Debra Wilcox won $$10$ million in the California lottery. She must choose how she wants the prize to be paid to her. First, Debra can elect to receive $26$ annual payments, with the first payment due immediately. Second, she can elect to receive a single payment immediately for the entire amount. However, if she elects the single payment option, the winning prize is reduced to one$-$half the winnings $($$$5$ million$).$

Assuming that Debra elects to receive $26$ annual payments with the first payment due immediately, compute the present value of the cash flows assuming her cost of capital $($discount rate$)$ is $($a$)8\%$ and $($b$)4\%.$

Round answers to the nearest whole number.

a$.8\%?$ $Answer

b$.4\%?$ $Answer

c$.$ What rate would make Debra indifferent between these two options?

Round to the nearest whole number $($i$.$e$.,0\mathrm{.}078=8\%)$

Answer

$\%$