Lets say we fire a bullet from a very powerful gun at a height of 1 metre parallel to the surface of the Earth. Assume there is no air resistance and the only force acting on the bullet is from Earth's gravity. Also assume that the Earth is perfectly spherical and that nothing will get in the bullets way when it travels around the globe.
How fast must the bullet be fired such that is circumnavigates the Earth once and lands at our feet?
I know that its speed must be close to the speed needed for it to stay at an orbit height of $1$ metre ($7925$ m/s), but I am not sure how I can work the exact speed out.
I first thought the curvature of the earth wouldn't matter in the calculation and that I could just work out the answer for a flat distance of $40 000$ km (circumference of Earth), however I quickly realised that this would not work.
Is this situation I have described even possible? Would the orbit be circular or elliptic?
Any help with this question would be greatly appreciated.
The situation as described is not possible. If Earth's gravity is the only force acting on the bullet, then the bullet's trajectory is Keplerian. That is, it is a conic section, of which the only bounded type is the ellipse. The Earth will be at one focus of the ellipse. If the bullet can circumnavigate the Earth, it will arrive back at its starting location, at the same height above Earth's surface. It is not possible to be at a lower elevation.
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This speed corresponds to a situation in which the perigee of the orbit is $R$, Earth's radius. Note that this occurs $180^\circ$ from the launch point - it would land at the foot of someone on the other side of the Earth. In this case, the semi-major axis of the orbit is
$$a = \frac{1}{2} (R + h + R) = R + \frac{1}{2} h$$
where $h$ is the height at which the bullet is fired. By conservation of energy, we have
$$E_{\rm orb} = -\frac{K}{2 a} = -\frac{K}{2 R + h} = \frac{1}{2} v_0^2 - \frac{K}{R + h}$$
$$\implies v_0^2 = \frac{K}{R} \left[ \frac{2}{\left( 1 + \frac{h}{R} \right) \left( 2 + \frac{h}{R} \right)} \right]$$
where $v_0$ is the initial speed and $K = G M$ is Earth's gravitational parameter. Note that the speed required to maintain circular orbit satisfies $v_c^2 = \frac{K}{R} \left[ \frac{1}{1 + \frac{h}{R}} \right]$, which you already calculated. We have then that
$$v_0^2 = v_c^2 \left[ \frac{2}{2 + \frac{h}{R}} \right] \implies v_0 = v_c \sqrt{\frac{2}{2 + \frac{h}{R}}}$$
With $h = 1 \text{ m}$ and the Earth's radius approximately $R = 6.38 \times 10^6 \text{ m}$, the ratio $\frac{h}{R} = 1.567 \times 10^{-7}$ is extremely small. The factor $\sqrt{\frac{2}{2 + \frac{h}{R}}} = 0.99999996$ is practically unity, so the required speed is about $39.2$ parts per billion smaller than the speed required to maintain the circular orbit.