The price of an item has increased 15% since last year. However, a person can buy the item for a 25% employee discount. The employee pays $172.50. What was the price last year?

100% - 25% (discount) = 75% (employee's amount)

$172.5 : 0.75 (75%) = $230

Increased 15% since last year ...

$230 x 0.15 (15%) = $34.5

$230 - $34.5 = $195.5

Answer: Last year's price is $195.5