PepsiCo has recently launched a new product line. The following financial details pertain to the new product line's first year of operations.

Income Statement for the Year Ended December 31, 2023:

• Sales revenue: $500,000
• Cost of goods sold: $300,000
• Gross margin: $200,000
• Operating expenses: $100,000
• Depreciation expense: $20,000
• Operating income: $80,000
• Non-operating items: $5,000
• Net income: $75,000

Balance Sheet as of December 31, 2023:

• Assets:
  • Cash: $20,000
  • Accounts receivable: $50,000
  • Merchandise inventory: $40,000
  • Equipment (less accumulated depreciation): $100,000
  • Total assets: $210,000
• Liabilities:
  • Accounts payable: $30,000
  • Notes payable: $60,000
  • Total liabilities: $90,000
  • Stockholders' equity: $120,000

Required:

1. Calculate the ROI for PepsiCo’s new product line.
2. Determine the effect on ROI if PepsiCo decides to reinvest $50,000 in the product line at an ROI of 14%.
3. Analyze the impact on ROI if the reinvestment yields only 6%.
4. Evaluate the strategic advantages and potential drawbacks of the reinvestment.