Question: PowerPlug Corp. is evaluating a project that will cost $200,000 initially and will generate free cash flows of either $220,000 (with a probability of 30%)

PowerPlug Corp. is evaluating a project that will cost $200,000 initially and will generate free cash flows of either $220,000 (with a probability of 30%) or $300,000 (with a probability of 70%) in one year.

The risk-free rate is 2% and the project's required return is 12%. Assume perfect capital markets.

If the project is the only project of the firm, what is the initial value of equity (in $)?

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