ABC Technology Berhad is a one-stop technology solutions provider. The niche of the company is in healthcare and medical devices, IoT gadgets, industrial equipment manufacturing, and consumer electronic lifestyle products. Concurrently, the company is fired up in providing cloud solutions. The companys geographical locations include Asia, Europe, and the United States.

The companys segments include research and development (R&D), manufacturing, and cloud computing. The R&D segment is engaged in the research, design, and development of electronic end products and subsystems for the healthcare, medical, Internet of Things (IoT), industrial, and consumer electronics industries. The manufacturing segment is involved in the manufacturing of electronic end products, sub-systems, wire-harness, and electronic related accessories. The cloud computing segment is engaged in the provision of advanced cloud technology comprising infrastructure as a service (IAAS), platform as a service (PAAS), cloud design, consulting and management services, and mobile application and development.

The company has an established market reputation and a proven track record. The company has been exporting more than 90% of its products and services year after year, primarily to Asia, Europe, and the United States, since its inception. The clients comprise mainly multinationals and technology conglomerates located globally. The company has strong R&D capabilities and engineering excellence. The company is able to quickly and cost-effectively model, plan, construct and build cutting-edge products by leveraging advanced tools, software, and testing. Through internal manufacturing, the company is able to leverage economies of scale through high volume manufacturing which lowers the average cost per unit. At the same time, the company is also flexible enough to handle the low volume and high mix production.

On the Cloud business, escalating positive contributions are expected as the lockdowns spurred Cloud usage with people working from home engaging in e-meetings and increased online activities. The coming widespread launch of 5G in many countries will further drive Cloud adoption as demand for data storage grows in tandem with internet speed.

Due to a favourable financial return in the last year, ABC Technology Berhad is considering to invest either of two competing software that will allow the company to meet the growing demand for its cloud computing services. The department of R&D had narrowed the alternatives down to High Momentum (HM) and Friendly Cloud (FC) software. HM is a system software, designed for managing system resources. The programming of system software is complex, which contributes to a slow market build-up for this product. On the other hand, Software Y is an application software, designed to accomplish tasks for specific purposes. The programming of application software is comparatively easy; hence it is expected that gaining market share is relatively easy. However, the company has to proactively maintain its market share against competitor attacks.

The two software provide the following set of after-tax cash flows. Each software has risk characteristics that are similar to the companys average project. The companys Weighted Average Cost of Capital (WACC) is 8%.

Cash Flows (Year)	HM ($)	FC ($)
0	(2,000,000)	(2,300,000)
1	445,000	555,000
2	498,000	586,000
3	521,000	592,000
4	587,000	600,000
5	603,000	623,000

(WITH STEPS PLEASE)

1. What is the Internal Rate of Return (IRR) for each software?

2. According to IRR, which software(s) should be accepted if they are (i) independent and (ii) mutually exclusive?