Undervalued /overvalued stock
A manager believes his firm will earn a 7.9% return next year. His firm has a beta of 1.69, they expect a return on the market is 15.9%, and the risk-free rate is 5.9%. Compute the return the firm should earn given its level of risk and determine whether the manager is saying the firm is under value or overvalued.
I got 22.8% and I chose overvalued and is that correct and why?