I am presenting this to my class:

You're the owner of a bustling cake business, and you've identified a vital piece of equipment costing $$7,000$that could significantly enhance productivity and efficiency. In your savings account, you've amassed $$20,000.$However$,$ with inflation at $4\%$and the bank offering a meager $2\mathrm{.}5\%$interest rate, you're worried about the diminishing value of your savings over time.

But here's the twist:

Upon analyzing your business prospects, you anticipate a substantial $20\%$increase in revenue if you invest in the new equipment. Last year, your revenue amounted to $$35,000.$

Now, let's weigh your options:

Using your savings: Opting to utilize your savings to purchase the equipment would shield you from the adverse effects of inflation on your money. Though you'd initially be out $$7,000,$investing in your business could potentially yield an additional $$7,000$in revenue $(20\%$of $$35,000).$With the upgraded equipment streamlining operations, you're confident in your ability to fulfill more orders and ultimately increase profits significantly.

Taking out a loan: Conversely, securing a loan at a $10\%$interest rate poses a different scenario. After accounting for the $4\%$inflation rate, the real interest rate on the loan would be $6\%.$While the loan grants immediate access to the equipment, interest payments would eat into profits. Despite the potential revenue boost from the equipment, interest expenses may offset the benefits, particularly when considering that you anticipate a $20\%$revenue increase by investing in your business.

Now, here's where it gets interesting:

If you opt to invest your savings in your cake business and achieve the projected $20\%$revenue increase, you'd generate an additional $$7,000$in revenue. This substantial increase not only offsets the loss you would have incurred by leaving your money in the bank due to inflation but also provides a considerable return on investment.

In this scenario, using your savings to invest in your cake business not only safeguards the value of your money but also generates a substantial return that more than compensates for the potential loss from inflation. It's a prudent financial move that outshines the alternative of taking out a loan with interest, ensuring optimal profitability and growth for your business.

Elaborate why using your savings is a better option than getting a loan, weigh the pros and cons, and elaborate more on the idea that using your savings account is better.