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Exotic Adeventures Inc Case Analysis

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Exotic Adventures Inc.
Case Synopsis Exotic Adventures Inc. is a company that specializes in providing voyages to tourist who primarily want to visit the Polar Regions. Although many come to Exotic Adventures to explore Mother Nature and its beauty, it can be very disheartening when now Mother Nature affects voyages from happening. This sort of incident has now put managers of Exotic Adventures in a difficult position where they now have to decide what to do. The voyages that are provided through Exotic Adventures consist of a boat sailing through 18 feet deep water. The problem arises after a drought in Central America causes water level to drop to 14. Brazil has marked these waters as unsafe to maneuver through but Peru says the water is perfectly fine. Although 14 feet may seem fine for the boat, the owners are debating if they want to risk this to satisfy the customers and also what would be more profitable and or less cost affective. Managers would have to decide between three options to see what would be more affective and of best interest to the company Case Analysis
Option One
The first option would be to cancel the entire voyage. If the company were to indeed cancel expected monetary value would equal to 184K. We derive at this number by first multiplying the total additional cost (184k) by the percentage amount (0%). In other words, because of there is no probability that nothing will occur and is certain to happen, this keeps the additional cost equal to the EMV.

Option Two
This option gives an expected monetary value of$ 56,400. We derive to this answer by calculating the probability (20%) and multiplying it by its total additional cost of $282K. This mean that the voyage has a 20% chance of not having water exceed 14 feet and refunds and other additional cost will not have to be returned to voyagers. Although this may seem pretty reasonable, we still must monitor does this option gives us the best result in expected monetary value. In order to tell if this is the best option we must compare it to Option one. As we observe we can see that the EMV is much lower in option 2 than it is in option one. Albright states that one should choose the option with the largest EMV. This will mean that option one is the best pick for now.
Option Three
As we examine Option 3. We understand the probability for this option is 80%. This probability was not given. I derived to this answer by understanding that option two had a given probability of 20% and option one had a 0% probability, which would mean that option three is 80%. This could be tricky because the problem stated that the voyage has a 50% chance of making it to Iquitoes, which means that it had 50% chance of not making it as well. This will now divide 80% by 2 to now be 40%. Now that we got the new probability (40%) we can now calculate our EMV which will be 116K. Although this seems like a large number, this is still not greater than option one.
Data Analysis to Support Decision
.
Exootic
Exootic
Cancel
Cancel
Sail
Sail
Stop at Manaus
Stop at Manaus
Continue Sailing
Continue Sailing
Reach Iquitoes
Reach Iquitoes
Turn Back
Turn Back | | | 20.0% | 20.0% | | | EV | | | -282000 | -282000 | | | -56400 | | TRUE | Chance | | | | | | | | | | | | | | | 50.0% | 40.0% | | | | | | 0 | 0 | | 0 | | | 80.0% | Chance | | | | | | 0 | | | | | | | | 50.0% | 40.0% | | | | | | -290000 | -290000 | | -116000 | | Decision | | | | | | | | | | | | | | FALSE | 0.0% | | | | -184,000 | | -184000 | -184000 | | | | | | | | | | | |

The Decision Like previously stated, in deciding which option to choose you must choose the one with the largest EMV. In this case option one exceeds this amount by far at 184K. In choosing this option Exotic Adventures runs less risk factor that may occur if proceeding with the voyage.
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