The Labrador Falls Company Has Three Divisions: a Division,B Division,and

question 7

Multiple Choice

The Labrador Falls Company has three divisions: A Division,B Division,and C Division. $\begin{array}{|l|r|r|r|}\hline & \text { A } & \text { B } & \text { c } \\\text { Sales }& \$ 320,000 & \$ 540,000 & ?\\\hline \text { Net operating income } & 60,000 & ? & \$ 24,000 \\\hline \text { Residual income }& ? & 36,000 & 14,400 \\\hline \text { Average Division } \\ \text { Assets } & 250,000 & 320,000 & 80,000 \\\hline \text { Cost of Capital } & 12 \% & 16 \% & \\\hline \text { Profit Margin } & 20 \% & 5 \% & \\\text { Asset Turnover } & ? & 4.0 & \\\hline \text { Return on irwestment } & 15 \% & & \\\hline\end{array}$
What was C Division's cost of capital last year?

• A) 8%.
• B) 12%.
• C) 18%.
• D) 20%.

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Definitions:

Abandoned

Refers to property that has been left by its owner without any intention to reclaim or use it again.

Knock-Out Rule

A principle in contract law that resolves conflicts in standard form contracts (often in international trade) by nullifying conflicting terms and substituting them with terms of a neutral nature.

Gap-Filling

Refers to the method used by courts or parties to resolve ambiguities or omissions in contracts, often by applying standard provisions or reasonable interpretations.

Presumptions

Beliefs or assumptions accepted as true on the basis of probabilities without direct evidence or proof.