Assume, that you are an airport manager and the regulator uses the rate of return approach for your airport. The highest stipulated Rate of Return is 6 percent. According to the current forecasts your revenues are expected to be PLN 77 million. Your operative cost is expected to be PLN 70 million and your annual capital use is another PLN 100 million.

a)Does your firm comply with the regulatory approach? Why?

b)In case of not: What management strategies do you have to comply with the stipulated rate of return? (Note: the current market interest rate is 2.0 percent).

Answer rating: 100% (QA)

a To determine if the firm complies with the regulatory approach we need to calculate the rate of return based on the given information Rate of Return ... View the full answer