Landon Stevens is evaluating the expected performance of two common stocks, Furhman Labs, Inc., and Garten Testing, Inc. The risk-free rate is 4 percent, the expected return on the market is 11.5 percent, and the betas of the two stocks are 1.2 and .9, respectively. Stevens’s own forecasts of the returns on the two stocks are 13.75 percent for Furhman Labs and 10.50 percent for Garten. 1. Calculate the required return for each stock. (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places. Omit the "%" sign in your response.)
Stock Required Return Furhman Labs 12.24% incorrect %
Garten Testing 9.32 incorrect % 2.
Is each stock undervalued, fairly valued, or overvalued?
Furhman Labs
Overvalued incorrect
Garten Testing
Undervalued incorrect