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?
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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, realized 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?
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