3. Fair value measurement (8 points) Sabre International Inc owns a trade name that was purchased in an acquisition of Dunder Mifflin Paper Company. According to IFRS, the trade name is assessed for impairment on an annual basis and Sabre must estimate the fair value of the trade name. Based on internal information, Sabre has developed the following estimated annual cash flows over the next 6 years. The trade name has a book value of $5.5 million and assumed to have no salvage value after the six years. (Assume the cash flows occur at the end of each year.) Cash Flow Estimate Probability Assessment $420,000 40% 540,000 25% 800,000 35% Instructions: a. What is the estimated fair value of the trade name? Sabre determines internally that the discount rate is 4% (and the risk adjusted discounted rate is 7%). You might use a factor table such as PV.2 as given in the textbook. (6 points) b. Is the estimate developed for part (a) a level 1, level 2, or level 3 fair value estimate? Briefly explain your answer. (2 points)