Mutrine Solutions Ltd is a food-processing company. Mutrine is planning to invest in freezer rooms. The initial investment required in this setup is £1,500,000. The annual revenue from this freezer for each of the next four years is £800,000. The operating expense is £200,000 per annum. Since this freezer is used for extensive storage, after four years the freezer will have zero scrap value. The freezer will attract a capital allowance of 30 per cent consistently throughout its operation. The capital allowance is on a reducing balance basis. The company is subject to a corporate tax rate of 40%. Mutrine Solutions is looking into an alternative investment option. The company is planning to invest in refrigerated rooms. The initial investment required in this setup is £1,200,000. The annual revenue from the rooms for each of the next 4 years is £600,000. The operating expense is £200,000 per annum.

Required
1. Determine the net cash inflows from the investment in freezer rooms in Year 1.
2. Calculate the net cash flow from investment in freezer rooms in Year 4.
3. Mutrine Solutions is planning to assess the viability of the two investments using the payback method.
Explain the features of the payback method of capital budgeting.
4. Mutrine Solutions Ltd will either invest in freezer rooms or in refrigerated rooms. Determine which alternative should be selected according to the payback method.