Currently the firm has total market value of debt $20 million and total market value of equity $80 million. This capital structure is considered optimal by the management. The optimal capital budget for new investment for the coming period is determined to be $30 million. The total net income is estimated to be $20 million. The firm has 5 million common shares outstanding. The firm pays dividend based on the residual policy. What would the dividend payout ratio be?

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