Unable to Add Reference

PROBLEM

When running a test project, the test fails with the following error in the application log:

09/03 10:53:15,Telerik.TestStudio.RemoteExecutor.exe(15300:14),ProjectModel] Project.Compile() : Unable to add reference Project2012SP2\Profiler Configurations\ClassLibrary5.dll.
Exception: System.IO.FileLoadException: The given assembly name or codebase was invalid. (Exception from HRESULT: 0x80131047)

Later in the application log, a second error appears:

[09/03 10:53:15,Telerik.TestStudio.RemoteExecutor.exe(15300:14),Execution] TestPlatform.OnRunnerError() : Error during remote runner execution: Compile failed: c:\Users\yee\AppData\Local\Temp\1\Projects\ce1cb993-aea7-46e9-9aa1-5d0493ddf4fc\Project2012SP2\Assembly.tstest.cs(18,7) : error CS0246: The type or namespace name 'ClassLibrary5' could not be found (are you missing a using directive or an assembly reference?)

SOLUTION

This behavior may occur when you try to add an assembly reference to a DLL located in a hidden project folder. These are: bin, Properties, obj, Backup, TestResults, Results, TestLists, Profiler, and Configurations.

To resolve this issue:

1.  Move the external DLL to a different location within the project that is not in one of these hidden folders.

2.  Remove and re-add the reference to the external DLL in the Project Settings screen.