Google has rolled out a new advertising algorithm. The following financial statements summarize the performance in the first year.

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: $700,000
• Depreciation expense: $200,000
• Operating income: $600,000
• Non-operating items: $50,000
• Net income: $550,000

Balance Sheet as of December 31, 2023:

• Assets:
  • Cash: $150,000
  • Accounts receivable: $800,000
  • Merchandise inventory: $500,000
  • Equipment (less accumulated depreciation): $1,500,000
  • Total assets: $2,950,000
• Liabilities:
  • Accounts payable: $600,000
  • Notes payable: $700,000
  • Total liabilities: $1,300,000
  • Stockholders' equity: $1,650,000

Required:

1. Calculate the ROI for Google’s new advertising algorithm.
2. Google’s headquarters has $500,000 available, with a target ROI of 16%. Calculate the new ROI if the investment achieves an ROI of 20%.
3. Assess the impact on the ROI if the funds are invested at an ROI of 10%.
4. Discuss the strategic advantages and potential risks of reinvesting in the new algorithm.