Intermet Corporation the largest independent iron foundry organization in the co

Intermet
Corporation the largest
independent iron foundry
organization in the
country reportedadeficitpershareof$0.15in1993.The
earningspersharefrom1984to1992
were as follows:YearEPS1984$0.691985$0.711986$0.901987$1.001988$0.761989$0.681990$0.091991$0.161992<$0.07>Thefirmhadcapitalexpendituresof$1.60pershareanddepreciationpershareof$1.20
in
1993. Working capital
was expected to
increase $0.10 per
share in 1994.
The stock has a
beta of 1.2 which is
expected to remain
unchanged and finances
its capital expenditure andworkingcapitalrequirementswith40%debt(D/(D+E)).Thefirmisexpectedinthe
long term to grow at the same rate as the economy (6%).a.Estimate
the normalizedearningsper share
in1994 using the average
earnings approach.b. Estimate
the normalized free
cash flow to
equity per share in 1994
using the average earnings approach.