Question: Bob the Builder enters into a contract to construct a manufacturing facility for an auto manufacturer. The contract price is $250 million plus a

Bob the Builder enters into a contract to construct a manufacturing facility

Bob the Builder enters into a contract to construct a manufacturing facility for an auto manufacturer. The contract price is $250 million plus a $25 million award fee if the facility is completed by a specified date. The contract is expected to take three years to complete. Bob has a long history of constructing similar facilities. The award fee is payable once the facility is complete. Bob will receive none of the $25 million fee if the facility is not completed by the specified date. Bob believes, based on 20 years of experience, that it is 95% likely that the contract will be completed successfully prior to the contract date. What is the transaction price?

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