8 litres of milk is withdrawn and replaced with water; the same process (withdraw 8 litres of the mixture, replace with water) is repeated once more.…

After each step, the fraction of milk remaining multiplies by (1 − removed/total) = (1 − 8/40) = 0.8. After two such steps, milk fraction = 0.8² = 0.64, i.e., milk left = 0.64×40 = 25.6 L. So water = 40−25.6 = 14.4 L, which is 14.4/40 = 36% of the mixture. A common error is to subtract 8+8=16 L of milk directly, ignoring that the second withdrawal removes a mixture, not pure milk.