OHM Corporation, an environmental service provider, had revenues of $209 million in 1992 and reported losses of $3.1 million. It had earnings before interest and taxes of $12.5 million in 1992 and had debt outstanding of $104 million (in market value terms). There are 15.9 million shares outstanding, trading at $11 per share. The pre-tax interest rate on debt owed by the firm is 8.5% and the stock has a beta of 1.15. The firm"s EBIT is expected to increase 10% a year from 1993 to 1996, after which the growth rate is expected to drop to 4% in the long term. Capital expenditures will be offset by depreciation and working capital needs are negligible. (The corporate tax rate is 40% and the treasury bond rate is 7%.)

a. Estimate the cost of capital for OHM.

b. Estimate the value of the firm.

c. Estimate the value of equity (both total and on a per share basis).