You have been asked to conduct a valuation on behalf of a client who intends on liquidating a number of his share positions.

EPS = 30.00

Plowback (b) = 0.47

Growth Years 1-5 = 0.25

Long-run Growth Rate = 0.04

Expected Inflation rate = 2%

Nominal risk-free rate is 5%

Nominal expected market return is assumed to be 12% (not the historical average)

You are also provided with the following one year of historical nominal monthly returns the market and Pepsico

Jan = Market (1.64%); Pepsico (1.62%)

Feb = Market (2.7%); Pepsico (2.87%)

March = Market (1.36%); Pepsico (4%)

April = Market (-0.99%); Pepsico (-1.14%)

May = Market (1.13%); Pepsico (-0.56%)

June = Market (-0.27%); Pepsico (-0.58%)

July = Market (-0.72%); Pepsico (-0.54%)

August = Market (-0.83%); Pepsico (-1.24%)

September = Market (2.86%); Pepsico (3.99%)

October = Market (-1.55%); Pepsico (-1.66%)

November = Market (-0.36%); Pepsico (0.59%)

August = Market (2.68%); Pepsico (2.81%)

Calculate the required rate of return for Pepsico using the CAPM.