I have Tiger. Can I install Lion on an external drive?

I have an iMac Intel Core 2 Duo running Tiger. What I would like to do is install Lion on an external hard drive and have the ability to boot up using either Tiger or Lion as the occasion arises. Reason being, I have some software apps that would no longer run on anything higher than Tiger and would require $1200 worth of upgrades. While I plan to eventually make such upgrades (and perhaps buy a new Mac to put it all on), for now I'm seeking an interim solution.
In short, I want to take advantage of what Lion has to offer in the way of increased speed and flexibility (especially with internet surfing) while at the same time being able to boot up part of the time in Tiger to continue to run my older apps when needed.
So, can it be done? Install Lion on an external HD? Or do I need to install Snow Leopard first, then upgrade to Lion? Or is none of this possible without buying a new computer and just keeping my old machine to run Tiger with the older apps?

The short answer is yes, the somewhat longer answer is that you must should first install Snow Leopard. With the exception of Classic / OS 9 everything you do with Tiger should run fine in Snow Leo.
Lion System Requirements: http://support.apple.com/kb/HT4949
Next you will need more memory. Consider Lion's specfied 2 GB minimum with a great degress of skepticism. That is a very small cage for this cat. 4 GB is a more realistic minimum.
If I interpret your system correctly, you have a mid-2009 iMac. It can address 8 GB memory. Lion will be very comfortable with that amount.
Message was edited by: John Galt

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