According to your best estimates the expected return on a share of stock of Firm A is 16 percent next year. Firm A's stock beta is 1.5, the expected return on the market portfolio is 14 percent, and the risk-free rate is 4 percent. Compute the expected return on Firm A's stock given its level of risk, that is indicated by the Capital Asset Pricing Model, and determine whether your estimates indicate Firm A's stock is undervalued or overvalued in the market.

Select one:

A. 22 percent, undervalued

B. 22 percent, overvalued

C. 19 percent, undervalued

D. 19 percent, overvalued