Compute the return the firm should earn given its level of, Financial Management

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Compute the return the firm should earn given its level of

Under-/Overvalued Stock

A manager believes his firm will earn a 13.20 percent return next year. His firm has a beta of 1.34, the expected return on the market is 11.20 percent, and the risk-free rate is 2.20 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.

Undervalued

Overvalued

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