Change number format in one cell based on drop selection of currency or percentage

I have a worksheet for our employees to figure 401(k) contributions and matches that's unique to our company. In my worksheet I included a drop down menu that allows then to figure the effect of their contribution as a percentage of salary or as a flat dollar amount. They choose from the drop down option and depending on their choosing a percentage or flat dollar amount they enter it in an empty cell below. Is there a way to have the number format change to either currency (for the flat dollar amount) or percentage based on what they chose from the drop down?

Everything I see in conditional formatting relates to changing the cells color. I have tried to figure out a way of using an if statement to do this, but cannot figure that out.

Thanks so much benishiryo you already put me miles ahead! However, after following your instructions (at least I think I did) The dollar displays as cents i.e. if I enter 56 instead of $56.00 it gives me $0.56. I have attached my spreadsheet. Can you help? 401(k) Calculator v2.xlsx