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Exotic Adventure Inc

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Running Head: Exotic Adventures Inc

Nova Southeastern University
H. Wayne Huizenga School of Business & Entrepreneurship Assignment for Course: QNT 5040
Submitted to: Yuliya Yurova
Submitted by: Joy Starks N00623592 8841 Southampton Drive
Miramar, Fl 33025 305 458 3129 954 441 5468
Date of Submission: 1/24/2010
Title of Assignment: Exotic Adventures Inc

CERTIFICATION OF AUTHORSHIP: I certify that I am the author of this paper and that any assistance I received in its preparation is fully acknowledged and disclosed in the paper. I have also cited any sources from which I used data, ideas or words, either quoted directly or paraphrased. I also certify that this paper was prepared by me specifically for this course.
Student's Signature: Joy Starks
*****************************************************************

Instructor's Grade on Assignment:
Instructor's Comments:
Executive Summary
Exotic adventures operate Amazon River voyages. The company operates successfully during high water season in March from Belem, Brazil on the Atlantic coast to Iquitos, Peru. After research Exotic adventures expanded their voyages to include low water season in October.
During September Exotic adventures had to make a decision whether to cancel a voyage or to continue the voyage based on ambiguous information regarding safety issues in unusual low water levels.
Method of analysis was conducted by a decision tree technique. Exotic Adventures had three options to make the decision on whether to continue or not continue on the voyage. Option one was to cancel at October 8, and incur total loss of $185,000. Option two was to Cancel at Manaus and incur total loss of $282,000. The third and last option was to turn back before Iquitos If they make it to Manaus the company will not incur any additional costs. However if they are unsuccessful the company will incur losses of $290,000.
The recommendation is for Exotic Adventures to continue from Manaus, with an estimate 50% probability of making it all the way up the river to Iquitos.

Background
Exotic adventures Amazon voyage operated successfully during high water season in March from Belem, Brazil on the Atlantic coast to Iquitos, Peru. EAI started to operate voyages during the low water season after suggestion from prominent naturalists. EAI after research found that the 14-foot draft vessel to be used on new voyages was within the safety margins to operate safely and comfortably. In early August of 1998, 99 passengers had booked passage on the upriver and the downstream voyage at an average price of $4000.00 for October of that year. By Early September EAI Brazilian agents informed them that the water level was too low between Manaus and Lquitos not safe to navigate. In contrast agents in Peru were advising them that it was okay, and that their Peruvian pilots were operating vessels with drafts of 14 feet on the river and it was not a problem with the planned voyages. The Brazilian agents would gain financially if the vessel stayed within the lower part of the river and within Brazilian waters, and the Peruvian did not want the vessel to cancel due to financial lose. EAI had to make a decision whether to proceed with the voyages or not to proceed; they had five days before passengers depart for Belem which would be enough time to cancel the voyage.
Problem
Exotic adventures have to make a decision whether to cancel their voyage or to continue the voyage based on the information they received from the Brazilian and Peruvian agents which was based primarily on their own financial gain.

Analysis Exotic Adventures as three options before making a final decision on whether to cancel their voyage or to continue the voyage. There are 4 decision alternatives. The first option is to cancel the voyage on October 8, notifying passengers before they left their homes. If they take this option they will have to reimburse passengers for payments, and pay penalties of $30,000 for air tickets. In addition, prepaid expenses were unrecoverable. Total cost of $426,000 less savings of $241,000 meant that Exotic Adventures would incur a loss of $185,000. The second option is to continue with the voyages and if water levels continue to drop cut the first voyage at Manaus and cancel the second voyage. This option is 20% probability that the voyage, will have to cancel at Manaus. Additional costs of $368,000 less savings of $86,000 generated total loss of $282,000. Manaus more stable and does not have a huge drop in EMV. $-172400 for EMV Option three; turn back before Lquitos, as a 50% probability of making it to Lquitos. If they make it to Manaus the company will not incur any additional costs. However if they are unsuccessful the company will incur losses of $290,000. The EMV is negative $145,000. In addition, Iquitos is more sensitive due to big drop in EMV.

Conclusions: The recommendation is for Exotic adventures to take option three and proceed all the way from Manaus, with a probability of 50% success rate. In addition, the company will not incur any additional costs and the EMV is more beneficial on this option.
Bibliography
Patrick Shaw, John S. Hulland (1999). Exotic Adventures Inc, the Amazon River Voyage.
Ivey Management Services

Albright, Winston, and Zappe (2009) Business Modeling (3e) Mason, Ohio: Cengage Learning

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