A Vintner Is Deciding When to Release a Vintage of Sauvignon

question 42

Multiple Choice

A vintner is deciding when to release a vintage of Sauvignon Blanc. If it is bottled and released now, the wine will be worth $2.2 million. If it is barrel aged for a further year, it will be worth 15% more, though there will be additional costs of $528,000 incurred at the end of the year. If the interest rate is 7%, what is the difference in the benefit the vintner will realize if he releases the wine after barrel aging it for one year or if he releases the wine now?

• A) He will earn $1,980,000 less if he releases the wine now.
• B) He will earn $328,972 more if he releases the wine now.
• C) He will earn $328,972 less if he releases the wine now.
• D) He will earn $356,400 more if he releases the wine now.

---

Definitions:

Export Units

Export Units refers to the quantity of goods or services sent out of a country to foreign markets.

Import Units

A measure concerning the quantity of goods or services that a country brings in from other countries for domestic consumption or use.

Trade

The exchange of goods, services, or both between two or more parties, either within an economy or between economies.

Comparative Advantage

The ability of an individual, firm, or country to produce a particular good or service at a lower opportunity cost than others.