She payed $25 (not including tax). To work this problem, you need to set up a ratio.
x 35
-- = --
40 100
This will show you how much money is off of the item.
After you solve the ratio (cross multiply and divide), you should have gotten the answer $14. Then you subtract 14 from 40 to get the price of the item currently at 35% off. The answer would be $25.