Consider a private firm with assets in place that generate a payoff of $$1\mathrm{.}1$m at T$=1$ with certainty. The firm has access to a new project that requires $$5$m in financing. If successful, the project generates a payoff of $$7\mathrm{.}7$m$.$ If unsuccessful, the firm generates a payoff of $$0.$ After the firm acquires financing, the existing owner can choose to either hire a qualified professional manager for the project, in which case the project succeeds with certainty, or to hire a less$-$qualified friend, in which case the project succeeds with probability $80\%.$ Hiring the less$-$qualified friend provides the existing owner with private benefits valued at $$1$m $($T$=1$ value$).$ Financial contracts cannot stipulate what kind of manager is hired $($it is difficult to verify in court a person$$s exact qualifications$).$ The discount rate is $10\%.$