The correct answer is A. 3.46 years.
The payback period is the amount of time it takes for an investment to recover its initial cost. In this case, the initial cost is Rs 300 and the full cash flow during recovery year is Rs 650. This means that the investment will recover its initial cost in 300/650 = 0.46 years. However, we also need to consider the 4 years prior to full recovery. This means that the total payback period is 4 + 0.46 = 3.46 years.
Option B is incorrect because it does not take into account the 4 years prior to full recovery. Option C is incorrect because it is the total number of years, not the payback period. Option D is incorrect because it is the payback period for an investment with a different initial cost and cash flow.