CASE STUDY QUESTIONS 8.1 Spoiled Cheese? Recall Frankie's Homemade Cheese Shop from the Chapter 7 cases. Assume now that Frankie's has finished construction of the new cheese superstore along Route 5 and capitalized $1.9 million related to the proj- ect as of the store's opening on 1/1/20X1. As of 12/31/X1, the current carrying value of the shop is $1.805 million (assuming a 20-year life for the store and straight-line depreciation). As of 12/31/X1, Frankie's notices that a few negative factors are at play and asks you whether it is required to test the superstore for impairment: 1. A key stock market index (the Dow) has slid 1,500 points, or 6%, since the store was opened. 2. Monthly sales have slid by 10% since the store was opened, partially due to a construction project on Route 5 that has reduced traffic flow to the area. 3. As a result of the slide in monthly sales, the store operated at a deficit in October, November, and December of 20X1. Assume the fair value of the store at 12/31/XI is $1.7 million. As of 12/31/X1, Frankie's estimates the store will produce net cash inflows of $50,000 in year 2, $100,000 each in years 3-5, $150,000 each in years 6-10, $175,000 each in years 1115, and $200,000 each in years 1620. Note that Frankie's incremental borrowing rate is 6%. Is the store required to be tested for impairment? Should Frankie's impair the current carrying value of the store at 12/31/X1