Effect on the wealth of the shareholders (ACCA Past Exam June 2015)

Dear John, Could you please explain to me that in the question 4 Section 4 of ACCA F9 Past exam (June 2015) why the revised earnings after redeeming loan notes =Previous earnings + after-tax interest saving? The questions is: Grenarp Co is planning to raise $11,200,000 through a rights issue The new shares will be offered at a 20% discount to the current share price of Grenarp Co, which is $3·50 per share The rights issue will be on a 1 for 5 basis and issue costs of $280,000 will be paid out of the cash raised The capital structure of Grenarp Co is: $m Equity Ordinary shares ($0.50 nominal) 10 Reserves 75 Non-current liabilities 8% loan notes 30 The net cash raised by the rights issue will be used to redeem part of the loan note issue. Each loan note has a nominal value of $100 and an ex interest market value of $104 A clause in the bond issue contract allows Grenarp Co to redeem the loan notes at a 5% premium to market price at any time prior to their redemption date. The price/earnings ratio of Grenarp Co is not expected to be affected by the redemption of the loan notes. The earnings per share of Grenarp Co is currently $0·42 per share and total earnings are $8,400,000 per year. The company pays corporation tax of 30% per year. Evaluate the effect on the wealth of the shareholders of Grenarp Co of using the net rights issue funds to redeem the loan notes. The solution provided: Rights issue price = 3·50 x 0·8 = $2·80 per share Grenarp Co currently has 20 million shares in issue ($10m/0·5) The number of new shares issued = 20m/5 = 4 million shares Cash raised by the rights issue before issue costs = 4m x 2·80 = $11,200,000 Net cash raised by the rights issue after issue costs = 11,200,000 – 280,000 = $10,920,000 Revised number of shares = 20m + 4m = 24 million shares Market value of Grenarp Co before the rights issue = 20,000,000 x 3·50 = $70,000,000 Market value of Grenarp Co after the rights issue = 70,000,000 + 10,920,000 = $80,920,000 Theoretical ex rights price per share = 80,920,000/24,000,000 = $3·37 per share Redemption price of loan notes = 104 x 1·05 = $109·20 per loan note Nominal value of loan notes redeemed = 10,920,000/(109·20/100) = $10,000,000 Before-tax interest saving = 10,000,000 x 0·08 = $800,000 per year After-tax interest saving = 800,000 x (1 – 0·3) = $560,000 per year Earnings after redeeming loan notes = 8,400,000 + 560,000 = $8,960,000 per year (I don't understand why they adding after-tax saving to Earnings? Is it because they treated the saving as other income)?