Q4: Comparing Options with Unequal Lives Two regulatory options to mitigate the effects of polution on residents adjacent to an industrial area are under consideration. The outcome (benefits) of each is identical, but their cost profiles differ. Option A has a life of 3 years, an initial (year O) cost of $400K and annual costs of $6K. Option B has a life of 5 years, an initial cost of $500K and annual costs of $10K. Assume a 15-year life for the project and at the end of each option's life it will need to be replaced at the same cost. Show how you would compare the three options, assuming a discount rate of 5% per annum. Discount r 5% 0 1 2 3 4 5 Option/yea A B $K PV of Cos A B AEC= A B