A vintner is deciding when to release a vintage of sauvignon blanc. If it is bottled and released now, the wine will be worth $ 2.6 million. If it is barrel aged for a further year, it will be worth 25 % more, though there will be additional costs of $ 975 comma 000 incurred at the end of the year. If the interest rate is 7%, what is the present value of the difference in the benefit the vintner will realize if he releases the wine after barrel aging it for one year or if he releases the wine now?
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