How many years would you hold the wine before selling

Reference no: EM131072321

The timing of wine sales is a frequent problem encountered by vintners. This is because many red wines improve with age. Let us suppose you own a particular vintage and you envisage that each bottle should increase in value by 10% the first year, 9% the second year, 8% the third year, etc.

(a) Suppose the interest rate is 5%, for how many years would you hold the wine if there is no storage cost?

(b) If in addition to interest rate costs, there is a cost of storing the wine that equals 2% of the wine's value each year, for how many years would you hold the wine before selling?

Reference no: EM131072321

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