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Cash invested at say 5% will return 3.5% tax paid at 30 cents in the dollar.

A P/E of 28 guaranteed by our government.

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Instead we all pooled together and invested these funds into a company.

We purchase a company with our $50 million. (you're putting alot more in than me) We leverage that by 50% and turned our investment into 75 million.

The companies income less direct costs per year is $14.3 million.

From that we deduct

Overheads                 $3 million

Interest @ 10%          $2.5 million

Repayment (15 years)  $1.67 million

                               =========

                                $7.13 million left. After tax of 30 cent in the dollar = $5 million or a P/E of 10

The following has been my concern and continues to be.

Suddenly sales drop by 25% which results in the income less direct expenses dropping to $10.75 million. It dropped our fully franked profit down to $2.5 million.  The P/E just blew out to 20.  So the "Share price" responds and is now half back to a P/E of 10.

If the sales dropped by 50% our company is not making anything.  Ofcoarse  we tighten "overheads" and the government helps by reducing interest rates.

But we are on the verge of going under. 

At this stage what is the share price?

Leverage is everywhere.  Reading through the Storm thread. Leveraged people investing into the leveraged Storm.  A double whammy. 

But we still consider investing into Leveraged companies selling products to the highly leveraged consumers. 

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On a side note:  I would assume if the bank was strapped for cash at the time of attempting to break a term deposit they could refuse!

Which would be fair enough.