Question
A manager believes his firm will earn a 20.10 percent return next year. His firm has a beta of 1.55, the expected return on the
A manager believes his firm will earn a 20.10 percent return next year. His firm has a beta of 1.55, the expected return on the market is 16.50 percent, and the risk-free rate is 6.50 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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M Finance
Authors: Marcia Cornett, Troy Adair, John Nofsinger
3rd Edition
0077861779, 978-0077861773
