So no cash went out of the door.

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.

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

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

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

So therefore, I put it down there.

They're usable over two years.

That's just the gasoline cost.

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.

Guess when he cashed out.

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

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

No, we didn't.

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.

So I used half of it in year one.

So instead of doing that, what you do is, at the beginning of the period you say, we have acquired a patent, an asset, that is worth 4,000, And then every year over the life of the patent, we'd amortize a fourth of it since it has a four year life.

Our profit, once again, is 30,000.

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

Our starting cash was 50,000, we had 50,000 from operations, now our ending cash is 100,000.

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

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

It doesn't matter... Although, it's due back.

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

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

Now, an airliner, carries just as much propellant as a rocket does, it's just as big, and they are actually far more complicated than a rocket is.

And let's say we do a straight line depreciation, which means we essentially depreciate the asset evenly over its lifespan.

The fact that this machine right here that cost 50,000 is used for in this example, in the depreciation video, it was usable for two years.

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

There is a definite time to return the book.

Duration

Direction

Period

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

I move we postpone the sale for six weeks.

This is the principal amortization.