The payout ratio of the firm ALFA is 35% and its shares are currently priced at e 48 in the market. Its profits are expected to grow 2% per year indefinitely and the analysts expect it to obtain a profit per share (EPS) of e 5 this year. If the firms beta is 1.3 ( = 1.3) and the market risk premium is 4% with a risk-free interest rate of 0.25%, we can say that:

(a) The firm is overvalued by the market, investing in it has positive NPV and the share price should increase.

(b) The firm is overvalued by the market, investing in it has negative NPV and the share price should decrease.

(c) The firm is undervalued by the market, investing in it has positive NPV and the share price should increase.

(d) The firm is undervalued by the market, investing in it has negative NPV and the share price should decrease.