A change in Par Value can affect the number of shares and the price a company has. However, the total capital remains unchanged as the change in Par Value is directly proportional to the change in its price, and inversely proportional to the change in number of shares.
PAR VALUE INCREASE SAMPLE COMPUTATION:
PAR VALUE of Company A changed from 1.00 to 10. If I had 1000 shares at Php5, the new price and new number of shares is computed as follows:
New Price = Old price * (New Par Value / Old Par Value)
= Php5 * ( 10/ 1)
= Php5 * 10
= Php 50 per share
New # Shares = Original number of shares / (New Par value/ Old Par value)
= 1000/ ( 10/1 )
= 1000/ 10
= 100 Shares
PAR VALUE DECREASE SAMPLE COMPUTATION:
PAR VALUE of Company B changed from 10 to 1.00. If I had 1000 shares at Php5, the new price and new number of shares is computed as follows:
New Price = Old price * (New Par Value * Old Par Value)
= Php5 / ( 1* 10)
= Php5 / 10
= Php 0.50 per share
New # Shares = Original number of shares / (New Par value* Old Par value)
= 1000* ( 1*10 )
= 1000* 10
= 10,000 Shares