The Terme Corporation is contemplating the purchase of new equipment which may potentially increase revenues by 30%. Currently, sales are $760,000 per year and variable costs are 60% of sales. The equipment is expected to last for 6 years with no residual value.The cash outflow expected at the beginning of the year is $429,600.

By how much would Termes annual gross profit increase if the investment is undertaken?

$760,000.

$228,000.

$136,800.

$91,200.

What is the amount of depreciation deduction the company could expense annually assuming the straight line depreciation method is used?

$28,640.

$76,000.

$42,960.

$71,600.