For the sake of unity and coherence, sentence 2 should be placed:
\begin{equation}
\begin{array}{l}{\text { A. where it is now. }} \\ {\text { B. before sentence } 1 \text { . }}\end{array}
\end{equation}
\begin{equation}
\begin{array}{l}{\text { C. after sentence } 3 .} \\ {\text { D. after sentence } 4 \text { . }}\end{array}
\end{equation}