# Calculating Weighted Average Cost of Capital (WACC) in this example

I am stuck with an exercise where I have to calculate the Weighted Average Cost of Capital (WACC) of the company X. The data is as follows:

We have two periods (t = 0 and t = 1). Company can be found in t = 1 in two states. Each state has a probability of 0.5. In t=1 the value of the company in State 1 is 200.000 USD and the value of the company in State 2 is 70.000 USD.

The corporate tax rate is 40 %. The incurred costs if the firms becomes insolvent would be 20.000 USD in t = 1, which is subtracted from the firm's value. Contingent unit claims are both in State 1 and State 2 equal to 0.45 USD.

Since I am not the economist, I would have the following questions. In order to calculate WACC we need to calculate cost of equity (Re) and cost of debt (Rd). I found in the literature that the cost of equity (Re) is obtained by CAPM (capital asset pricing model), where Cost of equity (Re) = risk free rate - beta * (market risk rate - risk free rate)

Now let us suppose that the firm's capital is 100% equity financed. I have no idea of how to calculate the cost of equity using CAPM model. Using the data that I have at disposal I guess that I can calculate risk free rate by inversing the sum of contingent claims in State 1 and State 2 which is equal to $$\frac{1}{0.90}$$

The problem remains how to calculate $$beta$$ and market risk rate having at disposal only data that I presented above.