Terminal Value

Bank of America Corporation

Bank of America Corporation (BAC)

Financial Services

Growth in perpetuity method:
Long-term growth rate
WACC (%) 10.05
Free cash flow (t + 1) 22,826.90
Terminal Value 377,304.07
Present Value of Terminal Value 233,744.42

Now that we’ve estimated the free cash flow generated over the five-year forecast period, we need to estimate the value of Bank of America Corporation’s cash flows after that period (if we don’t include this, we would have to assume that Bank of America Corporation stopped operating at the end of the five-year forecast period). To do so, we’ll determine the company’s terminal value.