Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

The Tillamook County Creamery Association manufactures Tillamook Cheddar Cheese. It sells the cheese in four varieties: aged 2 months, 9 months, 15 months, and 2

image text in transcribed

The Tillamook County Creamery Association manufactures Tillamook Cheddar Cheese. It sells the cheese in four varieties: aged 2 months, 9 months, 15 months, and 2 years. At the shop in the dairy, it sells 2 pounds of each variety for the following prices: $7.00, $9.50, $11.00, and $12.50, respectively. Consider the cheese maker's decision whether to continue to age a particular 2-pound block of cheese. At 2 months, he can either sell the cheese immediately or let it age further. If he sells it now, he will receive $7.00 immediately. If he ages the cheese, he must give up the $7.00 today to receive a higher amount in the future. What is the IRR (expressed in percent per month) of the investment of giving up $70.00 today by choosing to store 20 pounds of cheese that is currently 2 months old and instead selling 10 pounds of this cheese when it has aged 9 months, 6 pounds when it has aged 15 months, and the remaining 4 pounds when it has aged 2 years? The IRR is \% per month. (Round to two decimal places.) The Tillamook County Creamery Association manufactures Tillamook Cheddar Cheese. It sells the cheese in four varieties: aged 2 months, 9 months, 15 months, and 2 years. At the shop in the dairy, it sells 2 pounds of each variety for the following prices: $7.00, $9.50, $11.00, and $12.50, respectively. Consider the cheese maker's decision whether to continue to age a particular 2-pound block of cheese. At 2 months, he can either sell the cheese immediately or let it age further. If he sells it now, he will receive $7.00 immediately. If he ages the cheese, he must give up the $7.00 today to receive a higher amount in the future. What is the IRR (expressed in percent per month) of the investment of giving up $70.00 today by choosing to store 20 pounds of cheese that is currently 2 months old and instead selling 10 pounds of this cheese when it has aged 9 months, 6 pounds when it has aged 15 months, and the remaining 4 pounds when it has aged 2 years? The IRR is \% per month. (Round to two decimal places.)

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Intermediate Financial Management

Authors: Eugene F. Brigham, Phillip R. Daves

13th Edition

1337395080, 9781337395083

More Books

Students also viewed these Finance questions

Question

How competitive is the external environment of your organization?

Answered: 1 week ago

Question

What other organizations compete on this issue?

Answered: 1 week ago

Question

What significant opposition exists?

Answered: 1 week ago