each week that completion is delayed. Nair commonly includes these completion bonuses in its contracts and, based on prior experience, estimates the following completion outcomes:
- Completed by Probability
- August 1, 2015 70%
- August 8, 2015 20%
- August 15, 2015 5 %
- After august 15m, 2015 5%
Required:
Question: Determine the transaction price for this contract.
Note: Please provide through step by step calculations.