Cannot understand this Project Management question

Project:

-invest 300k$

-Generate 200k$ net pre-tax operating cash flow for the next 3 years

  • equipment will be scrapped after 3 years

  • using MACRS

year 1 = 33%

year 2 = 45%

year 3 = 15%

year 4 = 7%

  • tax rate = 40% and paid in the years they are accrued

  • cost of capital = 8%

Calculate the net cash flow in the 3rd year resulting from the equipment.

A - 122 800

B - 138 000

C - 146 400

Answer is:

200 x 0.6 + 300 x 0.15 x 0.4 + 300k x 0.07 x 0.4 = 146 400

I do not understand why there is the last part at 7% in the result

Do you have a reference to the question we can look at?

7% is the book value and since you sold the equipment for nada, there is a loss and you get a tax credit.

Thanks it makes sense.

What section is this? I would like to figure this out as well.