kaplan kit 89, why have they used nominal approach?

Hello can you help me point out where is it indicated that we use nominal approach as the answer in kaplan has done wo the following question: ''Spotty Ltd plans to purchase a machine costing $18,000 to save labour costs. Labour savings would be $9,000 in the first year and labour rates in the second year will increase by 10%. The estimated average annual rate of inflation is 8% and the company’s real cost of capital is estimated at 12%. The machine has a two year life with an estimated actual salvage value of £5,000 receivable at the end of year 2. All cash flows occur at the year end. What is the negative NPV (to the nearest $10) of the proposed investment? ''