A firm has outstanding debt of $100 million.Suppose it voluntarily agrees to pay a group of creditors 40 cents on the dollar immediately and to pay the remaining creditors 60 cents on the dollar in four periodic installments.This is

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This is a combination of an extension and a composition. The firm is extending the payment period for a portion of its debt (the remaining 60 cents on the dollar) by splitting it into four periodic installments. At the same time, it is offering a composition agreement to the other creditors, offering to pay them 40 cents on the dollar immediately.

A Firm Has Outstanding Debt of $100 Million