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A cost of 1000 in year 1 rising by 200 each year for 5 years is treated as a uniform 1000 plus a gradient of

  • A.1000 beginning in year 2
  • B.400 beginning in year 3
  • C.200 beginning in year 2
  • D.200 beginning in year 1

Answer: C

The gradient part is zero in the first period by definition and takes the value G in the second, so the decomposition matches how the factor is derived. Applying the gradient from year one would double-count the increase.

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