1) You have $20,000. After the success of the sequel of the Hunger Games, you want to know if Lions Gate Entertainment Corp. (NYSE:LGE) is a good buy. The firms total risk is 19%, its systematic risk is 0.57, the t-bill rate is 2.0%, the 30 year treasury rate is 3.5%, and the average market return is 8.8%.

a) What is the expected return on Lions Gate Entertainment Corp?

b) Assume you constructed a DCF model to evaluate Lions Gate Entertainment Corp and you found that the current market price of the stock implies an expected return of 8.05% [Note: You do not actually have to do a DCF model for this problem]. Given you answer in part (a), is the firm overvalued, undervalued, or properly priced? Explain.