Free Mark Abbey Winery, Case Study Example

Assuming Mr. Jaeger chooses to harvest the grapes before the storm arrives, how much money will he make?

It would be a very wise choice for Mr. Jaeger to harvest without any delays. The weather conditions concerning storms are very difficult to determine right up to the day the storm arrives. Weather forecasts have many different limitations especially when using modern technology to determine is a storm will destroy the harvest. Mr. Jaeger should consider this fact before making any decisions to wait to see how the storm will affect the harvest.

One the best decisions would be to eliminate the risk of storms destroying the harvest. The quantity will be 1,000 cases x 12 months will equal 12,000 bottles of wine.Answer will be 12,000 x price per bottle example $2.85=$34,200. The revenue made from the harvest would be $34,200.

Assuming Mr. Jaeger chooses to wait to harvest the grapes, what is the probability that the grapes will end up with the botrytis mold, and how much money will he make if that occurs?

Following Expect Monetary Value methodology the change for botrytis mold will be 40 to 45 percent change the development of botrytis mold would happen if the storm did happen. In addition, it would be a 50% probability that the storm might hit Napa Valley. The estimated price of the Riesling per bottle is $8.00 per bottle; however, the number of bottles would be decreased by 30%. This would be 12,000 times 70% would be $84,000. The final revenue using the Estimated Monetary Value (EMV) made by Mr. Jaeger would be 12,000 cases times 70%= $84,000 x 8 dollars per bottle= Revenue $67,200.

Taking into account all of the various possibilities, what should Mr. Jaeger do?

Mr. Jaeger is dealing with assumptions such as the storm destroying the harvest. However, the owner Mr. Jaeger should use historical reference from the last 5 years to determine the possibility that the storm will destroy the harvest. If Mr. Jaeger decides to sale at a discount lower than what the normally customers would buy, make gain the reputation of the product may not have the same quality. Mr. Jaeger should consider this method very seriously. He could market to establish customers as loyal customers for the next 10 days get a 50% discount for loyalty. This type of appreciation measures for established customers would not alarm the loyal buyer. However, still risky because if the sale is off-season instead of near a holiday make not bring a profit. The best decision for the Mr. Jaeger is to eliminate the risk of storms destroying the harvest. The best decision to harvest immediately without any further delays.

How much would Mr. Jaeger be willing to pay to learn whether the storm will really hit Nap Valley? Hint: The value of this information is equal to the expected value (EV) of the tree with the information minus the expected value of the tree without the information.

Using the basics for expected valuemethodology, we can determine the revenue approximate percent based on if the storm hits Napa or if the storm does not hit Napa. The assumption before the calculations will be higher than the current revenue made today. The value would be less because the expected value today is lower. The question is whether Mr. Jaeger will pay to learn whether the storm will hit Napa Valley? First, if he could get that information it would never be accurate because one change in winds or storms could change a storm into a hurricane. To answer the question Mr. Jaeger should not change his decision on that he would only gamble to make 10% or 20% more. The expected value for the storm hitting Napa percentage would about 20% more in revenues and if the storm does not hit Napa it would on be an approximately increase around 10%. Therefore, to answer the question Mr. Jaeger would not and should not pay to learn whether the storm will hit Napa.