Option to Choose. The project has the option to choose among three alternatives: (1) abandonment, (2) expansion, or (3) contraction. The static project value now is $318 million, the standard deviation of static project value is 78.0%, the riskfree rate is 0.00%, the project can be abandoned at any time for a salvage value of $83.0 million, the project can be expanded by 65% at any time for an expansion cost of $109.0 million, the project can be contracted by 62% at any time for contraction savings of $61.0 million, the time to project completion is 3.4 years, and an 8 period binomial model will be used. When should the project be abandoned, expanded, or contracted?

What is the flexible project value? What is the value of the option to choose?