A manager believes his firm will earn a 13.80 percent return next year. His firm has a beta of 1.39, the expected return on the market is 11.60 percent, and the risk-free rate is 3.60 percent.
Compute the return the firm should earn given its level of risk. (Round your answer to 2 decimal places.)
Determine whether the manager is saying the firm is undervalued or overvalued.