Additional Paid in Capital

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Definition

Additional Paid-in Capital is the amount received from equity investors that is greater than the stock's par value. Par value is usually set low so investors will record most of the amounts as additional paid-in-capital. Par value is usually $0.01.

Lets say a company issues 100 shares at $1 each. The par value is $1. If the company does an initial public offering at $5 per share, then the additional paid-in capital would be $400.

Formula

People usually calculate Additional Paid in Capital as:

(Issue Price – Par Value) x Shares Outstanding

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