45.The MNC's cost of equity is unrelated to the local risk-free rate.
46.Assume a subsidiary is forced to borrow in excess of the MNC's optimal capital structure. Also assume that the parent company reduces its debt financing by an offsetting amount. Under this scenario, the cost of capital for the MNC overall could not have changed.
47.Because increased external financing by a foreign subsidiary reduces the external financing needed by the parent, such an action will not affect the overall MNC's cost of capital.