The free cash flow (FCF) is the cash that is available for distribution to shareholders after all expenses, taxes, and investments have been accounted for. It represents the cash that is left over after all necessary expenses have been paid.

To calculate the FCF for Mary Washington Pediatrics, we can use Exhibit 3. For each year, we subtract the total operating expenses (including depreciation and physician salary) from the total net revenue to get the operating profit. This operating profit is then adjusted for capital expenditure, net working capital, and net equipment investment to calculate the FCF.

For example, in 2017, the net revenue was $1,682 thousand, total operating expenses were $959 thousand, depreciation was $20 thousand, physician salary was $525 thousand, and capital expenditure was $62.8 thousand. This means that the operating profit for 2017 was $167 thousand ($1,682 - $959 - $20 - $525 = $167). By subtracting the capital expenditure ($62.8), net working capital ($272.1), and net equipment ($375.1), the FCF for 2017 is $127.1 thousand ($167 - $62.8 - $272.1 - $375.1 = $127.1).

Similarly, the FCF for 2018 is $90.2 thousand ($189 - $60 - $214.2 - $415.1 = $90.2), and for 2019 it is $90.8 thousand ($200 - $68 - $176.5 - $455.1 = $90.8).

In summary, to calculate the FCF for each year, subtract the total operating expenses from the total net revenue to get the operating profit, and then subtract the capital expenditure, net working capital, and net equipment investment for the year.