Question

Asked Nov 4, 2019

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A manager believes his firm will earn a return of 16.35 percent next year. His firm has a beta of 1.13, the expected return on the market is 13.90 percent, and the risk-free rate is 7.90 percent.

Compute the return the firm should earn given its level of risk. **(Round your answer to 2 decimal places.)**

**Required Return: ___.__%**

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

a.) undervalued

b.) overvalued

1 Rating

Step 1

**Calculation of Required Return:**

The required return is **14.68%**.

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