Exercise $13$A$-3($Static$)$ Value$-$Based Pricing $[$L$013-10]$

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 $$1,200$ and needs to be replaced after $2,000$ hours

of use. It also requires $$200$ 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

$4,000$ hours of use and it requires $$300$ 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 $4,000$ hours of usage?

What is IC$-75\text{'}$s economic value to the customer over its $4,000-$hour life?

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