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My answer is (E).

(A) Main issue is with the placement of "depending on its atmospheric saturation". It is not clear which verb it tries to modify. It probably should modify "will condense", but, then, it is placed too far away. Eliminated.

Also, the comma after "cumulonimbus cloud" is superfluous.

(B) This option moves "depending on its atmospheric saturation" closer to "will condense", which is an improvement.
Still, having two present participle phrases juxtaposed at the very beginning is quite awkward.
Keep for now.

(C) "water vapor’s atmospheric saturation" cannot "cool in the upper atmosphere". Eliminated.

(D) "The atmospheric saturation of water vapor" cannot "cool in the upper atmosphere". Eliminated.

(E) A strong and clear (by using "determines") sentence containing just one present participle phrase ("after cooling in the upper atmosphere"). No ambiguity and no awkwardness. A better sentence than (B).
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Let’s first clarify that WATER VAPOR cools in the upper atmosphere. And whether water vapor condenses itself into different clouds depends on the atmospheric saturation. Let’s choose the answer that delivers this meaning.

(A) Water vapor will condense itself into a stratus cloud, cirrus cloud, cumulus cloud, stratocumulus cloud, or cumulonimbus cloud, after it cools in the upper atmosphere, depending on its atmospheric saturation.

“dependeing…” phrase is ambiguous here because it’s as if upper atmosphere now depends on atmospheric saturation. Incorrect.

(B) After cooling in the upper atmosphere, depending on atmospheric saturation, water vapor will condense itself into a stratus cloud, cirrus cloud, cumulus cloud, stratocumulus cloud, or cumulonimbus cloud.

Two initial adverbial modifiers that both modify “water vapor” are incorrect. Such modification isn’t allowed on the GMAT.

(C) After cooling in the upper atmosphere, water vapor’s atmospheric saturation will determine if it condenses itself into a stratus cloud, cirrus cloud, cumulus cloud, stratocumulus cloud, or cumulonimbus cloud.

Initial modifier illogically states that atmospheric saturation cools in the upper atmosphere

(D) The atmospheric saturation of water vapor, after cooling in the upper atmosphere, will determine whether it condenses itself into a stratus cloud, cirrus cloud, cumulus cloud, stratocumulus cloud, or cumulonimbus cloud.

Incorrect because it states that “The atmospheric saturation” cools in the upper atmosphere

(E) Atmospheric saturation determines whether water vapor, after cooling in the upper atmosphere, will condense itself into a stratus cloud, cirrus cloud, cumulus cloud, stratocumulus cloud, or cumulonimbus cloud.

Correct choice because it puts modifiers in the logical places.

So E
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Water vapor will condense itself into a stratus cloud, cirrus cloud, cumulus cloud, stratocumulus cloud, or cumulonimbus cloud, after it cools in the upper atmosphere, depending on its atmospheric saturation.

(A) Water vapor will condense itself into a stratus cloud, cirrus cloud, cumulus cloud, stratocumulus cloud, or cumulonimbus cloud, after it cools in the upper atmosphere, depending on its atmospheric saturation.
Pronoun error: ITS could be for upper atmosphere or water vapour. Ambiguous
Modifier error: Placement of ‘depending on its atmospheric pressure’ is not placed properly.

(B) After cooling in the upper atmosphere, depending on atmospheric saturation, water vapor will condense itself into a stratus cloud, cirrus cloud, cumulus cloud, stratocumulus cloud, or cumulonimbus cloud.
Modifier error: Placement of ‘depending on its atmospheric pressure’ is not placed properly.

(C) After cooling in the upper atmosphere, water vapor’s atmospheric saturation will determine if it condenses itself into a stratus cloud, cirrus cloud, cumulus cloud, stratocumulus cloud, or cumulonimbus cloud.
What is getting cooled: Not WV’s saturation but WV.

(D) The atmospheric saturation of water vapor, after cooling in the upper atmosphere, will determine whether it condenses itself into a stratus cloud, cirrus cloud, cumulus cloud, stratocumulus cloud, or cumulonimbus cloud.
Ambiguous-What is getting cooled: Not WV’s saturation but WV.

(E) Atmospheric saturation determines whether water vapor, after cooling in the upper atmosphere, will condense itself into a stratus cloud, cirrus cloud, cumulus cloud, stratocumulus cloud, or cumulonimbus cloud.
CORRECT

E
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