An entrepreneur has no wealth but has a project that yields high cash flows if she

makes an effort and low cash flows if she does not make an effort. She also gets a

private benefit in case of no effort. The effort is not verifiable by outside investors.

Discuss qualitatively $($without any calculations$)$ what type of outside investors would

be more suitable for this project. Explain in detail the issue that the entrepreneur

faces.

Answer rating: 100% (QA)

In this scenario the entrepreneurs project is characterized by the fact that the effort exerted by the entrepreneur directly influences the cash flows ... View the full answer