If due to extra set up time required, the production in 2001 drops by 12.5% over that in 2000, what should be the growth rate of production in 2002 to maintain the compounded annual growth rate (CAGR) of 20% (Approx)?

Answer: Option D

Assume the total production of the first year as 10000, second year becomes 12000, third year 14400 and fourth year 17280.
Then,
0.2 × 17280 - 0.2 × 12000 = 1056
But this difference is given as 2640. Hence, the value of production will be; 25000, 30000, 36000, and 43200 respectively for the 4 years.
Growth rate of production
= $$\frac{\left(144-87.5\right)\times 100}{87.5}$$
= 65% (approx)