A manager who tends to be risk averse is setting a discount rate to be used for investment projects. The manager will likely apply what type of adjustment to the weightedaverage cost of capital (WACC) for ariskyproject?

1.Set a discount rate that islowerthan the WACC.

2.No change; use the WACC as the discount rate.

3.Set a discount rate that ishigherthan the WACC.

4.The discount rate is not related to the WACC.