A cost analysis is to be made to determine what, if anything, should be done in a situation offering three "do-something" and one "do-nothing" alternatives. Estimates of the cost and benefits are as follows:

Alternatives            1       2        3          4

Cost                    500-- 600 -- 700 -- 0

UAB                    135 --100 --100 -- 0

Salvage                0 -- 250-- 180 --10

Life(yrs)                5 -- 5 -- 10 -- 0

Use a 10-year analysis period for the four mutually exclusive alternatives. At the end of Year 5, Alternatives 1 and 2 may be replaced with identical alternatives, which alternative should be selected?

a.) if an 8% interest rate is used?