A manager believes his firm will earn a 23.80 percent return next year. His firm has a beta of 1.69, the expected return on the market is 16.30 percent, and the risk-free rate is 6.30 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