issue with setting up permalink programmatically

Try to do something like this.

<?php
/* 
Plugin Name: My Custom Plugin
Plugin URI: 
Description: 
Author:
Version: 1.0 
Author URI:  
*/

/* Runs when plugin is activated */
register_activation_hook(__FILE__, 'mcp_install'); 

/* Runs on plugin deactivation*/
register_deactivation_hook( __FILE__, 'mcp_remove' );

function mcp_install() {

    //Make sure that .htaccess file is there.
    add_action('init', 'change_permalinks', 20);


    //Activate your theme also.
}

function mcp_remove() {

}

function mcp_change_permalinks() {
    global $wp_rewrite;
    $wp_rewrite->set_permalink_structure('/%postname%/');
    $wp_rewrite->flush_rules();
}

function mcp_custom_init() {
  $labels = array(
    'name' => 'Books',
    'singular_name' => 'Book',
    'add_new' => 'Add New',
    'add_new_item' => 'Add New Book',
    'edit_item' => 'Edit Book',
    'new_item' => 'New Book',
    'all_items' => 'All Books',
    'view_item' => 'View Book',
    'search_items' => 'Search Books',
    'not_found' =>  'No books found',
    'not_found_in_trash' => 'No books found in Trash', 
    'parent_item_colon' => '',
    'menu_name' => 'Books'
  );

  $args = array(
    'labels' => $labels,
    'public' => true,
    'publicly_queryable' => true,
    'show_ui' => true, 
    'show_in_menu' => true, 
    'query_var' => true,
    'rewrite' => array( 'slug' => 'book' ),
    'capability_type' => 'post',
    'has_archive' => true, 
    'hierarchical' => false,
    'menu_position' => null,
    'supports' => array( 'title', 'editor', 'author', 'thumbnail', 'excerpt', 'comments' )
  ); 

  register_post_type( 'book', $args );
}

add_action( 'init', 'mcp_custom_init', 10);