Question
Atlantic Container Lines (ACL), a Swedish-owned ocean cargo carrier, operates specialized roll-on/roll-off ships in the North Atlantic. ACL reported a loss of $15 million last
Atlantic Container Lines (ACL), a Swedish-owned ocean cargo carrier, operates specialized "roll-on/roll-off" ships in the North Atlantic. ACL reported a loss of $15 million last year and is currently deciding whether to continue operations in the North Atlantic. ACL's fixed costs associated with its 5 ships (depreciation, interest payments, etc.) are $35 million. If ACL leaves the ocean carrier market, it can charter (rent out) its 5 ships to another shipping firm. The lowest rental price for its fleet of 5 ships that would induce ACL to leave the market is
A. $15 million per year.
B. $20 million per year.
C. $35 million per year.
D. ACL should leave the market whatever the rental price.
E. None of the above.
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