What is the primary reason for projecting free cash flows in a DCF model?

The primary reason for projecting free cash flows in a discounted cash flow (DCF) model is to represent cash for distribution to capital providers. Free cash flow is essentially the cash that a company generates after accounting for capital expenditures necessary to maintain or expand its asset base. This cash flow is crucial because it is what is available to be distributed to shareholders (equity investors) and debtholders (creditors) in the form of dividends, interest payments, or capital returns.

By projecting free cash flows, analysts can estimate how much cash the company will generate over a certain period of time, which is then used in the DCF model to determine the present value of those cash flows. The total cash generated by the business is vital for assessing the company's financial health and its ability to provide returns to its investors. Understanding free cash flows allows investors to evaluate the sustainability of a company's operations and its capability to grow or distribute funds.

While forecasting future revenues, reflecting capital structure changes, and determining market valuation play significant roles in financial analysis, they are not the primary focus when specifically projecting free cash flows in a DCF context. The aim is to ascertain the cash available to those who have a financial stake in the company, hence reinforcing option B as the correct