Cumberland Industires

Question 1: What is your price for the curled metal pads?

Consider the first test by Colerick:

Number of sets required = 20

Cost per set = $50

Therefore cost of work = 20 x $50 = $1000

To drive the piles using CMI pads for the same distance as the Asbestos pads, I would assume the price should be about the same without taking into account the efficiency in time spent. Therefore Total cost should be $1000. Since 1 set of CMI were used and each set had 6 pads, each pad should be priced $1000/6 = $166.67 per CMI pad.

This does not take into account the time saved from using CMI compared to Asbestos.

Consider the second test by Fazio Construction

Number of sets required: 50

Cost per set = $40

Total cost of work = 50 x $40 = $2000

Assuming the same amount of work performed on CMI pads, only 1 set was used with total of 5 pads. Therefore, total cost of $2000 for 5 pads results in price of $400 per CMI pad. This does not take into account the time efficiency of CMI over Asbestos.

I would expect using substitute products, price is between $166.67 - $400 per CMI pad for initial customers is reasonable to encourage them to switch from Asbestos to CMI. This price is obviously too low as it does not take into account the time efficiency and therefore the economic savings. However, pricing higher may be difficult at initial adoption as customers are yet to build up a perception of the economic value after use.

Question 2: How much do you think one of these pads is worth to a customer (EVC)?

Efficiency of CMI pads:

The case mentioned that the test results were unusual and therefore a more reasonable estimate is:

CMI pads drove piles 20% faster

Set life of 10 times more for CMI pads

Using Asbestos pad as the Reference price in Colerick test

Asbestos total price = $50 x 20 = $1000

Total feet driven = 50 x 300 = 15,000 feet

Number of hours taken for driving = 15000 / 150 = 100 hours

Time required to change sets = 20 mins x 20 = 400 minutes = 6.67...