12. Volga is a large manufacturing and marketing company in the private sector. In 2013, the company had a gross sales of 7980.2 million. The other financial data for the company are given below: Some Financial Data for Volga, 2013 billion) Fixed assets 100.0 at 10) 40.0 Reserve 95.0 Net worth 135.0 Current assets: Debtors Items 20.0 Current liabilities Inventory 30.0 Net worth 35.5 Borrowing Cash 20.5 170.5 170.5 The finance director has recommended that the company should raise 15 per cent interest bearing debt for financing the expansion. In his opinion, given 35 per cent corporate income tax rate, the effective cost of debt will be 9.75 per cent, and considering the current net worth (see balance sheet given below), debt-equity ratio will be only EBIT Interest Fixed costs [excluding interest) million 152.31 165.47 43.17 34.39 118.23 You are required to calculate

(a) debt-equity ratio;

(b) debt ratio;

(c) interest coverage,

(d) operating leverage,

(e) financial leverage and

(f) combined leverage. Interpret your results and comment on the Volga's debt policy.