Don Masters and two of his colleagues are consideringopening a law office that would make inexpensive legalservices available to those who could not otherwise affordthese services. The intent is to provide easy access for theirclients by having the office open 360 days per year, 16hours each day from 7:00 a.m. to 11:00 p.m. The officewould be staffed by a lawyer, paralegal, legal secretary,and clerk-receptionist for each of the two 8-hour shifts.To determine the feasibility of the project, Masters hired amarketing consultant to assist with market projections. Theresults of this study show that if the firm spends $500,000on advertising the first year, the number of new clientsexpected each day would have the following probabilitydistribution.Number of NewClients per DayProbability--------------------------20.1030.3055.4085.20Masters and his associates believe these numbers arereasonable and are prepared to spend the $500,000 onadvertising. Other information about the operation of theoffice is given below.The only charge to each new client would be $30 for theinitialconsultation.All cases that warranted further legal workwouldbe accepted on a contingency basis with the firm earning30% ofany favorable settlements or judgments.Mastersestimates that20% of new client consultations will result in favorablesettlements or judgments averaging $2,000 each.It is notexpected that there will be repeat clients during the firstyearof operations.The hourly wages of the staff are projected to be $25 forthelawyer, $20 for the paralegal, $15 for the legal secretary,and$10 for the clerk-receptionist.Fringe benefit expense willbe40% of the wages paid.A total of 400 hours of overtime isexpected for the year; this will be divided equally betweenthelegal secretary and the clerk-receptionist positions.Overtimewill be paid at one and one-half times the regular wage,and thefringe benefit expense will apply to the full wage.Masters has located 6,000 square feet of suitable officespacewhich rents for $28 per square foot annually.Associatedexpenses will be $22,000 for property insurance and$32,000 forutilities.It will be necessary for the group to purchase malpracticeinsurance, which is expected to cost $180,000 annually.The initial investment in office equipment will be $60,000;thisequipment has an estimated useful life of 4 years.The cost of office supplies has been estimated to be $4perexpected new client consultation.