A company enters into a contract to build a factory. The agreed price is R12 million, and the specified completion date is 30 November 2024. However, the contract provides that the company should receive an incentive payment of a further R1 million if the factory is completed by 30 September 2024. Similarly, the price will be reduced by R1 million if the factory is not completed by 30 November 2024.

The company estimates that there is a 20% probability that the factory will be completed by 30 September 2024, a 70% probability that it will be completed during November 2024 and a 10% probability that it will not be completed until after 30 November 2024.

What is the expected value of this transaction? Ignore the time value of money.

(2 Marks)

Answer: R

Note: Enter only the amount (do not show your calculation, and do not make use of spaces, full-stops, commas or R-signs). Example: 7400000