Sam Houston Company owns a trade name that was purchased in an acquisition of Travis Company. The trade name has a book value of $10,000,000, but according to GAAP, it is assessed for impairment on an annual basis. To perform this impairment test, Houston must estimate the fair value of the trade name. It has developed the following cash flow estimates related to the trade name based on internal information. Each cash flow estimate reflects Houstons estimate of annual cash flows over the next 6 years. The trade name is assumed to have no residual value after the 6 years. (Assume the cash flows occur at the end of each year.)

Cash Flow Estimate			Probability Assessment
$1,000,000			30%
1,600,000			50%
2,000,000			20%

Cash flow Estimated		X		Probability Assessment			=		Expected Cash Flow
$1,000,000				30%					$300,000
1,600,000				50%					800,000
2,100,000				20%					420,000		x PV-OA
											Factor,
											n = 6, I = 4%		Present Value
									$1,520,000		5.24214		$7,968,053

(b) Is the estimate developed a Level 1 or Level 3 fair value estimate? Explain.