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Crazy boy [7]
3 years ago
7

Marle Construction enters into a contract with a customer to build a warehouse for $950,000 on March 30, 2021, with a performanc

e bonus of $50,000 if the building is completed by July 31, 2021. The bonus is reduced by $10,000 each week that completion is delayed. Marle commonly includes these completion bonuses in its contracts and, based on prior experience, estimates the following completion outcomes:
Completed by Probability July 31, 2021, 65% August 7, 2021, 5% August 14, 2021, 5% August 21, 2021, The transaction price for this transaction, based on the expected value approach, is Select one:
a. $950,000
b. $995,000
c. $685,000
d. $652,500
Business
1 answer:
Mandarinka [93]3 years ago
5 0

Answer:

The correct answer is option (B).

Explanation:

According to the scenario, computation of the given data are as follows:

As probability is not correctly given.

Let probability be:

July 31, 2021 = 65%

August 7, 2021 = 25%

August 14, 2021 = 5%

August 21, 2021 = 5%

So, We can calculate the transaction price by using following formula:

Transaction price = (Amount + Bonus) × Probability

July 31, 2018 =  ($950,000 + $50,000) × 65% = $650,000

August 7, 2018 = ($950,000 + $40,000) × 25% = $247,500

August 14, 2018 = ($950,000 + $30,000) × 5% = $49,000

August 21, 2018 = ($950,000 + $20,000) × 5% = $48,500

So, Total transaction price = $650,000 + $247,500 + $49,000 + $48,500

= $995,000

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The calculation of this question and working of solutions is in tabular form which is attached to this answer.

What is Cost?

The cost is of two types - Variable and Fixed . Variable costs exchange based on the amount of output produced. Variable costs may include labor, commissions, and raw materials. constant costs continue to be the same no matter production output. fixed charges may additionally include hire and rental bills, coverage, and interest payments.

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An individual who has left his or her native country and is unwilling or unable to return to it because of persecution or fear o
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3 years ago
The interest rate on short-term U.S. government bonds is 4 percent. The risk premium for any asset with a beta = 1.0 is 6 percen
Basile [38]

Answer:

The average expected rate of return on the market portfolio is 10 percent.

Explanation:

The CAPM (fixed asset pricing) model describes the relationship between systematic risk and expected return on assets, especially stocks. CAPM is widely used throughout the financial community to value high-risk securities and achieve the expected returns on assets when taking into account the risk of those assets and the cost of capital.

The formula for calculating the expected return on an asset taking into account its risk is as follows:

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where:

ERi = expected return on investment

Rf = risk-free interest rate = 4 percent.

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The largest area of job growth in the United States has been in the service sector.

<h3>What are the service sectors?</h3>

The service sector is commonly known as the tertiary sector. It is also known to be the third tier in the three-sector economy.

An Examples of service sector jobs are housekeeping, nursing, etc. The Service industries is made up of:

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