We talk about a problem in Corporate Governance in active monitoring. A monitor learns about the Bad Project, which yiel

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We talk about a problem in Corporate Governance in active
monitoring.
A monitor learns about the Bad Project, which yields private
benefit B, with probability M. The monitor learns nothing with
probability 1-M. This probability of M of effective monitoring
(=monitoring level) is dependent on the effort cost or what we call
disutility of effort g(M) incurred by this monitor. It is assumed
that disutility of effort is increasing g’()>0 and convex
g’’()>0. We also assume that g’(0) and g’(1) = ∞. Let Rb be the
borrower’s reward. In successful case, its value is
b/Δp < Rb < B/Δp. Let Rm be the monitor’s payoff in a
successful case.
The question is: Show the Net Present Value of the project for
monitoring level M.