Let's proceed, because we see that a great project cannot get equity financing. What can we do? Well, we have to go back to borrowing, why? Because in this set up where the investor does not observe what state of the world occurred in reality. The conditions of the contract should be based on something what I, the project manager, the project owner, say or claim. So the conditions of investment should be based on my words, so somehow investors should make sure that it is not to my benefit to lie to them. Let's see how can it arranged. We are back to the same situation, so we have now high and low state, same probabilities, same cash flows. And now, we are back to the borrowing contract. So, 6 million is given by the bank, and F is what is the required back. How could we calculate this F? So the contract looks like this, I give you $6 million, I say you will pay me back, F. If you fail to make this payment of F, then no one gets anything. Let's say your project, your company goes bankrupt, and all the money goes to the lawyers. Now, let's see what F is. Well first of all, we can see clearly that F should be greater or equal than 6, otherwise I won't recover my money. Or N should be less than or equal than 15 or otherwise, even in this great project I won't be able to make the payment. Now, let's see what's expected cash flow to the bank. That's what we did in the previous week, in the final episodes. Well, with probability of %80, the bank gets back its F because you see that F is less or equal than 15 so we are fine. Then we say, well, seems like with probability of 20, we could have got 5. And then if that would be equal to my expected cash flow of 6 because I'm a responsible bank and I have choose break even from this. Solving this equation, we could have concluded that F should be = to 6.25. Now, however, this is a wrong thing and I will explain why. The thing is that this 5, Cannot be recovered, because I say that if you fail to make a payment of F, which happens in the lower case, you case see from this condition. Then, you get no money, everything goes to the lawyer. So here, we actually have 0. And the equation transforms and it goes to 0.80 times F + 0.20 times 0 is = to 6 to where F is = to 7.5. So this is the face value below under the death contract of liquidation. So we can see that we've been able to overcome the problem of non-feasibility of equity investment. We can indeed finance this nice project with that kind of a loan. Now this loan is not so bad. We can see what happens to the expected cash flow to the borrower in this case because basically we can see that this is the bank. Well the bank we see that the counter goes like this. I give 6 million and I get back 7.5. Now that might expected cash flow, is exactly 6, so I just break even. Let's take a look at the borrower. Well, expected cash flow to the borrower. I will put just expected cash flow without B otherwise you can get mixed up with the bank is. We have probability of 0.8, I get back how much. I get back 15 is my cash flow- 7.5, this is what I paid to the bank, right, + the probability at the point where I get nothing, so that's also $6 million. Well this is kind of nice. Remember, before when we said with the equity investment, I had 7 but this time, it's a little bit less because I have to pay some interest to the bank. And, I lose something here, all right. Now, so we can see that the good news is this, that contract with liquidation, it does solve a problem, Of financing. And that's great. However, you can see that this threat of everything goes to the lawyers in the case that indeed we arrived at the low state and we have just $5 million we will lose that, how much do we lose? We lose an expected probability 120 times 5 $1 million. So this is inefficiency. So it is inefficient. So we did solve the problem, but we arrived at inefficiency. Now the question goes, can we do anything to overcome this inefficiency, to save this expected $1 million? Well, clearly we can. And that is what we will do in the next episode.