In the earnings capitalisation model,defining growth involves using the zero growth model,and then subtracting the present value of the growth opportunities.

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In the earnings capitalisation model,an estimate of the level of earnings is required.Under the assumption of no (real)growth,the earnings estimate is the constant (real)level of earnings.It is possible to use the latest reported earnings figure as the basis for the estimate.However,in practice,even though some companies,such as mature industrial companies,may appear to meet the requirements of the model (which is no real growth),the reported earnings figures can still be volatile across time.This is due to changes in accounting procedures and the occurrence of one-off items termed extraordinary items.

In the Earnings Capitalisation Model,defining Growth Involves Using the Zero