Step 1: Understand the definition of capacity ratio.
The capacity ratio \( C^ \) of a heat exchanger is defined as the ratio of the smaller heat capacity rate to the larger heat capacity rate:
\[
C^ = \frac{C_{min}}{C_{max}},
\]
where \( C_{min} = (\dot{m}c_p)_{min} \) and \( C_{max} = (\dot{m}c_p)_{max} \). \( \dot{m} \) is the mass flow rate and \( c_p \) is the specific heat at constant pressure.
Step 2: Apply the energy balance equation to both the hot and cold fluids.
For a heat exchanger with no heat loss to the surroundings, the heat lost by the hot fluid is equal to the heat gained by the cold fluid:
\[
Q_h = Q_c
\]
\[
(\dot{m}c_p)_h (T_{h,i} - T_{h,o}) = (\dot{m}c_p)_c (T_{c,o} - T_{c,i})
\]
where:
\( T_{h,i} \) is the inlet temperature of the hot fluid (150 °C).
\( T_{h,o} \) is the outlet temperature of the hot fluid (75 °C).
\( T_{c,i} \) is the inlet temperature of the cold fluid (25 °C).
\( T_{c,o} \) is the outlet temperature of the cold fluid (125 °C).
\( (\dot{m}c_p)_h \) is the heat capacity rate of the hot fluid (\( C_h \)).
\( (\dot{m}c_p)_c \) is the heat capacity rate of the cold fluid (\( C_c \)).
Step 3: Substitute the given temperatures into the energy balance equation.
\[
C_h (150 - 75) = C_c (125 - 25)
\]
\[
C_h (75) = C_c (100)
\]
Step 4: Determine the ratio of the heat capacity rates.
\[
\frac{C_h}{C_c} = \frac{100}{75} = \frac{4}{3} \approx 1.33
\]
or
\[
\frac{C_c}{C_h} = \frac{75}{100} = \frac{3}{4} = 0.75
\]
Step 5: Identify \( C_{min} \) and \( C_{max} \).
Comparing \( C_h \) and \( C_c \), we see that \( C_c<C_h \). Therefore:
\[
C_{min} = C_c
\]
\[
C_{max} = C_h
\]
Step 6: Calculate the capacity ratio \( C^ \).
\[
C^ = \frac{C_{min}}{C_{max}} = \frac{C_c}{C_h} = 0.75
\]
Step 7: Select the correct answer.
The capacity ratio of the heat exchanger is 0.75, which corresponds to option 3.