Festival Cruise Line Anthony Jordan Richard Hooper Stephanie de Roo Brenda Wolcott Cameran Jordan

Quick Summary  Company Provides variety of cruise line brands to customers  Competition Increasing in Market while prices fall  Turbulence: Incidents  Linda and Team: 3 Investment Proposals for upper management

Facts  Publicly Traded on NYSE and LSE  Avg. of 3.5 million passengers annually  Fleet of 24 ships  48 one week cruises per year  Current annual income = $880,032,000  Over 90K crew members  Avg. Cost of Cruise Ship = 500 Million

Responsibilities  Competence: Know what we are doing  Integrity: Represent Everyone  Confidentiality

Option1: Minimum Funding  Add Emergency Generators to the Ship  Project Cost $100,000,000

Option 1: Approx. Passenger Capacity:  All Years: 3500 x 90% x 48 x 24 = 3,628,800

Option 1: Costs  Investment: $100,000  Fixed Costs: $3,600,000  Price per Ticket: $1,700  Variable Cost: $300

Option 1: Expenses

Option 1: NPV

Option 1: Payback Period

Income Statement MinimumVsCurrent

Minimum Option Analysis  $100 Million minimum option  NPV of roughly $3.266 billion  Repayment Period of years  Accident cost savings of $8,800,000

Option 2: Midrange Funding Add Emergency Generators Add High- Pressure Water Mist Systems Project Cost :$250,000,000

Option 2: Approx. Passenger Capacity:  Year 1: 3500 x 90% x 36x24 = 2,721,600  Year 1: 3500 x 91%x 40 x 24 = 3,057,600  Year 1: 3500 x 92%x 49 x 24 =3,786,720

Option 2: Costs  Investment 250,000,000  Fixed Costs: 3,240,000,000  Price per Ticket:$1,700  Variable Cost:$300

Option 2: Expenses

Option 2- Expenses

Option 2: NPV

Option 2: Payback Period

Income Statement MidrangeVsCurrent

Option 2; Analysis  Investment $250 million - mid option  NPV approximately 3 billion positive  Money repaid within 6.4 years

Midrange Option- Analysis  Saving of $216 Million on annual fixed costs  Saving of $ 9,700,000 on annual projected accident costs  Approx. $260 million increase in annual revenues from year 3 onwards  Long run benefits outweigh initial costs  Total benefit over 15 years 2,363,930,400 in investment income

Option 3: Fully Funded  Add Emergency Generators  Add High-Pressure Water Mist Systems  Upgrade the Engine Rooms

Option 3: Capacity and Cruises per Year  Year 1: 90% capacity on One-week long  Year 2: 93% capacity on One-week long  Year 3+: 96% capacity on One-week long

Option 3: Costs and Passenger capacity  Investment: $3,000,000  Fixed Costs: $3,240,000,000 per year  Price per Ticket: $1,700  Variable Cost per Ticket: $300  Approximate Passenger Capacity: Year 1: 3,500x90%x30x24=2,268,000 Year 2: 3,500x93%x30x24=2,344,000 Year 3+: 3,500x96%x50x24=4,032,000

Option 3: Expenses  Depreciation Expense: 300,000,000/15=$20,000,000  Accidental Incident Expense: Significant Accident: $100,000,000=$1,000,000 Moderate Accident: $80,000,000=$800,000 Minor Accident: $60,000,000=$600,000 Total Accident costs: $2,400,000

Option 3: NPV

Option 3: Payback period

Income Statement MidrangeVsCurrent

Analysis  Option 3 Largest Investment Largest Overall Increase in Income to Festival Shortest Payback Period Most Net Present Value

 What is best for our future?  How can we place the customer first?  How can we avoid past issues? Questions to Determine Investment

Comparison-Full life  Option 2 ○ Payback Period=6.4 years ○ NPV= 108%  Option 3 ○ Payback Period=5.62 years ○ NPV= 123%

 Loss in Year 1  Low income in year 2  Years >3 $550 Million More income per year  Close to $5 BILLION over life Complete Investment Results?

 This is Really a Prevention Cost  This soon to be Sunk Cost will avoid our ships from sinking!!  So Lets Focus on the FUTURE, because that is where we want to be. Other Considerations

 Improves quality of services  Lower use of Estimates to use for calculating Probable Accidents  Customer Loyalty  Brand Name  Long-Term success  Safety and Less Fires Benefits