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The Laiterie de Coaticook in the Eastern Townships of Quebec produces several types of cheddar cheese. It markets this cheese in four varieties: aged 2
The Laiterie de Coaticook in the Eastern Townships of Quebec produces several types of cheddar cheese. It markets this cheese in four varieties: aged months, months, months, and years. At the producer's store, of each variety sell for the following prices: $$$ and $ respectively. Consider the cheese maker's decision whether to continue to age a particular block of cheese. At months, he can either sell the cheese immediately or let it age further. If he sells it now, he will receive $ immediately. If he ages the cheese, he must give up the $ today to receive a higher amount in the future.
What is the IRR expressed in percent per month of the investment of giving up $ today by choosing to store of cheese that is currently months old and instead selling of this cheese when it has aged months, when it has aged months, and the remaining when it has aged years?
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