You work for the CFO of Alaska Airlines. The finance team is evaluating a new advertising...

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You work for the CFO of Alaska Airlines. The finance team is evaluating a new advertising campaign that is estimated to cost $5 million today and expected to generate $1 million of free cash flows per year for the next 10 years. Download the Excel spreadsheet "HW 4 - Stock data" from Canvas. It contains 10 years of monthly returns on the S&P 500 Index and Alaska Airlines (ALK). A. (2 points) Estimate the beta of Alaska Airlines by calculating the slope of the CAPM regression: TALK = a+1 SP500 1 Note that the y-variable is the monthly returns on the stock and the x- variable is the monthly returns on the market. Verify that the beta of the S&P 500 is 1. B. (2 points) Using an expected market risk premium of 5% and the current yield on the 10-year Treasury bond of about 1.75%, determine the expected return of Alaska Airlines' stock. C. (2 points) Should your team approve the new marketing campaign? Why or why not? You work for the CFO of Alaska Airlines. The finance team is evaluating a new advertising campaign that is estimated to cost $5 million today and expected to generate $1 million of free cash flows per year for the next 10 years. Download the Excel spreadsheet "HW 4 - Stock data" from Canvas. It contains 10 years of monthly returns on the S&P 500 Index and Alaska Airlines (ALK). A. (2 points) Estimate the beta of Alaska Airlines by calculating the slope of the CAPM regression: TALK = a+1 SP500 1 Note that the y-variable is the monthly returns on the stock and the x- variable is the monthly returns on the market. Verify that the beta of the S&P 500 is 1. B. (2 points) Using an expected market risk premium of 5% and the current yield on the 10-year Treasury bond of about 1.75%, determine the expected return of Alaska Airlines' stock. C. (2 points) Should your team approve the new marketing campaign? Why or why not?