1. Cost Estimation (10 Points).

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You recently graduated from UIW and have just been hired by an investment banking firm to track the performance of publicly listed companies. Your first assignment is to analyze and forecast Netflixs 2018 operating income.

Condensed data in thousands of dollars (000s) from Netflixs 2016 and 2017 income statements are below:

In thousands	2017	2016
Revenues	$11,692,713	$8,830,669
Total cost of revenues and operating expenses	(10,854,034)	(8,450,876)
Operating income	$838,679	$379,793

It is your responsibility to answer the following questions:

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1. Develop a cost-estimation equation for Netflixs annual cost of revenues and operating expenses
2. Determine Netflixs annual break-even point.