Calculate the average rate of return...?

Question

A project costs $500000 and has a residual value of $25000. In five years it yields a total income of 280000. What is the average rate of return? How will it change if the project is taken over by another party at $400000 in the second year? (assume no other changes).

Answer 1

Avg rate of return = 11.8% which is the payback period inverted.  Payback period = 8.5 years ( 475,000 /  56,000).

If taken over by another party, avg rate of return = 28.6%.  Payback period = 3.5 years (475,000 / 136,000).

Answer 2

500,000 less 25,000 less 280,000 is a loss of 195,000; divided by 5 it's a minus 39,000.  

500k less 400k less 56K is a minus 44K

did you leave out a zero?