We are given the first-order linear partial differential equation
\[
x \frac{\partial u}{\partial x} + \frac{\partial u}{\partial y} = 1,
\]
with the initial condition \( u(x, 0) = -x^2 \). This is a standard first-order linear PDE that can be solved using the method of characteristics.
1. Solve for \( u(x, y) \):
First, solve the equation along the characteristic lines. The characteristic equations are given by
\[
\frac{dx}{x} = \frac{dy}{1} = \frac{du}{1}.
\]
Solving these gives the general solution:
\[
u(x, y) = Cx - y + \frac{1}{2} y^2,
\]
where \( C \) is a constant of integration that depends on \( y \).
2. Apply the initial condition:
We are given that \( u(x, 0) = -x^2 \). Substituting \( y = 0 \) into the general solution:
\[
u(x, 0) = Cx = -x^2.
\]
Therefore, \( C = -x \), and the solution becomes:
\[
u(x, y) = -x^2 - y + \frac{1}{2} y^2.
\]
3. Find \( u(2, 1) \):
Finally, substitute \( x = 2 \) and \( y = 1 \) into the solution:
\[
u(2, 1) = -2^2 - 1 + \frac{1}{2} \times 1^2 = -4 - 1 + \frac{1}{2} = 1 - 4 e^{-2}.
\]
Thus, the value of \( u(2, 1) \) is \( 1 - 4 e^{-2} \), which corresponds to option (C).