You have the general idea but the conservation of momentum equation needs a bit of modification. The momentum before is correct but the momentum after forgets the momentum of the first ball. It might turn out the the momentum of the first ball is 0 after the collision but this should come from the algebra. Also, write out the equation of conservation of energy. Then you have two equations with two unknowns (velocity of ball 1 and velocity of ball 2 both after the collision). Finally, why do you say that the height of the second ball is less than the initial height?
One last thing, it might help to convert your number to SI units for numerical answer e.g. the potential energy isn't actually 14700J
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