Can I use 8x16 tiles on shower walls that measure 39.5" by 35.5" by 39.5"?
The usual approach is to cut them so that the offcuts are not so small - and NOT to try to keep an "uncut edge" anywhere.

So, you'd basically plan to burn 48" of tile on each wall, though you should be able to re-use some of the offcuts around the corner. No getting around the 1.75" ones on the back wall unless you want to get cute and put a 3.5" slice in the middle of two 8x16's to make the width. Whether that looks good to you or not is your call - if it does, consider the same approach on the side walls. Something like:

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and then on the longer sidewalls: 

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Look OK is, of course, a highly variable and personal criteria. In your shoes I'd probably find that I could live with another wall tile, but I'm not you and you're not me.