Step 1: Set up coordinates for the square.
Let corner \(W\) be the origin, with the square's sides along the axes. Since the square has side 4 cm, \(W = (0,0)\), \(X = (4,0)\), \(V = (0,4)\), and \(Y = (4,4)\). Side \(VW\) lies along the y-axis and side \(WX\) lies along the x-axis.
Step 2: Locate the center \(O_1\).
Circle \(C_1\) is tangent to sides \(VW\) and \(WX\), the two sides meeting at corner \(W\). A circle tangent to both axes has its center at a distance equal to its radius from each axis, so \(O_1 = (r_1, r_1) = (1,1)\).
Step 3: Locate the center \(O_2\).
Circle \(C_2\) is tangent to sides \(VY\) (the top side, \(y = 4\)) and \(XY\) (the right side, \(x = 4\)), the two sides meeting at corner \(Y\). By the same reasoning, its center is at a perpendicular distance \(r_2\) from each of those sides, so \(O_2 = (4 - r_2,\ 4 - r_2)\).
Step 4: Use the external tangency condition.
Since the two circles touch each other at \(T\), the distance between their centers equals the sum of their radii: \(O_1O_2 = r_1 + r_2\). Compute \(O_1O_2\):
\[ O_1O_2 = \sqrt{(4-r_2-1)^2 + (4-r_2-1)^2} = \sqrt{2}\,(3 - r_2) \]
Step 5: Solve for \(r_2\).
Setting the two expressions equal:
\[ \sqrt{2}\,(3 - r_2) = 1 + r_2 \]
\[ 3\sqrt{2} - \sqrt{2}\,r_2 = 1 + r_2 \]
\[ 3\sqrt{2} - 1 = r_2\,(1 + \sqrt{2}) \]
\[ r_2 = \frac{3\sqrt{2} - 1}{1 + \sqrt{2}} \]
Step 6: Rationalize the denominator.
Multiply numerator and denominator by \((\sqrt{2} - 1)\):
\[ r_2 = \frac{(3\sqrt{2}-1)(\sqrt{2}-1)}{(1+\sqrt{2})(\sqrt{2}-1)} = \frac{6 - 3\sqrt{2} - \sqrt{2} + 1}{2 - 1} = 7 - 4\sqrt{2} \]
Step 7: Sanity-check against the other options.
Numerically \(r_2 = 7 - 4\sqrt{2} \approx 1.34\) cm, a small positive radius consistent with the figure. Option (A), \(4 - 3\sqrt{2} \approx -0.24\), is negative, which is impossible for a radius. Options (B) and (D), \(1 + 2\sqrt{2} \approx 3.83\) and \(5 + 3\sqrt{2} \approx 9.24\), would push \(O_2\) past the center line of the square (a valid \(r_2\) must be less than 2 for both circles to fit without crossing the diagonal midpoint), so they are also inconsistent with the tangency configuration shown.
\[ r_2 = \boxed{7 - 4\sqrt{2}\ \text{cm}} \]