Explanation:

          Wine                         Water

            8L                              32L

            1                :               4

           20 %                           80% (original ratio)

           30 %                           70% (required ratio)

In  ths case, the percentage of water being reduced when the mixture is being replaced with wine.

so the ratio of left quantity to the initial quantity is 7:8

Therefore , 7/8=[1−K/40]

= K = 5 Ltrs

Hence, option 2 is the correct answer.