Hi,

My approach would be to size the main source of profit of Sardinia (if I have to name 3 I would say tourism, real estate, and industry + other activities, that I would assume to be the 10% of the other 3) per annum, the profit I want to make on Sardinia's sale and then decide a payback period that would be suitable for France (e.g., 10 years !?)

E.g., for tourism, you can divide "beach tourism" and "historical tourism". For the first one you can hypothesize the number of hotels, the average number of room per hotel, the average % of rooms occupied per period of the year and the average cost per room per period of the year. Same for restaurants, beach facilities, services, ... For "historical tourism" you can do roughly the same (you could simply decide it is a percentage of the "beach tourism", I would expect it to be more spread in the year but lower)

Does it sound reasonable?

Clarifying questions: Who owns (assuming Italy govt owns this)? Why they want to sell? Key objective?

What are the current activities that happen on a daily basis? How does Italy uses this island - for some sort of trade/ uses sth grown here / uses it for tourism etc / for non-business purposes like R&D and stuff?

Population inhabited on the island? # of tourists if it is a tourist destination...

Safety issues (Natural disasters, wildlife, civilization)

Industry question: Can an island be used for any R&D activity? (if there is no / limited business on this island as per clarifying question)

Location of the island - how close to France? How close is this island to other major countries? Nearby airports...Any chance of airport establishment on island...which is the nearest civilization/ island / mainland.. how big is that... (basically judging the proximity of island to other commercial hubs and assessing its accessibility)

Is it strategic for them by any means? (France GDP % by different activities - tourism, other industries depending on what R&D can be done on island)

Approach:

1. Potential of the island (depending on objective - profitability potential from direct activities that France could establish - also take into account investments France will have to incur)

2. Cost saving avenues for France by purchasing this island

This will give total benefit for France (A)

3. Profits lost for Italy by giving this island (B)

Pricing = A - Opportunity cost for France by investing in this island and not some other avenue

(Edit: I had earlier used A+B- OC, but if i do this mistake in real interview, how to correct it?)

Then, you can decide Mode of selling: One-shot or sale and leaseback

Sale and leaseback maybe advantageous because developments can happen on island and Italy can later get it back..in the meantime, France would have popularized this island

Also, Italy can charge lesser in sale and lease back depending on the lease tenor...Also, need to take into account a multiplier on revenues when Italy gets back the island and establish clauses (penalties) for damaging island

Risk: 1) Depending on strategic location of the island, security threats in case France decides to turn hostile tomorrow

2) Rehabilititation of people and businesses in case there were any on the island...Their nationalities and rules by which they are governed...

How would you have approached this?

What am I missing (depending on your interview experience)? Look forward to your reply.

(editiert)