What is the present value of the net profit

Assignment Help Financial Accounting
Reference no: EM132942428

A vintner is deciding when to release a vintage wine. If it is bottled and sold now, the immediate revenue will be $2.5 million. If it is barrel aged for a further year, the revenue in one year will be 30% more, though there will be additional costs of $400,000, occurring in one year. Assume an interest rate of 5%.

Problem a. What is the present value of the net profit if the vintner sells the wine after barrel aging it for a further year? Please show your work (e.g., the formulas, Excel functions, and the numerical inputs).

Problem b. Should the vintner sell the wine now or a year later? Briefly Explain.

Reference no: EM132942428

Questions Cloud

Attitudes-self-concept and behaviour : Scenario: You are a student at College and you are in the process of improving your knowledge and expertise as a student that will help you to become a Business
List five examples of industry legislation : 1) List five examples of industry legislation. Provide a definition and example for each example.
Can a manager instill motivation into employees : Can a manager instill motivation into employees or is motivation a process of drawing out something from employees? Discuss coaching
Discuss setting up valid research designs : Discuss setting up valid research designs.
What is the present value of the net profit : What is the present value of the net profit if the vintner sells the wine after barrel aging it for further year? A vintner is deciding when to release vintage.
Assessing professionalism : Given the information in the journal article by Murphy et. al.; Assessing professionalism: the case of financial planning, comment on the following:
Improve the effectiveness of today board of directors : What recommendations would you make to improve the effectiveness of today's Board of Directors? Do you think that your recommendations will be different for a g
Solve the estimated cost of the inventory destroyed : Brewers Corp.'s inventory was available, Using the gross profit method, calculate the estimated cost of the inventory destroyed in the fire.
Type of corporate social responsibility edict : Many businesses today appear to have some type of corporate social responsibility edict.

Reviews

Write a Review

Financial Accounting Questions & Answers

  What are the warranty expense balances

Merritt Equipment Company sells computers for $1,520 each and also gives each customer a 2-year warranty that requires the company to perform periodic services and to replace defective parts. During 2014, the company sold 920 computers on credit. Bas..

  Treasury stock transactions

Prepare journal entries for the following treasury stock transactions. Assume that all three happen in order when preparing each entry. Instructions: Prepare journal entries for the above transactions.

  Illustrate what will be the effect of the lease on ltt

The office building was acquired by Lakeside at a cost of $1 million and was expected to have a useful life of 15 years with no residual value. Illustrate what will be the effect of the lease on LTT's earnings for the first year (ignore taxes)?

  Would advise sew-good to accept the credit card offer

Sew-Good that the use of this credit card would be very useful for times when is a short term cash deficit. Would advise Sew-Good to accept the credit card

  What amount should merry capitalize as cost of the machine

Merry Company purchased a machine costing $125,000 for its manufacturing operations and paid shipping costs of $20,000. Merry spent an additional $10,000 testing and preparing the machine for use. What amount should Merry capitalize as the cost of th..

  What is business risk and how is measured

What happens to the component costs of debt and equity when the debt ratio is increased? Why does this occur? What is business risk and how is it measured?

  Determine expected cash collections by month

The company is in the process of preparing a cash budget and must determine expected cash collections by month. To this end, the following information has been assembled:

  Prepare a report paper about ford motor company sec ten-k

Prepare a report paper about Ford Motor Company SEC 10-K. Post the name of your company in the SEC 10-K company in the week 1 Discussion.

  What the ending inventory cost rounded to nearest dollar is

The firm uses the periodic inventory.During the year, 60 units of the item were sold. The ending inventory cost rounded to nearest dollar using average cost is

  Principle of exceptions

The principle of exceptions allows managers to focus on correcting variances between

  What is incremental revenue associated with price reduction

Consider the production cost information for Mama Italiano Sauce given below. Mama Italiano Sauce Production Cost Budget April 2008. The company is currently producing and selling 250,000 jars of sauce annually. The jars of sauce sell for $4 per jar...

  Is not estimating bad debts way of manipulating net income

After all, the value to the asset has just increased due to the repair. 2. Isn't estimating bad debts a way of manipulating net income.

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd