Answer (B) is correct.
The NPV of this project is calculated as:
PV of Year 0 cash flow = −$20,000
PV of Year 1 cash flow = $6,000(0.893 PV lump sum i=12, n=1) = $5,358
PV of Year 2 cash flow = $6,000(0.797 PV lump sum i=12, n=2) = $4,782
PV of Year 3 cash flow = $8,000(0.712 PV lump sum i=12, n=3) = $5,696
PV of Year 4 cash flow = $8,000(0.636 PV lump sum i=12, n=4) = $5,088
The sum of these cash flows, which is also the net present value of the project, is $924.
