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Valuation: Measuring and Managing the Value of Companies, Fifth Edition
Chapter 3 Solutions
The Expectations Treadmill
1. The total returns to shareholders figure is the return earned by shareholders from
2. The expectations treadmill refers to the fact that recent growth builds expectations of
future growth. The efforts by managers to constantly grow earnings to meet expectations
3. A well-performing company may not deliver a high TRS if the expectations include
knowledge of the performance. This circumstance relates to the adage that a good
4. Bad actions by managers include any perverse action to increase the share price without
5. No, they will not all earn the same return, because some purchasers bought shares at
6. If the company performs in line with expectations, then the TRS will be commensurate
7. One company can outperform another on TRS despite lower performance on key value
8. The breakdown omits three important points. First, it does not indicate the source of the
9. The TRS earned if there were no growth would be the earnings yield. It is the inverse of
10. Management performance should be measured by the performance of the company and
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