Lister Inc. is a stable growth, publicly traded company, expected to grow 2% a year in perpetuity. It is expected to pay out 60% of its earnings as dividends next year and has a cost of equity of 8%.

a. Estimate the "intrinsic" PE ratio for the company.

b. The company has 100 million shares and 10 million management options outstanding; the options have a value of $5/option. If the firm is expected to earn $ 100 million in net income next year, estimate the fair value per share, based upon the PE ratio you estimated in part a.