The Terme Corporation is contemplating the purchase of new equipment which may potentially increase revenues by 25%. Currently, sales are $750,000 per year and variable costs are 55% of sales. The equipment is expected to last for 5 years with no residual value. The cash outflow expected at the beginning of the year is $357,500.

1. Refer to the information above. What is the amount of depreciation deduction the company could expense annually assuming the straight line depreciation method is used?

2.Refer to the information above. Ignoring income taxes, what is the estimated annual net operating income increase/decrease?