Error: Unknown graphics extension .eps,<== please help

Hi all,

I am a newbee in LATEX. In my computer I installed Miktex 2.7 and
Winedt. Normally when I want to add pictures to tex documents, I often
use pgn format.

Today a guy sent me his report packet (tex files along with pictures
in eps and pstex formats). I couldn't compile his documents in my
computer. I know that this document was compiled perfectly in that
guy's computer.
In my computer, I, as usual, simply opened the text file and then
pressed the icon button "PDF Texify" on the menu of WinEdt.

It seemed that my Miktex couldn't recognize the format .eps. The error
is " unknown graphics extension .eps". The compiler stopped whenever
it met the tag commands which add pstex or eps pictures into the pdf

For example:




I checked the top of the tex file and still saw the commands:

I also searched in my computer's drive and still found the file
epsfig.sty in the Miktex folder.

Can you please help, what should I do to compile this document? Do I
need some additional steps before compiling the document?

Thank you.