Kenji states that free cash flows usually occur throughout the year, not just at year-end, requiring a mid-year adjustment (e.g., using 0.5 instead of 1) for more accurate discount factor calculations.

Kenji states that a DCF model is not always applicable for companies with negative free cash flows, such as startups or highly growing companies, as it would result in a nonsensical negative valuation, requiring other valuation methods.

The first key step in creating a DCF model is forecasting free cash flows, typically for a five to ten year period.