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Kirk Inc. has come out with a new and improved product, and is expected to have...

Kirk Inc. has come out with a new and improved product, and is expected to have an EPS of $7.3 and an ROE of 20%. It will maintain a plowback ratio of 28%. Investors expect a 12% rate of return on the stock. Assuming Kirk's current value is measured with the constant growth DDM, compute the present value of growth opportunities for Kirk.

From the earlier problem with Kirk, suppose the present value of growth opportunities = 0. If everything else remains constant, find the ROE for Kirk and explain why.

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