A vintner is deciding when to release a vintage of pinot gris. If it is bottled

Question

A vintner is deciding when to release a vintage of pinot gris. If it is bottled and released now, the wine will be worth $2.2 million. If it is barrel aged for a further year, it will be worth 20% more, though there will be additional costs of $500,000. If the interest rate is 7%, what is the difference in the benefit the vintner will realise if he releases the wine after barrel aging it for one year, or if he releases the wine now?

OPTION1 : HE WILL EARN LESS IF HE RELEASE THE WINE NOW

OTION2: HE WILL EARN 80000 MORE IF HE RELEASE THE WINE NOW

OPTION3: HE WILL EARN 60000 LESS IF HE RELEASE THE WINE NOW

OPTION 4: HE WILL EARN 600000 LESS IF HE RELEASES THE WINE NOW

I NEED TO CHOOSE ONE OPTION WHICH THE BEST CORRECT

Explanation / Answer

A vintner is deciding when to release a vintage of pinot gris. If it is bottled and released now, the wine will be worth $2.2 million. If it is barrel aged for a further year, it will be worth 20% more, though there will be additional costs of $500,000.

so, the toal cost of keeping the wise one more year is: 500000 = .5m $

Increase in price is =
2.2m * 20% = .44m $

so, profit/loss = .5m - .44m = .06m $

If he releases it now, he will have profits,
so the answer is:
OTION2:HE WILL EARN 80000 MORE IF HE RELEASE THE WINE NOW

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