Under and overvalued stock

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Reference no: EM131356195

Under-/Overvalued Stock

A manager believes his firm will earn a 16.50 percent return next year. His firm has a beta of 1.65, the expected return on the market is 10.70 percent, and the risk-free rate is 4.70 percent.

Compute the return the firm should earn given its level of risk.

Required return %

Determine whether the manager is saying the firm is undervalued or overvalued.

Overvalued

Undervalued

Reference no: EM131356195

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