The summarised balance sheet of Smith plc as at 31 December 2020 is expected to be:

Smith's Ltd
Summarised Balance Sheet as at 30 September 2021
Assets		000
Cash		550
Other assets less liabilities		6,660
		7210
Liabilities and Capital
Ordinary shares of 20 pence		700
Share premium		430
Retained profit		3,170
		4300

The share capital of Smith plc consists of 3,000,000 ordinary shares of 50 pence. The distribution of shareholding is:

Alex Collin	1,500,000	shares
Max Stef	700,000	shares
Adam Rein	700,000	shares
Other shareholders	100,000	shares
	3,000,000	shares

Alex, Max and Adam are are directors of the company.

Smith plc wishes to raise 500,000 to finance expansion. The following four alternatives are being considered by the directors to achieve this.

Proposal 1

Issue 500,000 ordinary shares at a price of 1 a share.

Proposal 2

Make a 1 for 6 bonus issue of ordinary shares.

Proposal 3

Make a 1 for 6 rights issue of ordinary shares at a price of 1 a share.

Proposal 4

Borrow 500,000 as a 12% secured loan repayable in monthly instalments over five years.

Required

Advise with supporting calculations the directors of Smith plc on the relative merits of each of the proposals.