Intermet Corporation, the largest independent iron foundry organization in the country, reported a deficit per share of \($0.15\) in 1993.

The earnings per share from 1984 to 1992 were as follows:

The firm had capital expenditures of \($1.60\) per share and depreciation per share of \($1.20\) 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; the company finances its capital expenditure and working capital requirements with 40% debt [D/(D + E)]. The firm was expected, in the long term, to grow at the same rate as the economy (6%).

a. Estimate the normalized earnings per share in 1994, using the average earnings approach.

b. Estimate the normalized free cash flow to equity per share in 1994, using the average earnings approach.

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Year EPS 1984 $0.69 1985 $0.71 1986 $0.90 1987 $1.00 1988 $0.76 1989 $0.68 1990 $0.09 1991 $0.16 1992 -$0.07