Sonoma is considering investing in solar paneling for the roof of its large distribution facility. The investment will cost \($9\) million and have a six-year useful life and no residual value. Because of rising utility costs, the company expects the yearly utility savings to increase over time as follows:

The solar panels have already passed the payback period and ARR screening.
1. Compute the NPV of the solar panels, given the company’s 12% hurdle rate.
2. Estimate the IRR of the solar panels or use Excel to find the exact IRR.
3. Should Sonoma invest in the solar paneling? Why or why not?

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Year 1........ .$1,000,000 Year 2..... ..$1,500,000 Year 3........ ..$2,000,000 Year 4. .$2,500,000 Year 5...... Year 6...... ..$4,500,000 .$3,500,000