McDermott Company has developed a new industrial component called IC$-75.$ The company is excited about IC$-75$ because it offers superior performance relative to the comparable component sold by McDermott's primary competitor. The competing part sells for $$1,440$ and needs to be replaced after $2,240$ hours of use. It also requires $$320$ of preventive maintenance during its useful life.

The IC$-75\text{'}$s performance capabilities are similar to its competing product with two important exceptions$-$it needs to be replaced after $4,480$ hours of use and it requires $$420$ of preventive maintenance during its useful life.

$1\mathrm{.}25$

awarded

ored

Required:

From a value$-$based pricing standpoint:

What is the reference value that McD$$ermott should consider when pricing IC$-75?$

What is the differentiation value offered by IC$-75$ relative the competitor's offering for each $4,480$ hours of usage?

What is IC$-75\text{'}$s economic value to the customer over its $4,480-$hour life?

What range of possible prices should McDermott consider when setting a price for IC$-75?$

$\backslash$table$[[1.$ Reference value,$$1,440,,,,],[2.$ Differentiation value,$$3,117,,,,],[3.$ Economic value to the customer,$$6,617,,,,],[4.$ Range of possible prices,$$104x,,$Value$-$based price,$,$$$120x$