Problem 10-20 Under-/Overvalued Stock (LG10-3) A manager believes his firm will earn a return of 12.50 percent next year. His firm has a beta of 1.40, the expected return on the market Is 10.50 percent, and the risk-free rate is 3.50 percent. Compute the return the firm should earn given its level of risk (Round your answer to 2 decimal places.) Required return 15 Determine whether the manager is saying the firm is undervalued or overvalued overvalued undervalued