A milkman mixes 20 litres of water with 80 litres of milk.

Just solved this using a fantastic method by VeritasKarishma for a similar problem which takes this problem a step further by repeating the removal/replacement twice: https://gmatclub.com/forum/a-20-litre-m ... fl=similar

Recapping her method to make sure I have full understanding:

So we are given the initial amounts of water, 20 liters, and milk, 80 liters, which gives us our initial ratios, 1/5 and 4/5 respectively, and a total volume of 100 liters. We know that since 25% or 25 liters of the initial mixture are removed (total volume 75 liters) and replaced by 25 liters of just water (total volume 100 liters), that the amount of milk has remained the same from the initial mixture to the new one. As long as we can find one ratio, we can find the other, so by finding the new ratio of milk in the new mixture we will be able to determine the new ratio of water to milk.

The formula for new ratio is thus initial ratio * (Total Volume/New Volume)^ n (number of times this same replacement occurs)
--> 4/5 * (75/100)^1
--> New ratio of milk is 3/5
--> New ratio of water is thus 2/5
--> New ratio of water to milk is 2:3