CFA Practice Question

CFA Practice Question

A firm receives a contract that will pay it a total of $16 million over years. The total expected expense of the contract will be $12 million. The expenses incurred, and payments received by the firm are as follows ($ millions):

Year 1 | Year 2 | Year 3 | Year 4
Payments Received: 6 | 4 | 3 | 3
Expenses: 2 | 2 | 4 | 4

If the firm follows the percentage of completion then the revenues for Year 3 will be:
A. 3
B. 5.33
C. 4
Explanation: Revenues = (4/12) * 16 = fraction of expense for the year * total payments = 5.33

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