Exchange 2010 Setup Error: Access control list (ACL) inheritance is blocked for the Public Folder tree object. Re-enable the inheritance and restart setup…

I came across this error while running Exchange 2010 Mailbox server role setup in an Exchange 2003 environment. The CAS & HUB role installation went smoothly. The error was as follows.

Mailbox Role Prerequisites
Failed

Error:
Access control list (ACL) inheritance is blocked for the Public Folder tree object (CN=Public Folders,CN=Folder Hierarchies,CN=First Administrative Group,CN=Administrative Groups,CN=Org Name,CN=Microsoft Exchange,CN=Services,CN=Configuration,DC=domain,DC=local). Re-enable the inheritance and restart setup.

The solution was to use ADSIEdit, load the configuration partition and navigate to Service -> Microsoft Exchange > Org Name -> Administrative groups > First Administrative Group -> Folder Hierarchies > CN=Public Folders. Right click & select properties, navigate to the Security tab, click on Advanced button and make sure that "Include inheritable permissions from this object’s parent” checkbox is checked.

Ran setup again and everything was fine!