Agee enters into a contract with Pipkin Video to add their programs to Agee's network. Pipkin will pay Agee an upfront fee of $250,000 fixed fee for 12 months of access, and will also pay a $100,000 bonus if Agee's users access Pipkin Video for at least 10,000 hours during the 12 month period. Agee estimates that it has a 55% chance of earning the $100,000 bonus
Refer to Agee Corporation. Using the expected-value approach the transaction price would be
What will be an ideal response?
Answer:
$250,000 × 100%
$250,000
$100,000 × 55%
55,000
Transaction Price
305,000
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