Concept:
If two objects move along perpendicular directions, then the distance between them is
\[\begin{aligned}
s=\sqrt{x^2+y^2}
\end{aligned}\]
Differentiating with respect to time,
\[\begin{aligned}
\frac{ds}{dt}
=
\frac{x\frac{dx}{dt}+y\frac{dy}{dt}}
{\sqrt{x^2+y^2}}
\end{aligned}\]
Step 1: Find the distances travelled by \(A\) and \(B\) in 2 hours.
\[\begin{aligned}
x=80\times2=160\text{ km}
\end{aligned}\]
\[\begin{aligned}
y=60\times2=120\text{ km}
\end{aligned}\]
Step 2: Calculate the distance between them at 2 PM.
\[\begin{aligned}
s
&=\sqrt{160^2+120^2}\\
&=\sqrt{25600+14400}\\
&=\sqrt{40000}\\
&=200
\end{aligned}\]
Step 3: Find the rate of separation.
\[\begin{aligned}
\frac{ds}{dt}
&=
\frac{160(80)+120(60)}{200}\\
&=
\frac{12800+7200}{200}\\
&=
\frac{20000}{200}\\
&=100
\end{aligned}\]
\[\begin{aligned}
\boxed{100\text{ km/hr}}
\end{aligned}\]
Hence, option \(\mathbf{(B)}\) is correct.