Question
A brewery is deciding when to release its new non-alcoholic craft beer infused with Davidson Plum. It has two options. Option 1: If it is
A brewery is deciding when to release its new non-alcoholic craft beer infused with Davidson Plum. It has two options.
Option 1: If it is bottled and released now, the beer will be worth $1.5 million.
Option 2: If it is barrel-aged for a further year, it will be worth 20% more, though there will be additional costs of $500 000 in that year.
If the interest rate is 7%, what is the difference (today) in the benefit the brewery will realize if it releases the beer after barrel-aging it for one year (option 2) or if it releases the beer now (option 1)?
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Management Accounting
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