It is the beginning of September and you have been offered the following deal to go heli-skiing. If you pick the first week in January and pay for your vacation now, you can get a week of heli-skiing for $2500. However, if you cannot ski because the helicopters cannot fly due to bad weather, there is no snow, or you get sick, you do not get a refund. There is a 40% probability that you will not be able to ski. If you wait until the last minute and go only if you know that the conditions are perfect and you are healthy, the vacation will cost $4000. You estimate that the pleasure you get from heli-skiing is worth $6000 per week to you (if you had to pay any more than that, you would choose not to go). If your cost of capital is 8% per year, should you book ahead or wait?

  • CreatedAugust 06, 2014
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