You cannot call a method on a null-valued expression

The simple answer for this one is that you have an undeclared (null) variable. In this case it is $md5. From the comment you put this needed to be declared elsewhere in your code

$md5 = new-object -TypeName System.Security.Cryptography.MD5CryptoServiceProvider

The error was because you are trying to execute a method that does not exist.

PS C:\Users\Matt> $md5 | gm


   TypeName: System.Security.Cryptography.MD5CryptoServiceProvider

Name                       MemberType Definition                                                                                                                            
----                       ---------- ----------                                                                                                                            
Clear                      Method     void Clear()                                                                                                                          
ComputeHash                Method     byte[] ComputeHash(System.IO.Stream inputStream), byte[] ComputeHash(byte[] buffer), byte[] ComputeHash(byte[] buffer, int offset, ...

The .ComputeHash() of $md5.ComputeHash() was the null valued expression. Typing in gibberish would create the same effect.

PS C:\Users\Matt> $bagel.MakeMeABagel()
You cannot call a method on a null-valued expression.
At line:1 char:1
+ $bagel.MakeMeABagel()
+ ~~~~~~~~~~~~~~~~~~~~~
    + CategoryInfo          : InvalidOperation: (:) [], RuntimeException
    + FullyQualifiedErrorId : InvokeMethodOnNull

PowerShell by default allows this to happen as defined its StrictMode

When Set-StrictMode is off, uninitialized variables (Version 1) are assumed to have a value of 0 (zero) or $Null, depending on type. References to non-existent properties return $Null, and the results of function syntax that is not valid vary with the error. Unnamed variables are not permitted.