Optimal WACC Using Linear Programming And Genetic Algorithm – An Analytical Study In Al-Mansour HoteL

Abstract

The optimal capital structure constitutes a fundamental in financial decisions, whether at the level of theory or practice, Since Modigliani and Miller put forward their theories, an intellectual debate has formed regarding to determining the optimal combination of components that reflect the performance of the organization, although simplicity of the components of the capital structure, determining the optimal percentage of Each component is still difficult because these decisions are related to the future of the organization, This research light on the nature of the capital structure in service organizations and financing mechanism, and then presents a working mechanism that is considered a development of financing by proposing an amendment to WACC. application of the WACC equation after making an adjustment on the side of the weights related to the cost of financing by debt and financing by equity to the superiority of linear programming and the genetic algorithm in providing a combination of weights that reduces the value of the objective function (total cost of financing), this research presented the logical mechanism that you can then and in the light of sources available financing and in a simplified manner by re-weighing the assets of the capital structure in a way that achieves a significant cost reduction by taking advantage of the genetic algorithm philosophy by selecting the Better, the scientific contribution was determined in light of the knowledge gap, and accordingly, the idea of re-weighing the assets of the capital structure was presented in a way that reduces the cost