An entrepreneur has to finance a project of fixed size I. The entrepreneur has "cash-on-hand" A, where A < I. To implement the project, the entrepreneur (that is, the borrower) must borrow I-A from lenders. If undertaken, the project either succeeds, in which case it yields a return R > 0, or fails, in which case it delivers a zero return. The probability of success depends on the effort exerted by the entrepreneur: if the entrepreneur exerts high effort, the probability of success is equal to pg; if the entrepreneur exerts low effort, the probability of success is equal to PL, where Ap = PH - PL > 0. If the entrepreneur exerts low effort, she also obtains a private benefit B>0, while there is no private benefit when the entrepreneur exerts high effort. Define as R, the amount of profit going to the entrepreneur, and as R₂ the amount of profit going to the lenders in case of success, where R=R₁+R₁. We assume both players obtain zero in case the project fails. All the players are risk neutral and there is limited liability for the entrepreneur. Lenders behave competitively, and both entrepreneur and lenders receive zero if the project fails.

Write down the "break-even constraint" for the lenders (IR) assuming that the en- trepreneur exerts high effort.