Describe Robert Merton's Strain Theory and Provide Examples to Illustrate

question 135

Essay

Describe Robert Merton's strain theory and provide examples to illustrate your answer.

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Definitions:

Internal Rate of Return

The discount rate that makes the net present value of all cash flows from a particular project zero.

Interest Rate

Interest: the financial charge applied to the borrower by the lender, calculated as a percentage of the principal for asset usage.

Corporate Tax Rate

The tax imposed on the net income of a company by the government.

WACC

Weighted Average Cost of Capital (WACC) is a calculation of a firm's cost of capital in which each category of capital is proportionately weighted, including all sources of capital like equity, debt, and any other funding sources.