Understanding Free Cash Flow in Equity Valuation

In equity valuation, one of the fundamental approaches to determine a firm's value is the Free Cash Flow (FCF) model. This model focuses on the cash that a company generates after accounting for cash outflows to support operations and maintain its capital assets. In using the Free Cash Flow model, an analyst needs to estimate the future free cash flows of the firm and discount them back to present value using an appropriate discount rate.

Considering this approach, which of the following statements about Free Cash Flow models is true?