So therefore, I put it down there.

They're usable over two years.

And there's all sorts of intangible assets that you might amortize.

And then their SG amp A is the same.

So I'll just write down the number first.

And amortizing really just means spreading out the cost of this asset, just like depreciation was spreading out the cost of a physical asset.

This is the interest rate you assume.

Really, in my mind, it's very similar to depreciation.

And I'm running out of time in this video, and I'll cover it in the next, but you might have also heard of the word

And just so you know, most corporate debt actually works that way.

This is all a review of the depreciation video.

Well, you know depreciation, man.

Depreciation is tangible.

To figure out the cash from operations from actually how much cash the operations are producing.

So no cash went out of the door.

That's just the gasoline cost.

If you divide 50,000 by 4, it's 12,500.

No, we didn't.

So 20,000 over 3 years is the life of that truck.

So I used half of it in year one.

Our profit, once again, is 30,000.

Our short term goal for this is to be half the price of solar cells and our longer term goal is to be less than a five year payback.

And then at the end of 2010, it'll say the machine is worth nothing.

Full metal jacket.

You'll often hear the words depreciation and amortization used together.

It just makes economic sense. Right now, solar paybacks are between 30 and 50 years.

And then instead of having an equipment expense, instead of having that expense, they'll have an equipment depreciation expense.

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They have no money down, 1 million loan, subprime, negative amortization, they had no credit rating, etc, etc.

amortization. Amortization is to spread out a non tangible cost over a period of time.

So for example, depreciation, this was factory equipment, and it gets old as I use it, so I spread out its cost.

Accounts Receivable, that they're not changing over the course of the year.

And then the other 250,000 essentially went to an expense called depreciation, which is right there.

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All right.

Take us in. Full impulse.

I'm sorry, the correct answer is Full Metal Jacket .

This is the principal amortization.

At this point in time, your patent is arguably only worth 1,000, because you paid 4,000 for four years, and now you only have a year left.

Nothing fancy.

So the way you'd think about this is instead of having factory retooling, you could say factory tool.

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