A competitor sells heavy machinery priced at $14,000. Your firm has been working to enter the heavy machinery market and has developed a new product with a marginal cost of $8,500. Your firms new machine is superior to its competitors in some ways and inferior in other ways. Its speed is limited, which reduces the value to customers by $1,000 per engine. However, it requires less maintenance, delivering labor savings of $3,500 per engine.

a. What is the price of the nearest comparable alternative for New Product?

b. What is the differential value of New Product in comparison to Old Product?

c. What is the exchange value of New Product?

d. Where range would you suggest to executives for pricing New Product?