"Netflix Inc. tumbled 35% on Wednesday, in a selloff that wiped out $54 billion in market value, after it reported a surprise decline in its subscriber base. Netflix closed at $226.19 in New York, extending its plunge this year to 62% -- making it the worst performing stock in the S&P 500 and the tech-heavy Nasdaq 100 indexes. Netflix has a 0.8% weighting on the Nasdaq 100 and 0.3% on the S&P 500. The shares posted their biggest drop since October 2004. The streaming service shocked Wall Street by losing 200,000 customers in the first quarter, the first time it has shed subscribers since 2011. It also projected it will shrink by another 2 million customers in the second quarter. "A big problem with Netflix is that it's too easy to leave the service," said Russ Mould, investment director at AJ Bell. Consumers feeling the pinch from inflation will be looking hard at their expenses and streaming services are a quick way to save money, he said. The drop in customers has led Netflix to break some of its long-standing rules: it will introduce a cheaper, advertising-supported option for subscribers in the next couple years and will start to crack down on people sharing their passwords even before that." Required: a) Using the valuation model discussed in the lectures, provide reasons for Netflix's recent decrease in value. Your answer should specifically reference the valuation model and identify specific factors that are expected to affect Netflix's share price. b) Your next-door neighbour says: "Did you see the crash in Netflix's share price? I knew it was a bubble!" Discuss why your neighbour said Netflix was a bubble. Do you agree or disagree with the statement? Justify your