A manager believes his firm will earn a $10\mathrm{.}87$ percent return

next year. His firm has a beta of $1\mathrm{.}01,$ the expected return on the

market is $11\mathrm{.}30$ percent, and the risk$-$free rate is $5\mathrm{.}30$

percent.$$Compute the return the firm should earn given its level of

risk.$($Round your answer to $2$ decimal

places.$)$

$$

$$Determine whether the manager is saying the firm is undervalued

or overvalued.