Firm is under-valued or over-valued

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Under/Over Valued Stock A manager believes his firm will earn a 17.7 percent return next year. His firm has a beta of 1.67, the expected return on the market is 15.7 percent, and the risk-free rate is 5.7 percent. Compute the return the firm should earn given its level of risk and determine whether the manager is saying the firm is under-valued or over-valued.

Reference no: EM131350533

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