Here is an official explanation of solution method from "Math Question Bank For GMAT Winners" at www.my-gmat.com
Let the CP (cost price) of the article be $x, since he earns a profit of 20%, hence SP (selling price)=1.2x.
His selling price=SP*0,75
This SP is arrived after giving a discount of 20% on MP (marked price).
Hence --> MP=1.6x/0.8=2x --> it means that article has been marked 100% above the cost price.
Can somebody can suggest an alternative solution method with a better explanation?!
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