Can I upgrade the CPU from i5 3.2Ghz to i7 4.0 Ghz for 2016 27" iMac

While it's technically possible I don't think you'll find it worth the risk or effort ;-{

This is not a job for a first timer. Just taking the display off is very tricky! If you mess up you damage the display which would be a very expensive mistake! Here's the IFIXIT guide to take the logic board out: iMac Intel 27" Retina 5K Display Logic Board Replacement and here is a view of the logic board from the 5K IFIXIT teardown

We do CAD rendering fly overs and short site video presentations (4K) we still find a six core Mac Pro just tolerable.

As you are seeing it's the concurrent thread count that makes the difference! Your CPU has 4 cores (4 threads) the i7 also has 4 cores but unlike the i5 has hyper threading so each core offers 2 threads so you get a total of 8 concurrent threads. In our case the Mac Pro offers a 6 cores offering up 12 concurrent threads.

So you need to do some soul searching here. What is the best way to go forward...

Frankly, I wouldn't do the CPU upgrade as we really don't know what Apple did in the late 2015 models they could have soldered the i5 to save some money on the socket. Then the risk of damage also makes this dangerous direction.

If you want to move to the i7 model I think its best to buy a replacement system and then sell yours. But, will it have the needed horsepower to do what you want to do?

This then gets into moving to a Mac Pro as the next choice. Here you could even go with a more powerful CPU than what we went with and upgrading the CPU is a lot simpler! Mac Pro Late 2013 CPU Replacement

Now heres the dropping of the other shoe!

As you likely know Apple hasn't done any updating on any of the desktop systems. Some of this is on Intel for not offering any WOW'er chips as of late. Even the newer CPU's Intel has available today are not much better than what these systems use. Intel has announced a roadmap that does show something coming this fall so can Apple wait that long and how much better will they be?

Then there is the dark horse AMD with Ryzen! Apple might be swayed into offering some Ryzen based systems. Big Tim has stated systems for Pro's are coming very soon so I'm starting to think Apple might offer an AMD option as I can't see them waiting till the late winter for Intel. The other possibility is Apple just does a small step improvement with the current Intel crop. That would satisfy the basic users not the pro's in the iMac line. The newer Xeon (Skylake-DT) E5 Series in the Mac Pro line wouldn't be a bad jump and not a big hardware changeout.

Here's a bit more on Ryzen: AMD’s Zen goes mainstream with Ryzen 5: 4 cores, 8 threads, from $169 Review the 6 core product info.

As a tease the server based versions of Ryzen AMD Naples server processor: More cores, bandwidth, memory than Intel has my mouth watering ;-} Here's hoping!