Jeff Heun, president of Crane Always, agrees to construct a concrete cart path at Dakota Golf Club. Crane Always enters

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Jeff Heun, president of Crane Always, agrees to
construct a concrete cart path at Dakota Golf
Club. Crane Always enters into a contract with Dakota to
construct the path for $238,000. In addition, as part of the
contract, a performance bonus of $34,000 will be paid based on
the timing of completion. The performance bonus will be paid fully
if completed by the agreed-upon date. The performance bonus
decreases by $8,500 per week for every week beyond the
agreed-upon completion date. Jeff has been involved in a number of
contracts that had performance bonuses as part of the agreement in
the past. As a result, he is fairly confident that he will receive
a good portion of the performance bonus. Jeff estimates, given the
constraints of his schedule related to other jobs, that there
is 50% probability that he will complete the project on time,
a 25% probability that he will be 1 week late, and a 25%
probability that he will be 2 weeks late.
Determine the transaction price that Crane Always
should compute for this agreement.
Transaction Price
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Assume that Jeff Heun has reviewed his work schedule and decided
that it makes sense to complete this project on time. Assuming that
he now believes that the probability for completing the project on
time is 92% and otherwise it will be finished 1 week late,
determine the transaction price.