Is the .Net Framework installed?:
Right-click on your setup project, hover on View, and click Launch Conditions:

You want to add .NET Framework to your launch conditions:

After that, you can right-click on .NET Framework and click Properties Window. You can choose the Version number in that window.
Install assemblies to the GAC:
Right-click on your setup project, hover on View, and click File System:

Then in that window, right-click on the root node (File System on Target Machine), hover on Add Special Folder, and click Global Assembly Cache Folder:

Drag your assemblies to this folder to have them installed on the machine. If the correct version is not already there in the GAC, the setup program will install it.