Part A: True False (4 points cach) ( ) A proxy is a grant of authority by a shareholder allowing another individual to vote that shareholder's shares. If shareholders are not satisfied with the current management, an "outside" group of shareholders can try to obtain votes via proxy. They can vote by proxy in an attempt to replace management by electing enough directors. The resulting battle is called a proxy fight. ( ) Capital budgeting is a process of decision making with regard to investments in short-term fixed assets. Thus, if a capital budgeting decision is incorrect, the firm will have serious consequences for relatively short period of time. 3. The profitability index (PI) ratio of a project is the present value of the project's future cash outflows divided by the present value of its cash inflows. Thus, PI method is different from NPV method and generally leads to different decisions. However, PI may lead to identical decisions in comparisons of mutually independent projects. The internal rate of return (IRR) method of evaluating investment projects equates the present value of cash inflows with the present value of cash outflows by discounting all of the cash flows at the firm's cost of capital. The same basic equation is used for both IRR method and NPV method. In the NPV method, the NPV is specified to equal zero and the discount rate is determined, whereas in the IRR method, the discount rate is specified and the NPV is found. ( This spring, American BankCorp was considering the establishment of a branch office in a newly developed section of Detroit. To help with its evaluation, America BankCorp, back in 2008, hired a consulting firm to perform a site analysis, the cost was $50,000, and this amount was expensed for tax purposes in 2008. This 2008 expenditure is not a relevant cost with respect to the 2011 capital budgeting decision