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Since the smaller square has a perimeter of 4 cm and its sides are equal in length, each side measures $4/4=1$ cm. Since the larger square has area 16 square cm, each side measures $\sqrt{16}=4$ cm. To find the length of $AB$, we draw a right triangle with $AB$ as the hypotenuse and the two sides parallel to the sides of the squares, as shown below: The horizontal side has length $1+4=5$ (the length of the smaller square and the length of the larger square added together) and the vertical side has length $4-1=3$ (the length of the larger square minus the length of the smaller square). Using the Pythagorean Theorem, the length of $AB$ is $\sqrt{5^2+3^2}=\sqrt{34}\approx \boxed{5.8}$ cm.