A. $218,800 is the total of the present values of the future cash inflows, but this is not net present value.

B. $130,800 results from discounting the initial investment for 5 years and subtracting the discounted value from the present value of the future cash inflows. However, the initial investment which occurs in Year 0 does not need to be discounted in order to calculate net present value, because it is already expressed at its present value in the analysis.

C. $100,000 results from subtracting the initial investment of $200,000 from the total of the undiscounted cash flows, which is $300,000. This is not the correct way to calculate NPV.

D. The net present value is the net expected monetary gain or loss from a project when all the expected future cash inflows and outflows are discounted to the point of the investment, using the firm's required rate of return. Discounting the annual cash inflows using the discount factors given results in annual discounted cash inflows of ($120,000 × .91) + ($60,000 × .76) + ($40,000 × .63) + ($40,000 × .53) + ($40,000 × .44) = $218,800. The discounted total annual cash flows minus the initial investment of $200,000 = $18,800, which is the NPV.