Question: Construct a simple example to show that a firm's existing stockholders gain if it can sell overpriced stock to new investors and invest the cash

Construct a simple example to show that a firm's existing stockholders gain if it can sell overpriced stock to new investors and invest the cash in a zero-NPV project. Who loses from these actions? If investors are aware that managers are likely to issue stock when it is overpriced, what will happen to the stock price when the issue is announced?

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