Question
A manager believes his firm will earn a 18.80 percent return next year. His firm has a beta of 1.82, the expected return on the
A manager believes his firm will earn a 18.80 percent return next year. His firm has a beta of 1.82, the expected return on the market is 16.20 percent, and the risk-free rate is 6.20 percent.
| Compute the return the firm should earn given its level of risk. |
| Required return | % |
| Determine whether the manager is saying the firm is undervalued or overvalued. | ||||
|
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Personal Financial Planning
Authors: Lawrence J. Gitman, Michael D. Joehnk, Randy Billingsley
12th Edition
1439044473, 978-1439044476
