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Good Day I am currently working through the AUE1601 may/june 2017 exam and I am struggling with question 1.3.1 how do I go about answering

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Good Day

I am currently working through the AUE1601 may/june 2017 exam and I am struggling with question 1.3.1 how do I go about answering the question ?

I have attached the question

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