Number of bottles kick-start and Wine Investment Appreciation

Question

Question1: Why in 1st question of Analysis I Kick-Start of bottles was counted 192 bottles and in 2nd Question was only 120? So, logically it will be 120, and from year 6, he will always sell 72 bottles and buy 72 bottles so it would be constant from year 6= always 72*5

Question 2: Why wine Investment appreciation is counted as constant and in background it is mentioned appreciation 20% per annum? However, it is power 5 from 5th year. Thus, it should increase per power year. Or is it wrong what I am thinking?

Answer 1

Hi there,

To be honest, I agree with you. I just went through this case and a cannot figure it outself myself either.

Sometimes they say the kick-start is 170, sometimes 120, and sometimes 192.

Sometimes it's better to move on from a case and focus on another one :)

Answer 2

Hi there,

Whenever you pick up on these sort of inconsistencies, feel free to write to PrepLounge so they can ask the author to withdraw it or adjust the case.

It's good that you have an eye for detail ;)

Best,
Cristian

Answer 3

Question 1:

It's a matter of thinking about beggining of the year vs. end of the year (in one you have 120, on the other you have 120+72).

The problem is that on the first graph it has one year before “Year 1” and is stated as “Initial” and has… 196 bottles. Well, if it is the initial… it could only be 120, so yes, the graph is mistaken.

But… by the end of that year, it would have sold 120 + 72

Question 2

No bottle is more that 5 years old, as after 5 years they are sold. So max value is “Initial Price” * (1+20%)^5 * Number of Bottles

Answer 4

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)