This is a question of parallel structure. It can resize documents, lighten documents, collate documents and copy (or copying) documents. The form copy needs to be used, because this form is consistent with the rest of the sentence. That eliminates choices A, B and C. Choice D is incorrect as it changes the subject of the sentence to the functions of the machine, rather than the machine itself. The word ‘simply’ is in the wrong place in the sentence. The tense is also incorrect. Choice E is the correct answer

One may question the use of "copy" - "copy" is definitely not parallel to "resize", " lighten" and "collate" because it is in a different sentence (independent clause) altogether - "can" does not cover "copy". Moreover "copy" is not a verb parallel to "does". Then it would be "copies" in order to agree with the subject "The new Xerox machine". "Copy" here is a special kind of infinitive that is used WITHOUT "to".