Yes, you have to add it in the setup project.
-Right click on Solution '<name>' at the solution explorer
-Add -> new project
-Click setup and deployment -> Setup project and then OK
-At the left column ""file system on target machine right click on "application folder" -> Add -> File...
You can also check out where it will be installed: Click application folder, goto to properties. The default value of the property "DefaultLocation" is "[ProgramFilesFolder][Manufacturer]\[ProductName]"