Instead of Assumption 3.2.6, assume that the management acts in the interest of all shareholders. How would that affect the investment decision of the management? If management acts in the interest of the new shareholders, what is the optimal equity issuance rule?

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Assumption 3.2.6. The management acts in the best interest of the old shareholders. Moreover, old shareholders are assumed to be passive-that is, they do not adjust their portfolios in response to the issue-invest decision of the firm.