A manager believes his firm will earn a $16\mathrm{.}50$ percent return next year. His firm has a beta of $\mathrm{.}64,$ the expected return on the market is $14\mathrm{.}40$ percent, and the risk$-$free rate is $5\mathrm{.}40$ percent.

Compute the return the firm should earn given its level of risk. Determine whether the manager is saying the firm is undervalued or overvalued.

$\backslash$table$[[$Expected return next year,$16\mathrm{.}50\%$