FREEMARK ABBEY WINERY

SECTION B GROUP 3

GROUP MEMBERS

1) MOHAMMAD ANIS AHMED (P20057)

2) ASCHARYA DEBASISH MISHRA (P20062)
3) ADITYA JOSHI (P20076)
4) KARAN NAGULAPALLY (P20083)
5) SHUBHANGI SHANKAR (P20101)
 In the case it is given that a storm is approaching and its consequences can be huge for the
company either way.
The company has 2 choices i.e harvest the grapes immediately or leave the grapes on the
vine.
It is given if the grapes are left to harvest and storm occurs then there will be a 40% chance of
development of Botrytis and the resulting wine can be sold at $8/bottle. However there are
60% chances that Botrytis doesn’t develop and the wine resulting from it is sold at $2/bottle.
If grapes are not bottled then they are sold in bulk at $1.
However if the storm does not occur then there is 80% chance that acidity level will go below
0.7%. If sugar concentration rises to 25% then wine is sold at $3.50/bottle and at 20%
concentration at $3/bottle. However if the acidity rises to 0.7% then the grapes must be
immediately harvested and sold at $2.5/bottle.
Total number of bottles of Reisling= 1000*12=12000
The results are summarized as below
Monetary results due to storm
Price/Bottl Probability of Monetary
Alternatives e Qty occurrence value expected
Storm Strikes and
Botrytis develops 8 12000-3600=8400 0.5*0.4=0.2 8*8400=67200
Storm Strikes and
Botrytis does not
develop 2 12000 0.5*0.6=0.3 2*12000=24000

Monetary results due to no storm

Probability of Monetary value
Alternatives Price/Bottle Qty occurrence expected
Acidity falls below
0.7% 2.5 12000 0.2*0.5=0.1 2.5*12000=30000
25% Sugar 3.5 12000 0.4*0.5=0.2 3.5*12000=42000
20% Sugar 3 12000 0.4*0.5=0.2 3*12000=36000

Returns if storm occurs

(0.2*67200) + (0.3*24000) = 20640 -------------If Botrytis develops
Returns if storm does not occur
(0.1*30000) + (0.2*42000) + (0.2*36000) = 18600
Conclusion
The reults show that the company is getting maximum returns if Mr Jaeger leaves the grapes
to be harvested and storm occurs.
So this should be the recommended course of action.