Step 2Cheap Parts!!
1 - Ultra Bright white LED, great for throwies. (approx. $0.99 ea @ RadioShack)
2 - CR2032 batteries, useful for throwies or replacing the battery in your car's remote. ($1.95 ea @ WallMart)
And assorted other parts like a small circuit board and a magnifying lens, etc. that I'll give a cumulative value of $0.50 just to round things out nicely.
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the piece in the middle has to be magnetic ... otherwise it wouldnt be able to induce a current in the coil from changing emf. Also you forgot to mention the large amount of magnet wire you get from this too!