I have Mountain Lion OS Install CD downloaded onto my external hard drive, how do I use this to upgrade from Leopard

Current computer that I just bought used is operating on Leopard 10.5.8
I have Mountain Lion OS X CD installation files downloaded on my external hard drive from another Mac that I have owned.
How do I use my external HD to download and Install Mountain OS X wizard.
Is the only way to do this to buy a copy of snow leopard and then once upgrading to that, plug in my external HD and then access the Mtn install file as I would if I had the installation CD?
When I try to access the install file from my external HD, i get to the installation window and then when I am to select a hard drive to install it on I receuve a red exclamation mark error that says it can not be written to the HD. Why is this? Because I'm not on snow leopard but rather leopard?

As you have the installer on a DVD, you can do a trick that consists in formatting the hard drive, and then, install Mountain Lion.
First, make a backup of your files with Time Machine > http://support.apple.com/kb/HT1427 I recommend Time Machine because it will be easier to restore your files later.
Then, insert the DVD with Mountain Lion and hold the C key while your Mac is starting, so you will see a window with different options. Open Disk Utility, choose Macintosh HD in the sidebar, go to Erase tab and erase the drive.
After erasing the drive, you can install Mountain Lion. Close Disk Utility and install it. During the initial setup, it will ask you to restore your files, so plug the external drive with the backup and follow its steps. Note that PowerPC apps aren't compatible

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