In theory, capital budgeting decisions should depend solely on forecasted cash flows and the opportunity cost of capital.The decision criterion should not be affected by managers' tastes, choice of accounting method, or the profitability of other independent projects.

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According to the principles of capital budgeting, decisions should be based on forecasted cash flows and the opportunity cost of capital, and should not be influenced by managerial biases, accounting methods, or the profitability of other projects. This ensures that investment decisions are made objectively, based on their potential to create value for the firm's shareholders.

In Theory, Capital Budgeting Decisions Should Depend Solely on Forecasted