Bali Entity (BE), an Orchid Grower, Is Located on the Island

Essay

Bali Entity (BE), an orchid grower, is located on the island of Bali, Indonesia. On July 10, 20X7, BE entered into a contract with Weddings-For-You (WFY). The contract indicates that for $5,000, BE would supply WFY with 500 rare ghost orchids in three months from the contract date. However, due to a virus infesting orchids, the contract is contingent upon an independent count of ghost orchids in BE's greenhouses. If the number of viable orchids plants falls below 1,000 - a 25 percent chance - the contract price would jump to $7,000 for 500 ghost orchids. If the number of viable orchid plants falls below 800 - a 18 percent chance - the contract price would jump to $10,000. The contract would be called off if the number of viable orchid plants fell below 500 - a 2 percent chance.
a. What is the contract consideration under the expected value method?
b. What is the contract consideration under the most likely value method?