Using an unlevered Free Cash Flow to Firm (FCFF) model, we project Bank of America Corporation's cash flows over 5 years with line-by-line expense modeling. Revenue is projected revenue growing from -37.4% to 19.5% annually, with expenses (COGS, SG&A, R&D) held at historical ratios. Depreciation is computed from a vintage matrix based on a 5-year useful life. Working capital is modeled using historical turnover days (DSO 237, DPO 30, DIO 60). At a 11.0% WACC with mid-year discounting, the terminal value (85% of enterprise value) is derived by applying the industry peer median EV/EBITDA multiple of 24.4x to Year 6 EBITDA. After subtracting net debt, the equity value implies a fair price of $121.74 per share, suggesting BAC is undervalued by 152.2% at the current price of $48.27.
Adjust parameters to explore scenarios. Changes are for exploration only and do not affect saved valuations.
| 2026 | 2027 | 2028 | 2029 | 2030 | Terminal | |
|---|---|---|---|---|---|---|
| Profit Before Tax | 4,558 | 4,798 | 4,996 | 5,070 | 6,061 | 6,212 |
| (−) Net Interest | 36,745 | 38,676 | 40,270 | 40,872 | 48,853 | 50,075 |
| (+) D&A | 0 | 1,199 | 2,462 | 3,776 | 5,110 | 5,238 |
| EBITDA | 41,303 | 44,674 | 47,727 | 49,718 | 60,024 | 61,525 |
| (−) Tax | 454 | 477 | 497 | 505 | 603 | — |
| (−) CapEx | 5,996 | 6,312 | 6,572 | 6,670 | 7,973 | — |
| (−) ΔWC | -22,344 | 4,259 | 3,513 | 1,327 | 17,596 | — |
| Free Cash Flow (FCF) | 57,197 | 33,626 | 37,145 | 41,217 | 33,852 | — |
| Peers' EBITDA Multiple | 24.4x | |||||
| Terminal Value | 1,499,971 | |||||
| WACC / Discount Rate | 10.97% | |||||
| Timing of FCF (mid year) | 0.5 | 1.5 | 2.5 | 3.5 | 4.5 | 5 |
| Present Value of FCF | 54,295 | 28,764 | 28,633 | 28,630 | 21,190 | 891,289 |
| Enterprise Value | 1,052,802 | |||||
| Projection Period | 161,513 | 15.3% | ||||
| Terminal Value | 891,289 | 84.7% | ||||
| (−) Current Net Debt | 134,059 | |||||
| Equity Value | 918,743 | |||||
| (÷) Outstanding Shares | 7547M | |||||
| Fair Price | $122 | +152.2% | ||||
| WACC \ EV/EBITDA Exit Multiple | 20.4x | 22.4x | 24.4x | 26.4x | 28.4x |
|---|---|---|---|---|---|
| 9.0% | $113 | $123 | $134 | $144 | $155 |
| 10.0% | $107 | $117 | $128 | $138 | $148 |
| 11.0% | $102 | $112 | $122 | $131 | $141 |
| 12.0% | $98 | $107 | $116 | $125 | $135 |
| 13.0% | $93 | $102 | $111 | $120 | $129 |
Current price: $48.27. Green = undervalued, Red = overvalued.
Based on default parameters
This is an unlevered Free Cash Flow to Firm (FCFF) model with a 5-year projection period. Revenue, expenses, D&A, and working capital are projected using the same line-by-line approach as the Growth Exit models. The key difference is the terminal value methodology: instead of assuming perpetual cash flow growth, the terminal value is calculated by applying the industry peer median EV/EBITDA multiple to the projected Year 6 EBITDA.
Using a peer exit multiple anchors the terminal value to how the market currently prices comparable companies, rather than relying on a theoretical perpetual growth assumption. This approach captures relative valuation dynamics and is particularly useful when a company is expected to converge toward industry-average profitability over time. The sensitivity matrix shows how fair value changes across different WACC and EV/EBITDA multiple scenarios.