Hi Team,
In Year 5, why aren't we considering the sale of 120 bottles (investment cellar in Year 0)? Instead, we are including these 120 bottles along with the 72 bottles from Year 1, in Year 6 sale calculation, why is this so? I would like to understand the logic behind the same.
Thanks in advance!
This is how the cash flow should look like:
This is the cash flow per year. Each bullet number is the year and between parenthesis the accumulated cash flow
Hi there,
I would be happy to share my thoughts on it:
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Best,
Hagen
(edited)
Hi there,
As the case states, you are selling the 120 initial investment in year 5!
Hello,
I think the case treats the initial investment as “Year 0”, and the time accounting only starts after you start drinking and buying new wine.
This is why the case says “Thus at the end of year one, I should have 120+72=192 bottles in the investment section or 242 bottles in the total cellar”
Hope this clarifies!
In the "number of wine bottles" section - "After 5 years (in my time accounting), I sell the kick-start of 192 bottles". This says that you sell 192 bottles in Year 6 In the "economics of the cellar" section - After 5 years, you sell the kick-start of 120 investment bottles and get a big push in revenue of 120*$250=$30,000. Here, the solutions says that you sell 120 bottles in Year 6. I'm confused on this aspect.
