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...

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 valued, or overvalued.