Studies into the workings of the world’s stock markets have been conducted for many years. Since the first groundbreaking studies done on the Efficient Market
Hypothesis, a vast amount of attention has been paid to stock valuation models. The study examines which models are preferred and used in the investment industry as well as their effectiveness. The research indicates that one model; the Free Cash Flow to Firm, Discounted Cash Flow model has not received much academic attention.
This paper provides an objective version of the Free Cash Flow to Firm, Discounted Cash Flow stock valuation model. The model is adapted to maintain its objectivity and facilitate empirical testing. The study also provides a framework by which the model can be empirically tested.
The results of the testing indicate that the model is able to correctly value overpriced and correctly priced stocks, and value stocks correctly with relation to each other. It was not able to correctly value undervalued and correctly valued stocks though. This could be because of a number of reasons relating to over simplification used in the assumption of the model. The value of the research for professional use and further research is discussed.

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