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:

1. Calculate the ROI for Johnson & Johnson’s new pharmaceutical product.
2. 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%.
3. Evaluate the effect on ROI if the funds are invested at an ROI of 10%.
4. Discuss the strategic benefits and potential risks of investing additional funds in the pharmaceutical product.