Sailing Inc. manufactures and markets engines and batteries for small boats. Management wanted to expand, and Sailing Inc. decided to make engines and batteries for bigger boats. Dan Tufts was evaluating the financial viability of this long-term investment proposition by using net present value analysis. From his view, these additional investment projects are risky compared to Sailing's current business. This has more fierce competition and Sailing Inc. does not have experience in this market. Weighted average cost of capital is used as the discount rate by Sailing Inc. for net present value analysis. Why did Dan decide to adjust weighted average cost of capital? Stockholders would be happy with the additional risk that Sailing Inc. has undertaken. Sailing Inc. used different discount rates for high-risk projects. The new projects are long-term projects and different discount rates are used. The risk in these projects can be eliminated by adjusting the discount rate