a. Present number of common shares = $2,000,000/$8 par value = 250,000.

b. (1) The total market value of the firm before the stock dividend is

$60 X 250,000 shares = $15 million. With no change in the total value of the firm, market price per share after the stock dividend should be $15 million/300,000 shares = $50 per share. (2) If there is a signaling effect, the total value of the firm might rise and share price be somewhat higher than $50 per share. The magnitude of the effect probably would be no more than several dollars a share, based on empirical findings.