The firm has a policy that Brooks has been trying to change, so far unsuccessfully, of not using any debt. Brooks proposes to complete the current analysis utilizing the existing capital structure, but then to lower the cost-of-capital for illustrative purposes by including long-term debt in the capital structure. He hopes to demonstrate to the Jenkins brothers the advantages of debt financing and to show them the effect a change in the capital structure would have on the capital budget. (See table 2).