Gasworks, Inc., has been approached to sell up to 3.4 million gallons of gasoline in three months at a price of $2.80 per gallon. Gasoline is currently selling on the wholesale market at $2.70 per gallon and has a standard deviation of 59 percent.

If the risk-free rate is 5 percent per year, what is the value of this option? Use the two-state model to value the real option. (Enter your answer in dollars, not millions of dollars, e.g., 1,234,567. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

Value of contract

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