A healthcare firm's investment of $1,000 in a piece of equipment will reduce labor costs by $400 per year for the next 5 years. 30% of all patients seen by the firm have a third-party payer arrangement that pays for capital costs on a retrospective basis. 30% of all patients also reimburse for actual operating costs.

What is the annual cash flow of the investment? Assume a 5-year life and straight-line depreciation

Cash flow= annual depreciation x proportion of capital cost payers + (annual operating savings x [1 - proportion of operating cost payers])

Cash flow= 200 x 0.30 + ($400 x [1 - 0.30])

Cash flow= $60 + $280= $340

My question is how did the 200 (annual depreciation) come about? How to calculation the annual depreciation?