Issue while converting dtd to schema

I am trying to convert a DTD to Schema using “Add Generated Items”. Selected the Document Type as “DTD Schema” and selected the dtd file to be converted to schema. After clicking OK button there is no schema generated with the error saying “Cannot find file C:\workingdirectory\prj1\<dtdfilename>.xsd”.

There is no description given what the error is and I couldn’t even find any event log.

Please help if any one came across this.