Under/Over Valued Stock A manager believes his firm will earn a 11.95 percent return next year. His firm has a beta of 1.43, the expected return on the market is 9.3 percent, and the risk-free rate is 4.3 percent. Compute the return the firm should earn given its level of risk and determine whether the manager is saying the firm is under-valued or over-valued.

Under/Over Valued Stock A manager believes his firm will earn a 11.95 percent return next year. His firm has a beta of 1.43, the expected return on the market is 9.3 percent, and the risk-free rate is 4.3 percent. Compute the return the firm should earn given its level of risk and determine whether the manager is saying the firm is under-valued or over-valued.

Under/Over Valued Stock A manager believes his firm will earn a 11.95 percent return next year. His firm has a beta of 1.43, the expected return on the market is 9.3 percent, and the risk-free rate is 4.3 percent. Compute the return the firm should earn given its level of risk and determine whether the manager is saying the firm is under-valued or over-valued.