FRPost tax interest saved

Post tax interest saved comes into discussion whenever there's a repayment (or conversion) of loan notes. As long as the loan notes are in issue, entity will be incurring interest expense. This will reduce earnings but will save some tax as loan interest is always tax-deductible. If these loan notes are repaid, the interest expense will be saved but the tax savings from that expense will be lost. So, post-tax interest saved will be the amount which will increase earnings of the entity. Hope it helps.

I don't understand this part: If these loan notes are repaid, the interest expense will be saved but the tax savings from that expense will be lost. So, post-tax interest saved will be the amount which will increase earnings of the entity. If the loan notes are repaid,how will there still be interest expense and I am confused how tac savings from that expense will be lost?

If loan notes are repaid, there will be NO interest expense anymore! Here's an example: PBIT = $100,000 Finance cost = $40,000 Tax rate = 30% Profit before tax = 100,000 - 40,000 = 60,000 Tax expense = 60,000*30% = 18,000 Profit after tax = 60,000 - 18,000 = 42,000 Now, if the loan notes are repaid and there's no interest expense, then: Profit before tax = 100,000 Tax expense = 100,000*30% = 30,000 Profit after tax = 70,000 As you can see, earnings increased from $42,000 to $70,000 but the Tax expense increased from $18,000 to $30,000. In conclusion, repayment of loan notes increased earnings by saving interest expense but also resulted in increased tax expense. Clear now?