Question
How do I estimate the value per ordinary share of JB Hi-Fi as of 30/09/2018 based on data from 2017 and before using the Dividend
How do I estimate the value per ordinary share of JB Hi-Fi as of 30/09/2018 based on data from 2017 and before using the Dividend Discount Model?
For the dividend discount model: p = D1(Ri - g)
Where:
P= Price
D1= Next year's annual dividend per share
g= Constant growth rate of dividends
Ri = Cost of Equity
So I have already calculated Cost of equity as 6.93% based on a beta of 0.405003246 (calculated based on historical data on Yahoo finance of JBH from 2013 - 2017), a market risk premium of 0.06 and a risk-free rate of 0.045 (market risk premium and risk-free rate taken from KPMG survey).
However, whenever I try to calculate g or constant growth rate, I always get a number bigger than the Cost of equity, which means I'll get a negative answer for p when I try to compute it. Where did I go wrong?
Calculations all based off historical data at Yahoo Finance or the JB Hi-Fi Annual Reports.
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