Firm is under-valued or over-valued

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Reference no: EM132073930

A manager believes his firm will earn a 17.6 percent return next year. His firm has a beta of 1.66, the expected return on the market is 15.6 percent, and the risk-free rate is 5.6 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: EM132073930

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