Suppose that a firms recent earnings per share and dividend per share are $2.40 and $1.40, respectively. Both are expected to grow at 8 percent. However, the firms current P/E ratio of 23 seems high for this growth rate. The P/E ratio is expected to fall to 19 within five years.

Compute the value of this stock in five years.

Calculate the present value of these cash flows using a 10 percent discount rate