Liquidate or Continue Operations?
In the liquidate vs. continue operations problem, why are we ignoring the cost of liquidation? The examiner's report actually says not to liquidate (vs. the BA solution says to liquidate) due to the cost of liquidation being greater than the difference between invested capital & PV(future income).
Comments
You are correct. I have made the necessary adjustments to the pdf solution in the wiki and also to the practice template. Sorry for the confusion and thank you very much for pointing this out.
It looks like the example on page 14 of Felbum Surplus calculates equity in the unearned premium reserves as: acquisition expense ratio * written premium (25%*200, the UEPR in the problem is 100 and written premium is 200), but the actual answer of 172.75 only makes sense if it is actually 25 * 100. Is there an errata I am missing somewhere?
This is not in the paper's errata, but it's certainly an error. He meant to say 100, but said 200 instead. The resulting 172.75 is correct, as if 100 had been used.