A manager believes his firm will earn a 16.20 percent return next year. His firm has a beta of 1.98, the expected return on the market is 13.10 percent, and the risk-free rate is 5.10 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. Undervalued/Overvalued.