Just my $.02 since I am a freelance designer and spend a good deal of time trying to effectively price my work.
First and foremost is always consider your skills worth something. If they weren't, then everybody would be doing it, and you wouldn't even have someone inquiring in the first place. There are far too many people out there who want something for nothing, and i always try to use it as a teaching moment to make them realize what's involved. You may not get the job, or even want the job, but by trying to teach them, maybe someday they'll "get it" and be more respectful of other people's time and skill. If nothing else you may help someone else in a similar position down the road have a better project experience.
I honestly tailor my responsiveness at times to how appreciative and understanding people are about what it takes to do such projects. If I get a feel for the person and it's obvious they don't value my time and skill, then that means they are going to abuse it. I happily walk away from the project.
If someone tries to manipulate me by telling me that I would be "doing it for fun anyway" or they will have "more future work that will pay", I call BS on this immediately and never take the project.
As far as pricing, it's up to you, but I always start high and negotiate down. Set people's expectations. Define the scope of the project and be sure they know when discussing aspects that fall outside the scope that it will cost extra money. Clear and decisive communication is key.
When considering a price, a lot of people don't consider opportunity cost, that is, what could you be doing instead of this project and what is that worth to you, (both in terms of actual dollars and value, such as time spent away from other hobbies, projects, family etc). I think this is very important.
I never take pro-bono work if it means putting off a paying project. The exception to this is when a client is willing to allow me to work on it over a long period of time at my leisure.
And like some of the other commenters on here, I'd agree on what is the implementation of this piece. If it is going to be used in a for-profit setting, then under no circumstances would I ever do the work for free or even at a discount. Good businessmen ought to know the value of good work and be willing to pay for it.
And probably most importantly, get it in writing and make them pay up front for all material costs, and that's non-refundable. That way if something happens and they flake out on you halfway through or some other unforeseen event happens, at least you aren't holding the bag for all those expenses.
Good luck.