SG Oil Ltd is a financially-distress firm. It had just reported a net loss of $0.10 per share recently (t = 0). Analysts, however, are predicting that the firm will turnaround and post a positive EPS of $0.26 per share in year 3 if the firm is able to overcome its existing cash flow problem. Estimate the equity value per share of SG Oil today (t = 0), given the following:

• SG Oils cost of equity is equal to 20%.
• There is an 80% probability that SG Oil will default in the next 3 years and that the firms equity will be worth nothing if the firm does not survive.
• The current PE ratio for comparable (going concern) firms in the same industry, which is equal to 15.0 times, is assumed to remain constant over time.

	A.	$1.50
	B.	$0.45
	C.	$2.00
	D.	$0.00
	E.	$3.70