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McDermott Company developed a new industrial component called IC-75 that offers superior performance relative to...

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Accounting

McDermott Company developed a new industrial component called IC-75 that offers superior performance relative to the comparable component sold by McDermotts primary competitor. The competing part sells for $1,360 and needs to be replaced after 2,160 hours of use. It also requires $280 of preventive maintenance during its useful life.
The IC-75s performance capabilities are similar to its competing product with two important exceptionsit needs to be replaced after 4,320 hours of use and it requires $380 of preventive maintenance during its useful life.
Required:
From a value-based pricing standpoint:
1. What is the reference value McDermott should consider when pricing IC-75?
2. What is the differentiation value offered by IC-75 relative the competitors offering for each 4,320 hours of usage?
3. What is IC-75s economic value to the customer over its 4,320-hour life?
4. What range of possible prices should McDermott consider when setting a price for IC-75?

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