Question: Sorry I dont have enough time to post questions, please give me a favor help me answer this two questions. You own a 10-acre vineyard
You own a 10-acre vineyard and earn income by selling your grapes to wineries. Your vineyard is currently planted to Merlot grapes, but you are thinking of replanting with Syrah grapes because they are commanding a higher market price per ton. Merlot fetches $1,500 per ton but Syrah sells for $3,000 per ton, those prices are expected to remain stable, and you produce 5 tons per acre (so 50 tons per year total). Either way, you plan to sell the vineyard 5 years from now (at the end of the year) for 5-times (5x) the annual income (in year 5) from the sale of grapes (that is, you'll get the income from grape sales and then sell the vineyard for 5 times that amount at the end of year 5). However, if you switch to Syrah, it will cost you $100,000 immediately and the vines won't produce any grapes until year 4 (that is, years 1-3 will have no sales if you plant Syrah, but years 4 and 5 will). The applicable discount rate is 15% per year. From a pure economic standpoint, should you switch to Syrah? OAYes O B No O CIt doesn't matter O D Not enough information to answer this
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