Question 5: (a) What are the main features of Risk and Uncertainty in relation to financial modeling? 1.Risk and Uncertainty factors require little consideration from the financial modeling perspective, as both cover easily insurable events 2.Risk is about financial modeling, but uncertainty should be handled in product/service design and engineering 3.Risky events are harder to model than uncertain events, because risky events always have a greater impact on financial modeling than uncertain events 4.Risky events are associated with known probability and impact distributions, while uncertain events require relatively subjective modeling of their potential likelihoods and impacts Explain your answer.

(b) Consider the following scenario: you are a project manager in a Colorado company that is trading internationally. In early 2022, your company makes a public announcement that it will discontinue all operations in Russia due to the country invasion of Ukraine. Your company operations in Russia are small in scale and scope, but your company growth strategy prior to 2022 was heavily reliant on expanding its business in the emerging markets of Europe. These markets include 23 countries of Central, Eastern, South-Eastern Europe and the South Caucasus, with Russia being the largest market of them all. Case 1: There is no clarity as to what, if any, adverse impact on your company's future performance will its 2022 decision have. Case 2: We know relatively well how much adverse impact - in terms of foregone future revenues and profits - the company's 2022 decision will have. In each case (cases 1 and 2), discuss how the difference between Risk and Uncertainty is likely to impact company's cost of debt? Its cost of equity? Explain your reasoning.