A Winery Owns Hundreds of Acres of Grape Vineyards

question 83

Multiple Choice

A winery owns hundreds of acres of grape vineyards. The grape vines are tended and manually picked by a large staff of workers. Which of the following best describes the cost of this type of production setup?

• A) low initial cost, low operating cost
• B) low initial cost, high operating cost
• C) high initial cost, low operating cost
• D) high initial cost, high operating cost

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Definitions:

Simple Interest

Interest assessed only on the principal sum, or on the part of the principal that still needs to be repaid.

Principal Amount

The original sum of money borrowed in a loan or invested, distinct from interest or profit earned.

Invested

To be invested refers to the allocation of resources, such as capital or time, into a particular venture, asset, or effort with the expectation of generating a future return.

Present Value Equation

A mathematical formula used to determine the current value of a future amount of money or stream of cash flows given a specific rate of return.