Given a project cost of $500,000 and cash flows of $150,000 per year, what is the payback period?

To determine the payback period, you need to calculate how long it takes for the initial investment to be recovered through the cash flows generated by the project.

In this scenario, the project has an initial cost of $500,000 and generates annual cash flows of $150,000. The payback period can be calculated using the formula:

Payback Period = Initial Investment / Annual Cash Flow

Substituting the given numbers into the formula gives:

Payback Period = $500,000 / $150,000 = 3.33 years

This result indicates that it will take approximately 3.33 years for the cash inflows from the project to equal the initial investment. Therefore, the correct answer is indeed 3.33 years, as it reflects the time required to recover the entire initial investment through the project's annual cash flows.