The fallacy lies in believing that the three friends spent Rs 75, whereas they actually spent Rs 72 (if one rupee each was returned to them, then their total spend is 24 x 3 = Rs 72). Of these 72 Rupees, 70 went to the coffee shop manager, and Rs 2 was paid as tip to the waiter.
This problem arises when we add the amounts erroneously: If the three friends paid Rs 25 each, and one rupee each was returned to them, their payment per person is Rs 24. The two rupees paid to the waiter are not over and above this Rs 24, but contained in this payment itself.
If the payment made to the waiter is to be considered as part of the friends' outlay, then assign 25 each to the friends (total 75), of which then 70 went to the coffee shop manager, 2 went to the waiter, and 3 was kept separately for the friends to take back.
Free profile evaluation by top b-school alumni: email us at firstname.lastname@example.org
B-school application service http://www.gyanone.com/appone.html
[b]Visit our blog: www.gyanone.com/blog