Janet Wu is treasurer of Wilson Paper Company, a manufacturer of paper products for the office and school markets. Wilson Paper is selling one of its divisions for $70 million cash. Wu is considering whether to recommend a special dividend of $70 million or a repurchase of 2 million shares of Wilson common stock in the open market. She is reviewing some possible effects of the buyback with the companys financial analyst. Wilson has a long-term record of gradually increasing earnings and dividends. Wilsons board has also approved capital spending of $15 million to be entirely funded out of this years earnings.

Book value of equity	$750 million ($30 a share)
Shares outstanding	25 million
12-month trading range	$25$35
Current share price	$35
After-tax cost of borrowing	7%
Estimated full year earnings	$25 million
Last years dividends	$9 million
Target debt/equity (market value)	35/65

Assume that Wilson Paper funds its capital spending out of its estimated full year earnings. If Wilson uses a residual dividend policy, determine Wilsons implied dividend payout ratio.