Landon Stevens is evaluating the expected performance of two common stocks, Furhman Labs, Inc., and...
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Landon Stevens is evaluating the expected performance of two common stocks, Furhman Labs, Inc., and Garten Testing, Inc. The risk-free rate is 4.9 percent, the expected return on the market is 11.6 percent, and the betas of the two stocks are 1.1 and 0.9, respectively. Stevenss own forecasts of the returns on the two stocks are 15.80 percent for Furhman Labs and 12.10 percent for Garten.
a. Calculate the required return for each stock. (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places.)
Stock
Required Return
Furhman Labs
%
Garten Testing
%
b. Is each stock undervalued, fairly valued, or overvalued?
Garten Testing (undervalued, fairly valued or overvalued) ?
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