Why does System.IO.File.Exists(string path) return false?

It could well be a permission problem. From the documentation:

The Exists method returns false if any error occurs while trying to determine if the specified file exists. This can occur in situations that raise exceptions such as passing a file name with invalid characters or too many characters, a failing or missing disk, or if the caller does not have permission to read the file.

One way of seeing what's happening is to just try to read the file (e.g. with File.OpenRead). I'd be surprised if that succeeds - but if it fails, the exception should give you more information.

Hiding file endings in windows can sometimes cause confusion: you KNOW your file is named file.txt when it is actually named file.txt.txt because the last 4 characters have been hidden by the OS.

One possibility not mentioned in any of the answers here is 'File System Redirection' on Windows 8.1 onward.

For example, if your program is a 32-bit application and you're running on 64-bit Windows then an attempt to access %windir%\System32 would be redirected to %windir%\SysWOW64. And if the file you're trying to access doesn't exist in %windir%\SysWOW64 then System.IO.File.Exists(string path) would return False.

Link to a nice article explaining this behavior