T3 EIC 5 (Tutorial)

You've just joined Berkshire Hathaway

(Warren Buffet's fund) as a business analyst graduate recruit and there are

several meetings you are to attend for the day. Prior to the meetings you must

do preparation work for each meeting.

Your first meeting is in property

investment. Two similar property leases are on the market, and you are required

to provide basic valuation of rental cash flows and a recommendation

regarding what price to pay for each lease. Real estate agents are taking bids

from prospective buyers now.

The price to purchase each lease is $350 mil. 

Value each lease and provide a

recommendation on which to buy. The current WACC of Berkshire Hathaway is 10% and there are no capital constraints.