A small business needs to invest in a new piece of equipment. The equipment costs $50,000 and has a useful life of 5 years. The business plans to depreciate the equipment using the straight-line method. The business has $10,000 in cash on hand and can borrow $40,000 at a 7% interest rate to purchase the equipment. The business expects the equipment to generate annual revenue of $25,000 and annual operating expenses of $8,000 over the next 5 years. Should the business borrow money to purchase the equipment or use its existing cash? Show all calculations and explain your answer.

(20 marks)