Graphics and Concluding question

Question

In the Graphics “Economics over time” it should consider the big revenue every five years.

Quote:

"Ask the candidate: Does the 20% p.a. strike one as a credible return on an investment-grade wine? Why or why not? How does it compare to other returns you know?

Well, yes, it’s extremely aggressive but not completely implausible. It’s certainly not a sustainable return!"

I think that the answer is quite weak. Could someone elaborate a bit more? I thought that 20% was an actually quite high appreciation and that it would probably be closer to 5%. At least it wouldn't make sense to me that all years appreciate equally. Particularly the first ones. Could someone share their views on that please?

Answer 1

Wine has been growing at almost 10% CAGR since 2003. To be at 20% you would need to outperform this benchmark on a consistent basis. That is a very aggressive assumption.

Answer 2

Given that the investment strategy is to hold each bottle of wine for exactly 5 years before selling, they will not s... (read entire answer)

Given that the investment strategy is to hold each bottle of wine for exactly 5 years before selling, they will not sell everything in the inventory immediately at year 5. If w... (read entire answer)