A Vintner Is Deciding When to Release a Vintage of Sauvignon

question 58

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 20% more, though there will be additional costs of $500 000. If the interest rate is 7%, what is the difference in the benefit the vintner will realise if he releases the wine after barrel-aging it for one year or if he releases the wine now?

• A)He will earn $600 000 less if he releases the wine now.
• B)He will earn $107 000 less if he releases the wine now.
• C)He will earn $80 000 less if he releases the wine now.
• D)He will earn $60 000 more if he releases the wine now.

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Definitions:

Functional Fixedness

A cognitive bias that limits a person to using an object only in the way it is traditionally used.

Restructuring

Thinking about a problem in a new way in order to solve it.

Using Analogies

The process of explaining a concept or idea by comparing it with something else that is more familiar or easier to understand.

General Intelligence

The theory that one common factor underlies intelligence.