Use the Following Information for the Next 5 Questions

question 58

Multiple Choice

Use the following information for the next 5 questions.
Bellingham Division has a required rate of return by corporate headquarters of 20%. The weighted average cost of capital is 12%. You are given the following information for Bellingham's operations for a two-year period:
-The residual income for 2005 was

• A) ($21,000)
• B) ($22,000)
• C) ($14,000)
• D) $1,000

Identify the characteristics that distinguish services from tangible goods.

Understand the classification of services based on their method of delivery (people-based vs. equipment-based).

Recognize the unique marketing concerns associated with different types of services.

Distinguish between for-profit and nonprofit organizations in the context of service delivery.

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Definitions:

Unprofitable Segment

A division or part of a company that does not generate profit and may result in a financial loss for the company.

Cost of Capital

The required return necessary to make a capital budgeting project, such as building a new factory or investing in new equipment, worthwhile.

Equity Funds

Investment funds that primarily invest in stocks, aiming to provide investors with growth or income through dividends and capital gains.

Borrowed Funds

Money that an entity obtains from another party with the promise to return the principal amount along with interest.