General Electric (GE) has introduced a new line of industrial equipment. The financial statements for the first year are as follows.

Income Statement for the Year Ended December 31, 2023:

• Sales revenue: $4,000,000
• Cost of goods sold: $2,500,000
• Gross margin: $1,500,000
• Operating expenses: $600,000
• Depreciation expense: $200,000
• Operating income: $700,000
• Non-operating items: $20,000
• Net income: $680,000

Balance Sheet as of December 31, 2023:

• Assets:
  • Cash: $200,000
  • Accounts receivable: $700,000
  • Merchandise inventory: $500,000
  • Equipment (less accumulated depreciation): $1,300,000
  • Total assets: $2,700,000
• Liabilities:
  • Accounts payable: $500,000
  • Notes payable: $600,000
  • Total liabilities: $1,100,000
  • Stockholders' equity: $1,600,000

Required:

1. Calculate the ROI for GE’s new industrial equipment.
2. GE’s headquarters has $250,000 to invest, aiming for an ROI of 14%. Calculate the new ROI if the investment yields an ROI of 18%.
3. Determine the effect on ROI if the investment yields only 10%.
4. Discuss the strategic benefits and potential risks of investing additional funds in the new equipment.