From the following information calculate inflow or outflow from investing activity. Opening Balance of Investment - 5,00,000 Closing Balance of Investment - 10,00,000 Half of the investments held at the beginning of the year were sold at 20% Profit.

₹4,50,000 Outflow

The correct answer is option 3- ₹4,50,000 Outflow.

Opening Balance - 5,00,000
Half of investment is sold means 5,00,000 x 1/2
                                              = ₹2,50,000
Profit on sale of investment = 20%
Profit = 2,50,000 x  20/100
        = ₹50,000
Sale of investment = 3,00,000 (250000 value + 50000 profit)
Thus, Inflow of cash by sale = ₹3,00,000

Closing Balance = 10,00,000

Purchase of investment = closing balance- opening balance + Cost of Sale of investments
                                                        = 1000000 - 500000 + 250000
                                                        = 7,50,000 (outflow as it is purchased during the year)

Net Outflow of cash = 7,50,000 (outflow by purchased investments) - 3,00,000 (inflow by sale of investment)
                            = 4,50,000