Under-over valued stock

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Under/Over Valued Stock A manager believes his firm will earn a 11.35 percent return next year. His firm has a beta of 1.39, the expected return on the market is 8.9 percent, and the risk-free rate is 3.9 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.

10.85%, over-valued

16.271%, over-valued

10.85%, under-valued

16.271%, under-valued

Reference no: EM131190156

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