GRASP Practice Problem 40

[neverending]

Does a problem need to specify that an area adjustment or any other adjustment for this matter is annual in order for it to be applied each year? In this problem, they provide the 2006 cost per service and ask for 2008 numbers. I applied the annual trend for two years, but then assumed the area factor would also be squared...the solution only applies this factor once...it doesn't square it.

Any insight would be greatly appreciated!! Thanks!

[MarsLasar]

Same reason you only apply the discount once. Does the discount make intuitive sense to you? The area factor is sort of a discount factor for the geographical area.