The problems must be solved using the sum formula for geometric rows. When using the sum formula, write down what k, n and a1 are, and a few words about what these numbers represent in relation to the assignment text.

A company is considering making a machine investment that costs NOK 4 million. We assume that the investment will provide a fixed annual profit at the end of each year for a total of 10 years before the machine must be replaced.

a) How large must the annual profit be for the investment to pay off if the interest rate is 4% per year for the entire period?

b) An interest rate cut of 3 years is forecast from 4% per year to 2% per year. If we take into account this reduction in interest rates, how large must the annual profit be for the investment to pay off?