Highland Manufacturing spends $$25,000$ to update the lighting in its factory to more energy$-$efficient

LED fixtures. This will save the company $$7,000$ per year in electricity costs. The company estimtes

that these fixtures will last for $7$ years.

Year $0123456$

Cash flows $$(25,000)$ $$7,000$ $$7,000$ $$7,000$ $$7,000$ $$7,000$ $$7,000$

PV $$(25,000)6469\mathrm{.}505979\mathrm{.}215526\mathrm{.}075107\mathrm{.}274720\mathrm{.}214362\mathrm{.}49$

What is the Net Present Value $($NPV$)$ of this investment if Highland's cost of funds is $8\mathrm{.}2\%?$

Also, what does Net Present Value mean?

NPV $=$ $$11,196\mathrm{.}63$

Meaning: Net Present Value, or NPV realtes to the future of all cash inflows over the entire life of an investment discounted to the present.

What is the Internal Rate of Return $($IRR$)$ of this investment?

Also, what does Internal Rate of Return mean?

Also, if Highland Manufacturing's cost of funds is greater than the IRR, does that mean

the NPV of the investment is positive$/$negative$?$

IRR$=$

Meaning:

Will NPV be positive or negative if cost of funds $>$ IRR?