Good Eats, Inc., a national food company, is evaluating whether to extend its product line into plant-based foods. Given the recent success of Beyond Meats IPO and Impossible Foods anticipated IPO, Good Eats believes it can acquire the R&D talent to quickly develop similar plant-based products. The new product line would be marketed through its current distribution channels.

Good Eats management will introduce the new product line early next year. The CFO believes the plant-based product line will require $40 million in additional net operating assets for the R&D and related production facilities as well as supporting the sales initiative. The CFO estimates that the new plant-based product line sales will be $20 million.

For the current year, Good Eats anticipates its existing business will earn $480 million in sales generating a profit margin of 3.5 percent with an asset turnover of 3.0. When the new product line comes on board next year, the existing business line sales will be $480 million as the new product line will cannibalize some sales initially. However, Good Eats expected profit margin will increase to 4.3 percent on all sales.

Future growth for the plant-based food line is expected to be greater than the traditional food line, although management is uncertain what the difference will be as other new entrants will certainly enter into the plant-based food market as well.

Based solely on the above financial consideration, explain whether you would recommend management consider extending its product line into plant-based foods. [Hint: Conduct a RNOA Analysis]