Question: Calibri Regular (B 12 B U A.. A E WN - E E 2. Wilson is now evaluating the expected performance of two common stocks,

Calibri Regular (B 12 B U A.. A E WN - E E 2. Wilson is now evaluating the expected performance of two common stocks, Furhman Labs Inc. and Garten Testing Inc. He has gathered the following information: . The risk-free rate is 5%. . The expected return on the market portfolio is 11.5%. The beta of Furhman stock is 1.5. The beta of Garten stock is .8. Based on his own analysis, Wilson's forecasts of the returns on the two stocks are 13.25% for Furhman stock and 11.25% for Garten stock. Calculate the required rate of return for Furhman Labs stock and for Garten Testing stock. Indicate whether each stock is undervalued, fairly val- ued, or overvalued. CSS

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