A stock just paid an annual dividend of $1.8. The dividend is expected to grow by 6% per year for the next 4 years. The growth rate of dividends will then fall steadily from 6% after 4 years to 3% in year 8.

The required rate of return is 12%.

1. What is the value of the stock if the dividend growth rate will stay 3% forever after 8 years?

2. In 8 years, the P/E ratio is expected to be 17 and the payout ratio to be 80%. What is the value of the stock when using the P/E ratio?