Incompatibility issues between SQL Server 2012 and Visual Studio 2012

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Tags:
SQL Server 2012
Visual Studio 2012
I am hitting a strange error while trying to create an SQL Database project in Visual Studio 2012.

Unable to open Database Project

This version of SQL Server Data Tools is not compatible with the database runtime components installed on this computer.

I am using SQL Server 2012 Developers Edition installed on a workstation. I can open or create a database project in VS2008 with SQLServer 2012 DE installed, so why not VS 2012?

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