Problem 2 (use of the CAPM or SML to calculate the cost of outstanding and new common share equity capital) The non-diversifiable or market risk measure (i.e. Beta) for MacMillan Bloedel common shares equals 1.40. The risk-free rate of return (measured by the rate of return on T-bills) is 8% and the currently expected rate of return on the TSE 300 Composite Index (that approximates the expected market rate of return) is 13%. a) Calculate the company's cost of outstanding common share equity capital. b) The company plans to sell new common shares at the current market price of $12 per share, with 3% after-tax issuance and underwriting expenses. What will be the cost of the new common equity capital