It's a URL. It doesn't refer to a file, or a directory (all right, "folder", if you want to call it that), it refers to a resource. It might be a file, or a directory, or a bathmat, but that's the server's problem, not yours.
As the manual page for [man]file_exists[/man] notes, it only works with some URL schemes, and only since PHP5. If you're not using PHP5, file_exists() won't be any use to you.
sneakyimp's earlier code works for me. To suppress the warnings in the event that the URL fails, use @fopen.