# Finance Assignment | Professional Writing

16.1 A proposed brewery in the Central European country of Dubiety will produce a beer—the “Dubi Dubbel”—for Grolsch N.V. of the Netherlands. A number of other European brewers have announced plans to produce and sell beer in the Dubi market. If too many breweries open, beer prices will fall. If some of these investment plans do not materialize, prices are likely to rise. The price of beer is determined exogenously and will be known with certainty in one year. Grolsch management must decide whether to begin production today or in one year. The following facts apply: Initial investment Price of beer in 1 year Variable production cost Fixed production cost Expected production Discount rate Io = D200,000,000; rises by 10% each year P1 = D25 or D75 with equal probability VC = D10 per bottle FC = D10,000,000 per year Q = 1,000,000 bottles per year forever i= 10%

Save Time On Research and Writing
Hire a Pro to Write You a 100% Plagiarism-Free Paper.

a. Draw a decision tree that depicts Grolsch’s investment decision. b. Calculate the NPV of investing as if it were a now-or-never alternative. c. Calculate the NPV (at t = 0) of waiting one year before deciding. d. Calculate the NPV of investing today, including all opportunity costs. e. Should Grolsch invest today or wait one year before making a decision? 16.6 Grolsch management has gone ahead with the investment in Problem 16.1. The market has grown increasingly competitive, and nearly all of the brew- ery investments in Central Europe are losing money. To make matters worse, variable production costs of D20/bottle are higher than expected. According to local laws, employees cannot be laid off so long as the brewery is open, and Grolsch must either produce at capacity or close the brewery. A competi- tor is considering exiting the market. If this brewer does not abandon, price will remain D15/bottle. If the brewer abandons, price will rise to D35/bottle. Assume Grolsch’s abandonment decision does not influence the competitor’s decision, so price uncertainty is exogenous. The following facts apply to the abandonment decision: Cost of abandoning Current price of beer Price of beer in 1 year Variable production cost Fixed production costs Expected production Discount rate 10 = D10,000,000; rises by 10% each year Po =D15 per bottle in perpetuity P, = D15 or D35 with equal probability VC = D20 per bottle FC = D10,000,000 per year Q = 1,000,000 bottles per year forever i = 10% Note that the cash flows of this abandonment option are similar to those of the investment option. Grolsch management can pay an exercise price today to avoid future losses. But avoiding future losses is the same thing as receiving a net cash inflow-just as in the investment option. a. Draw a decision tree that depicts Grolsch’s investment decision. b. Calculate the NPV of abandoning as if it were a now-or-never alternative. c. Calculate the NPV of waiting one year before making a decision. d. Calculate the NPV of abandoning today, including all opportunity costs. e. Should Grolsch abandon this losing venture today?

Get Finance homework today

Save Time On Research and Writing
Hire a Pro to Write You a 100% Plagiarism-Free Paper.
Calculate the price
Pages (550 words)
\$0.00
*Price with a welcome 15% discount applied.
Pro tip: If you want to save more money and pay the lowest price, you need to set a more extended deadline.
We know how difficult it is to be a student these days. That's why our prices are one of the most affordable on the market, and there are no hidden fees.

Instead, we offer bonuses, discounts, and free services to make your experience outstanding.
How it works
Receive a 100% original paper that will pass Turnitin from a top essay writing service
step 1
Fill out the order form and provide paper details. You can even attach screenshots or add additional instructions later. If something is not clear or missing, the writer will contact you for clarification.
Pro service tips
How to get the most out of your experience with Homework Writing Services
One writer throughout the entire course
If you like the writer, you can hire them again. Just copy & paste their ID on the order form ("Preferred Writer's ID" field). This way, your vocabulary will be uniform, and the writer will be aware of your needs.
The same paper from different writers
You can order essay or any other work from two different writers to choose the best one or give another version to a friend. This can be done through the add-on "Same paper from another writer."
Copy of sources used by the writer
Our college essay writers work with ScienceDirect and other databases. They can send you articles or materials used in PDF or through screenshots. Just tick the "Copy of sources" field on the order form.
Testimonials
See why 20k+ students have chosen us as their sole writing assistance provider
Check out the latest reviews and opinions submitted by real customers worldwide and make an informed decision.
Foundations of Language and Literacy for Diverse Prekindergarten and Kindergarten Learners
Always cite used resources.
Customer 454463, May 2nd, 2022
Good work.
Customer 458115, May 10th, 2022
Excellent work!
Customer 463469, October 17th, 2022
Education
WELL DONE , THANK YOU
Customer 463813, April 12th, 2023
SEO
A job well done. Followed the instructions to the letter.
Customer 463679, April 24th, 2023
It met expectations. Thanks!
Customer 463143, September 7th, 2022
Good Job. Thanks
Customer 453413, April 29th, 2020
Finance/Acc related
Outstanding discussion, grammar, and plagiarism score.
Customer 460073, April 6th, 2022
Social Work and Human Services
Thank you for the revision which was done timely and efficiently!
Customer 452703, January 23rd, 2020
Education
Loved the fact that the writer took note of the corrections given and did a superb job. Good work
Customer 463679, March 3rd, 2023
History
Just impeccable!
Customer 463001, May 19th, 2022
Automotive
Excellent Keep it up
Customer 452441, April 26th, 2022
11,595
Customer reviews in total
96%
Current satisfaction rate
3 pages
Average paper length
37%
Customers referred by a friend