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McDermott Company developed a new industrial component called IC - 7 5 that offers superior performance relative to the comparable component sold by McDermott's primary

McDermott Company developed a new industrial component called IC-75 that offers superior
performance relative to the comparable component sold by McDermott's primary competitor.
The competing part sells for $1,320 and needs to be replaced after 2,120 hours of use. It also
requires $260 of preventive maintenance during its useful life.
The IC-75's performance capabilities are similar to its competing product with two important
exceptions-it needs to be replaced after 4,240 hours of use and it requires $360 of preventive
maintenance during its useful life.
Required:
From a value-based pricing standpoint:
What is the reference value McDermott should consider when pricing IC-75?
What is the differentiation value offered by IC-75 relative the competitor's offering for each
4,240 hours of usage?
What is IC-75's economic value to the customer over its 4,240-hour life?
What range of possible prices should McDermott consider when setting a price for IC-75?
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