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Johnson & Johnson has introduced a new pharmaceutical product. The first-year financial results are presented below. Income Statement for the Year Ended December 31, 2023:
Johnson & Johnson has introduced a new pharmaceutical product. The first-year financial results are presented below.
Income Statement for the Year Ended December 31, 2023:
- Sales revenue: $4,500,000
- Cost of goods sold: $2,700,000
- Gross margin: $1,800,000
- Operating expenses: $900,000
- Depreciation expense: $300,000
- Operating income: $600,000
- Non-operating items: $20,000
- Net income: $580,000
Balance Sheet as of December 31, 2023:
- Assets:
- Cash: $200,000
- Accounts receivable: $700,000
- Merchandise inventory: $500,000
- Equipment (less accumulated depreciation): $1,400,000
- Total assets: $2,800,000
- Liabilities:
- Accounts payable: $600,000
- Notes payable: $800,000
- Total liabilities: $1,400,000
- Stockholders' equity: $1,400,000
Required:
- Calculate the ROI for Johnson & Johnson’s new pharmaceutical product.
- Johnson & Johnson’s headquarters has $300,000 available, targeting an ROI of 14%. Calculate the new ROI if the funds are invested at an ROI of 18%.
- Evaluate the effect on ROI if the funds are invested at an ROI of 10%.
- Discuss the strategic benefits and potential risks of investing additional funds in the pharmaceutical product.
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