An abridged balance sheet of Ltd shows the following: The company currently distributes all of its

An abridged balance sheet of Β Ltd shows the following:

The company currently distributes all of its profits of £25,000 to its shareholders. It now wishes to raise an additional £80,000 by issuing further ordinary shares, estimating that it will earn a further £20,000 profit from these funds. Explain why the company would issue these new shares at a premium, and calculate the issue price.

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100,000 1 ordinary shares 100,000 Reserves 90,000 190,000