Simik Corporation is a large construction company listed on ASX. Stocks of Simik Corporation are currently selling for $25 per share. In a recent report, equity analyst Zoe Root of Barmy Capital forecasted the earnings per share for Simik to be $5 in the coming year. The company distributes 90% of its earnings each year as dividends. The rest of the profits are retained and invested in projects that earn a 20% rate of return per annum. 

1. If the current market price of Simik's stock reflects its intrinsic value as computed using the constant-growth DDM, then find out the rate of Return Simik's investors require?

2. In her report, Zoe suggested that to increase the intrinsic value of the firm, Simik should re-invest at least 40% of its profit. Do you agree with her suggestion? Justify your answer with an explanation.