PowerPlug Corp. is evaluating a project that will cost $700,000 initially and will generate free cash flows of either $770,000 (with a probability of 30%) or $1,050,000 (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.

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

2. If the company finances 20% of the project by borrowing the initial costs at the risk-free rate, what is the initial value of equity (in $)?