A company's cost of equity is often used as a proxy for the investor's minimum required rate of return because it is the minimum expected rate of return that a company must offer its investors to purchase its shares in the primary market and to maintain its share price in the secondary market.
Using the CAPM, the company's cost of equity = 3.50% + 1.80(5.25%) = 12.95%.
Comparing this result with the fund manager's required rate of return of 13.60%, the fund manager should not invest in the stock.